The Price of Destroying the Future How true prices can incentivize a sustainable Circular Economy: the case of electronic waste

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THE PRICE OF DESTROYING THE FUTURE

How True Prices Can Incentivize a Sustainable Circular Economy: The Case of Electronic Waste

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Abstract

This study develops the concept of true prices, which strives to internalize so-called externalities, which are in fact internal to society and make prices represent all costs. The goal is to bring private and social costs closer together to stop private profit from being created through social risk. The fitting framework in which the concept of true prices can be applied is the Circular Economy, with its goal of regenerative growth. Fully true prices in itself are unrealistic, and therefore the idea of true prices must be seen as a guiding tool that incentivizes a fairer and more sustainable economy. In this thesis, a case study of electronic waste demonstrates the applicability of this concept and reveals the untrue prices of virgin and recycled materials, as well as the lack of liability of producers which enables untrue prices. Moral questions remain because true prices try to quantify the presumably unquantifiable. Therefore, a discussion around how and what society wants to value is crucial to developing the concept further. More research is required on valuation and quantification, as well as on the positive (e.g., true salaries) and negative impact true prices could have on the poor being affected disproportionately by true but higher prices.

Keywords

Political economy; alternatives to capitalism; rethinking economics; rethinking capitalism; circular economy; WEEE; recycling; Germany; European Union; prices; true prices; true costs; shadow prices; distorted prices; negative externalities; value; resources; virgin materials; impact assessment; life cycle analysis

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Table of Figures

Figure 1: Ellen MacArthur Foundation, Infographic: Circular Economy System Diagram. Figure 2: Difference Between Ask Price and True Price.

Figure 3: Overview of Interviews.

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Abbreviations

CSR: Corporate Social Responsibility CO2: Carbon Dioxide

DUH: Deutsche Umwelthilfe e.V.

EEE: Electrical and Electronic Equipment

ElektroG: Elektro- und Elektronikgerätegesetz [German Legislation on EEE] EMEA: Europe, the Middle East and Africa

EPR: Extended Producer Reliability

EU: European Union

E-waste: Electronic Waste

GDP: Gross Domestic Product

GHG: Greenhouse Gases

GRI: Global Reporting Initiative

NGO: Non-Governmental Organization

PPP: Polluter Pays Principle

RoHS: Restriction of Hazardous Substances

TEEB: The Economics of Ecosystems and Biodiversity [initiative] UBA: Umwelt Bundesamt [German Environment Agency] US/USA: United States of America

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1. Introduction

Some three years ago I bought a decent Bluetooth speaker. Recently I wanted to bring it outside to sit in the sun in front of my door and enjoy some music in the empty streets of pandemic-hit Amsterdam. However, after just a couple of minutes the speaker stopped working and it was pretty obvious that it was the battery that stopped working. Quite annoyed, I checked whether the warranty would still cover this damage. It would not. Buying a new one seemed to be a waste because the speaker was not that old and still worked when connected to the charger. I decided to contact some shops that could repair it. After getting a couple of offers by mail, I figured that the repair would cost almost as much as the product itself. I decided to look for replacement batteries myself, but the manufacturer’s website was of no help, and I ended up in a webshop where they had geeky do-it-yourself videos and replacement batteries. My excitement about being able to fix the speaker instead of throwing it away was quickly replaced by disappointment, when I figured that the replacement battery would cost more than a third of the price of the speaker itself. Anyway, I ordered it, and with it a soldering-iron that was necessary for the repair. I managed and repaired the speaker; however, the questions that started to puzzle me were: Why does a product break down that early? Why is the repair so complex? Why is the repair so expensive? Why does the manufacturer not have to help me repair it? Or offer subparts? Or maybe provide (less geeky) videos that help repair it? Where do I get rid of the old battery now? All these questions led me to doubt whether the prices of electronic products actually reflect what they should and whether companies actually take the responsibility they should …

We are at a breaking point in human development. Climate change, environmental destruction, and loss of biodiversity are threatening the environment and also our species. The economy’s constant striving for more growth has brought us to the limits of what this planet can handle, and more and more voices call for a radical change of our economic system. However, the positive developments that also have come with this economic system in the past centuries and the difficulties of changing, or replacing, the fundaments of this system have to be acknowledged as well. Therefore, this thesis tries to create more sustainability within the existing system. It argues that a central failure of the existing system is that the damage economic action causes towards the environment and society (in this thesis labeled as “social costs”) is wrongly “externalized.” This leads to prices, the fundamental indicator for every transaction in the economy, often being untrue, not reflecting the actual costs. In the following, it will be argued that truer prices, which internalize more of these costs, can be a powerful tool to guide us to a sustainable future where resources

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remain in the cycle and the economy can grow in a regenerative way, with low prices indicating low costs to the environment. This economic system, the so-called Circular Economy, has gained traction with policymakers, and, e.g., recently became central to the new European Commission’s strategy, which, on its front page, calls “for a cleaner” as well as a “more competitive” economy.1 This thesis will start off by discussing the achievements that capitalism, but also liberalism, socialism, and democracy have brought in the past (2.1.). Right after, it will question the success of capitalism and criticize its ideology and the damages it has created, as well as the flaws it still entails (2.2.). The Circular Economy will be presented as the guiding ideal and framework which can help correcting these flaws, while still appreciating the achievements (2.3.). Afterwards, the central idea of prices will be analyzed, where it will become clear, that prices are not just about costs, but also a lot about what we value (3.1.). The chapter helps understanding, why environmental damage has been externalized from the market for so long, and it will be shown how past thinkers have tried to deal with this problem (3.2.). Once this crucial fundament has created an orientation for what prices, externalities and capitalism mean to each other, the core argument and the conceptual innovation of true prices can be presented. It will be shown how true prices can help change the way we see and value our surroundings and change the existing narrative (4.1.). Prices will be presented as a powerful tool, because of their comprehensiveness and ability to inform efficiently (4.2.). The creation of truer prices, which internalize more real costs, means also that these social costs to the environment, but also to society, have to be quantified in order to be expressed within a price (4.3.1.). Once this has been addressed, the core questions of who will be liable for the damage (4.3.2.) and who is able to enforce the liability and fuel the change will be discussed (4.3.3.).

To make the theoretical argument more accessible and probe its plausibility, a case study of Germany’s electronic waste system was conducted. In chapter 5, the relevance of electronic waste will first be discussed (5.1.), before the methodology section explains how expert interviews were used (5.2.). Afterwards, the concept of true prices will be applied to the problems of electronic waste, which are wrong material pricing, and insufficient assigned liability (5.3.). Similar to the theoretical argument made earlier, the following sub-chapters discuss the responsibility for changing the system (5.4.) and end with concrete policy implications (5.5.). Before the thesis concludes the results, it will discuss how feasible the concept of true prices is, what objections can

1_{European Union, “Circular Economy Action Plan: For a Cleaner and More Competitive Europe,” 2020, 1,}

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be brought forward against the idea, but also what limitations this study has and what future researchers might usefully focus on (6.).

… Some weeks ago, I decided to buy a pair of second-hand speakers. When I told my father that I am looking for an amplifier, he said that he still had an old one around. Now, his old amplifier from 1977 is standing next to the broken battery of my Bluetooth speaker that I still have not gotten rid of. Does our prosperity really rely on creating a world of untrue prices that lead to overconsumption and waste, as the title page of this thesis suggest? The question this thesis aims to answer is, how true prices can be the tool to incentivize a sustainable Circular Economy. Will it be possible to re-incentivize the design of products, like the amplifier, and create a circular economy in which we do not exploit our environment but learn to thrive with it. Or do we really want to pay the price of destroying the future?

The following research questions will be answered with a qualitative analysis of primary and secondary sources, as well as a case study with expert interviews as an illustration and plausibility probe.2

Research Question: How can true prices incentivize a sustainable Circular Economy? Sub-Question 1: Why hold on to capitalism and use the concept of the Circular Economy? Sub-Question 2: How are prices composed, and how have they related to externalities?

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2. The Need for a More Sustainable Capitalism

Convince yourself that things can be both better and bad.3

—Hans Rosling et al.

The book cover of Branko Milanovic’s recent book Capitalism, Alone: The Future of The System That

Rules the World sums up the fundamental idea of this chapter pretty well: “Capitalism gets much

wrong, but also much right – and it is not going anywhere. Our task is to improve it.”4_{The system} is in place, and while a fundamental replacement might be better, improving it is certainly a more realistic first step. This thesis tries to contribute to this, by suggesting that correcting the price system and striving for true prices that internalize societal and environmental damage will improve the system and be a realistic move to a sustainable capitalism. For that, 2.1. will first discuss how capitalism has improved our situation, but, as 2.2. will subsequently show, how things can be better and still remain bad. It will become clear at the end of this chapter that to improve the system from within, the most suitable framework that can create a compromise between capitalism and sustainability, is the concept of the Circular Economy (2.3.), which still allows for growth, but in a regenerative way, and which can facilitate a system of true prices.

2.1. Holding on to Capitalism?

According to the Oxford Dictionary of Economics, capitalism is an economic system that is “based on private ownership,” “private profit-seeking,” but also government restrictions or “regulations on the activities of the private sector regarding public health and safety, enforcement of competition, and protection of the environment.”5_{To phrase it differently, capitalism requires} and enables private property, i.e. capital, to be used for the constant accumulation of surplus, or growth, utilizing voluntary exchange, which is supervised by governments. The price mechanism itself is a prerequisite for this process, being the indicator of the value of what is exchanged. In capitalist market economies, goods and services, also including labor, have a value that is determined by what “people are willing to pay,” which makes them the ultimate information transmitter between seller and buyer in the market.6_{Why it is sensible to hold on to the price} system (explained in 3.1.) and make use of it to move towards a sustainable economy will be discussed in detail in chapter 4.

3_{Hans Rosling, Ola Rosling, and Anna Rosling Rönnlund, Factfulness: Ten Reasons We’re Wrong about the World and Why}

Things Are Better than You Think (London: Sceptre, 2018), 74.

4_{Branko Milanović, Capitalism, Alone: The Future of the System That Rules the World (Cambridge, Massachusetts: The}

Belknap Press of Harvard University Press, 2019).

5_{Nigar Hashimzade, John Black, and Gareth Myles, Oxford: A Dictionary of Economics, 5th ed. (New York, NY: Oxford}

University Press, 2017), 65–66.

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In his famous “end of history” essay from 1990, Francis Fukuyama already claimed that “the term ‘capitalism’ has acquired so many pejorative connotations over the years” that an objective definition is hardly possible.7_{Usually, capitalism is seen to require a liberal environment in which} a free-market economy is possible that includes public, “open-access” institutions and a democratic setting.8_{However, recent developments have also brought this fundamental linkage of} capitalism with liberal democracy into question. China, and also other countries’ authoritarian forms of capitalism, have brought up an alternative model that is a “state-led political, or authoritarian, capitalism.”9_{For this thesis’ argument, however, the idea of liberal capitalism will be} used as the framework for true prices. That means, a system with the right to private property and decentralized coordination, with competition that strives for utility maximization or growth, but also is constrained by governmental regulations.

Capitalism might be an efficient system to arrange an economy, but it certainly is not the optimal system to achieve social equality and happiness. Nevertheless, it seems to have been the system that has combined these two worlds best so far. The world has become better in many respects since the rise of capitalism, liberalism,

socialism and democracy.10_{While these are hard to disentangle and not only reinforcing, but have} “frequently clash[ed] with each other” it is worthwhile to continue on these tracks.11_{The argument} is not that it was solely capitalism, which has driven the developments laid out below, but that it was, and continues to be, a driving force and enabler for the development. This is not to say that many people, and the environment, do not still have to suffer terribly. Capitalism and the market economy can, however, provide the framework for the price-mechanism with which we can achieve a sustainable economy and competition for regenerative growth. To lay out its positive contributions, the development in the last centuries since the rise of capitalism will now be sketched, discussing the following interdependent issues: technological progress, war and peace, and how capitalism has been paving the way for freedom and equality.

7_{Francis Fukuyama, The End of History and the Last Man (New York, Toronto, New York: Free Press; Maxwell}

Macmillan Canada; Maxwell Macmillan International, 1992), 44.

8_{Douglass C. North, John Joseph Wallis, and Barry R. Weingast, Violence and Social Orders: A Conceptual Framework for}

Interpreting Recorded Human History (Cambridge; New York: Cambridge University Press, 2009), 110–15.

9_{Milanović, Capitalism, Alone, 5.}

10_{Rosling, Rosling, and Rönnlund, Factfulness, 60–64.}

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2.1.1. Technological Progress

Winston Churchill underlined the importance of technological process when he said: “if we are to bring the broad masses of the people in every land to the table of abundance it can only be by the tireless improvement of all our means of technical production.”12_{The automation of much of the} physical labor by machines and robots has freed many people from harsh and inhumane work such as coal-mining, forging and so on. As you are reading this, it is very likely that you have almost all the written knowledge of the world in your pocket in the form of a smartphone. The internet, as another example of technological progress, has democratized information in an astonishing way and enabled people to connect almost without borders.13_{As scholars such as Simon Kuznets and} Joel Mokyr have argued, the rapidity and affordability of this unpreceded development was fueled by capitalism’s striving for economic growth and the subsequent higher productivity and innovation enabled by competition.14_{Already Joseph Schumpeter highlighted the importance of} the “creative destruction” that creates the necessary innovations, and is caused by the “competition from […] new technology.”15_{Even though scholars argue that “while rivalry is ‘natural,’, there is} nothing ‘natural’ in competition in general,” it can lead to peak-performances that help overall prosperity.16_{This has meant especially economic prosperity, which helped to improve other factors} such as the general health of people.

Health, apparently, is fundamental for being able to improve one’s general well-being. In the past centuries we can witness an extremely positive development in this regard, reflected by indicators such as child mortality, starvation rates, health care coverage and especially life expectancy (see Appendix 1). This has meant, in the words of Steven Pinker, that “during the 20th_{century, the} average person approached death by just seven months for every year they aged.”17_{As one of the} first scholars, Samuel Preston suggested in 1975 a correlation between growing income and life expectancy (the so called ‘Preston-curve’), implying that “the relationship between life expectancy and national income per head has shifted upwards.”18_{However, it remains difficult to demonstrate}

12_{Andrew McAfee, More from Less: The Surprising Story of How We Learned to Prosper Using Fewer Resources - and What}

Happens Next. (New York: Simon & Schuster, 2019), 15.

13_{W. Lance Bennett and Alexandra Segerberg, “The Logic of Connective Action: Digital Media and the}

Personalization of Contentious Politics,” Information, Communication & Society 15, no. 5 (June 2012): 739, https://doi.org/10.1080/1369118X.2012.670661.

14_{Cited in Elhanan Helpman, The Mystery of Economic Growth (Cambridge, Massachusetts: Harvard University Press,}

2004), 34–35.

15_{Joseph Alois Schumpeter, Capitalism, Socialism and Democracy (London: Routledge, 1994), 83–84.}

16_{Eric Brousseau and Jean-Michel Glachant, The Manufacturing of Markets: Legal, Political and Economic Dynamics}

(Cambridge: Cambridge University Press, 2014), 7, https://doi.org/10.1017/CBO9781107284159.

17_{Steven Pinker, Enlightenment Now (UK: Penguin Random House, 2019), 54.}

18_{Samuel H. Preston, “The Changing Relation between Mortality and Level of Economic Development,” International}

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to what extent this relationship is causal, critics have shown that this connection is often too easily made, and also Preston acknowledges the limited informative value of “nation’s level of income,” because factors external to it “had a major effect on mortality trends.”19_{While technological} progress and innovative competition have helped develop vaccines, modern medical technology and medicines, health remains to be connected to economic prosperity, i.e. individual wealth. Data from the 18th_{and 19}th_{century confirm the “common observation” that richer groups do “live as} long or longer” than poorer ones, and “suffer less from chronic and debilitating diseases.”20 Moreover, since the general wealth of people worldwide has grown, improving health and living conditions can be related to economic growth and capitalism. Today, “you won’t find any countries where child mortality has increased. Because the world in general is getting better.”21_{A good} example is the eradication of smallpox, which have hopefully vanished forever due to vaccinations but also to global cooperation, which leads us to the next point.

2.1.2. War and Peace

The capitalist system strives for constant accumulation of capital. The logical consequence is that markets need to grow and therefore start to cooperate with other markets. This has in the past centuries led to growing global interconnection between markets (and nations), which had the compelling effect to create the “longest peace between superpowers in human history. Today, conflicts and fatalities from conflicts are at a record low.”22_{Since the tragedies of the world wars} in the short 20th_{century, liberalism, socialism, democracy and capitalism have brought the world} closer together, and us closer to the “perpetual peace” through global interdependence, as Immanuel Kant already described in 1796.23_{Part of the reason is the cooperation of nations, or} more specifically of their economies, as “capitalism was from the beginning an affair of the world-economy and not of nation-states.”24_{Capitalism “is capable of linking different societies around} the world to one another physically through the creation of global markets.”25_{This growing} interdependence has made it less profitable to attack a trading partner or supplier, because doing

19_{Simon Szreter and Graham Mooney, “Urbanization, Mortality, and the Standard of Living Debate: New Estimates}

of the Expectation of Life at Birth in Nineteenth-Century British Cities,” The Economic History Review 51, no. 1 (February 1998): 84–85, https://doi.org/10.1111/1468-0289.00084; Preston, “The Changing Relation between Mortality and Level of Economic Development,” 489.

20_{Roderick Floud et al., The Changing Body: Health, Nutrition, and Human Development in the Western World since 1700,}

NBER Series on Long-Term Factors in Economic Development (Cambridge; New York: Cambridge University Press, 2011), 1.

21_{Rosling, Rosling, and Rönnlund, Factfulness, 21.} 22_{Rosling, Rosling, and Rönnlund, 113.}

23_{Immanuel Kant, Zum Ewigen Frieden. Ein Philosophischer Entwurf von Immanuel Kant, 1796.}

24_{Immanuel Wallerstein, “The Rise and Future Demise of the World Capitalist System: Concepts for Comparative}

Analysis,” Comparative Studies in Society and History 16, no. 4 (September 1974): 401.

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so would have a negative impact on the attacker eventually. However, it must not be forgotten that exploitation and violence are still possible and can even, at least temporarily, increase because of global interconnection, as the atrocities of colonialism have shown, or the working conditions in some of today’s economies still show. The forceful expansion into new markets and economically motivated military operations – think of the Opium wars – are sad examples.26_Yet, while the capitalist globalization has led to wars, it has brought world peace closer than ever.

2.1.3. Paving the Way for Freedom and Equality

In the 16th_{century some important tools of capitalism were established that benefited the freedom} and equality of people. This started with the idea of “private property,” which reduced the gap between the nobility and the people, because not just nobles were from then on allowed to accumulate wealth, but also ordinary people. This led to a point where the nobility started to depend on the new financial intermediaries, shifting the dependency-relations.27_{To grant the right} to own property also meant the development of stock markets, as Ludwig von Mises argued: “There can be no genuine private ownership of capital without a stock market,” making capital available to more people.28_{Joseph Schumpeter concluded: “Capitalist evolution first of all} destroyed, or went far towards destroying, the institutional arrangements of the feudal world” thanks to tools such as competition and regulations.29_{This freedom remained incomplete,} however, since it just enhanced the idea of negative freedom, where one is free from something and not hindered. It did not ensure real, positive freedom, where one can choose from options and is free from systemic domination, where “no one is able to interfere” or limit the available options.30

Another relevant tool that helped freedom and equality was the introduction of “limited liability” for corporations. Business starters and owners gained freedom by not having to fear losing everything in case of bankruptcy. Karl Marx, known for his criticism of capitalism, appreciated the concept and considered this as a “point of transition” to socialism, because limited liability helped

26_{Jeffrey D. Sachs, “Consolidating Capitalism,” Foreign Policy, no. 98 (Spring 1995): 54–56,}

https://doi.org/10.2307/1148957.

27_{Larry Neal, The Rise of Financial Capitalism: International Capital Markets in the Age of Reason, Studies in Monetary and}

Financial History (Cambridge: Cambridge University Press, 1993), 4.

28_{Murray N Rothbard, Making Economic Sense (Auburn, Ala.: Ludwig von Mises Institute, 2006), 426. Van Mises added:}

"there can be no true socialism if such a [stock] market is allowed to exist."

29_{Schumpeter, Capitalism, Socialism and Democracy, 135.}

30_{Sean Irving, “Hayek’s Neo-Roman Liberalism,” European Journal of Political Theory, July 17, 2017, 4,}

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separate the management from ownership.31_{Through the limitation of liability, individual risk was} decreased, to the extent that large projects such as railways and the heavy industries were able to develop and fuel the previously mentioned technological progress. Following Max Weber’s argument, capitalism and its Protestant work ethic also had an equalizing, secularistic, effect. This does not mean that it achieved true equality with equal opportunities or possibilities. But in terms of power relations, secularism opened up the way to less hierarchical relations than had been embedded in the Catholic tradition, allowing more equality between clerical and ordinary people.32 Some scholars, such as Francis Fukuyama, even go as far to claim that “capitalist economies tend to break down many conventional and cultural barriers to equality”: While “a century of Marxist thought has accustomed us to think of capitalist societies as highly inegalitarian, […] the truth is that they are far more egalitarian in their social effects than the agricultural societies they replaced.”33_{Noteworthy, Marxism, just as the approach of this thesis, does not deny the} achievements of capitalism, but wants to develop it further. However, here the argument is that the next step should be neither socialism nor communism, but a system with prices that more accurately internalize negative externalities and strives for regenerative growth.

To conclude, some arguments have been brought forward that suggest that capitalism has enabled positive developments regarding economic prosperity, equality, freedom, peace, health, and technological progress. Believers who think that capitalism has enabled this are sometimes called “Cornucopians,” who “view technology, economic growth, and market forces as the saviors.”34 This fanatic followership, however, seems to disregard the many remaining flaws, and that capitalism’s development has never been a linear or finished process. Notably, the previous representation of capitalism also comes from a privileged, European, white, male individual who probably wants to feel less guilty about the injustice outside of the Western world. It partly ignores the complexity that especially colonialism has meant – such as the costs people paid because of exploitation, which are innumerable. But the point is not to defend capitalism, or claim it to be just, but

merely to acknowledge its relative achievements. Controversial scholar Steven Pinker has a point when he

states that “progress has a way of covering its tracks. As our moral standards rise over the years,

31_{Ha-Joon Chang, 23 Things They Don’t Tell You about Capitalism (London: Allen Lane, 2010), chap. 2. [Due to the}

pandemic induced closure of libraries I occasionally had to make use of digital versions of books which do not always indicate page numbers, only chapters. My apologies.]

32_{Max Weber, Protestant Ethic and the Spirit of Capitalism (Hoboken: Taylor and Francis, 2013), chap. 5.} 33_{Fukuyama, The End of History and the Last Man, 290.}

34_{Paul A. Samuelson and William D. Nordhaus, Economics, 19th ed, The McGraw-Hill Series Economics (Boston:}

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we become alert to harms that would have gone unnoticed in the past” – luckily this is the case.35 Overall, we can say that in the 21st_{century, “the idea of a divided world with a majority stuck in} misery and deprivation is an illusion.”36_{What role capitalism plays in this remains up for discussion,} but the argument is made that working within this system is an option, and we shall keep in mind that “when things are improving we know we are on the right track,” but also “that things can be both better and bad.”37_{This is what the following sub-chapter will deal with: what has to become} better without being bad?

2.2. Rethinking Capitalism

This sub-chapter will start with the argument that capitalism is without a feasible alternative (2.2.1.) and should be the starting point for a transformation towards a healthier form for the environment and society. For that, some of the many flaws of the system will be highlighted, beginning with the oversimplification (2.2.2.) that has contributed to one of the biggest social challenges, inequality and unfairness (2.2.3.). Then, the unhealthy relation to the concept of growth will be discussed (2.2.4.), which leads to the externalization of important aspects of economic activity causing harm to society and the environment (2.2.5.). Certainly, there are many more flaws. Be it the role of finance, which has shifted from “transferring existing wealth” to “creating new wealth,” the lack of democratic representation or the role of large companies and lobbyism.38_{However, the} previously mentioned points are more directly related to the idea of true prices, and will therefore remain in the focus. Finally, a link is made to the theory I propose: that prices are the crucial, most effective, and unavoidable tool to internalize the negative externalities capitalism currently is not dealing with and that they can create a system wherein a regeneratively growing economy stands aside ecology and greater equality.39

2.2.1. Inevitability of Capitalism?

To quote Max Weber, the fact that capitalism has been common to “all sorts and conditions of men at all times and in all countries” supports the idea that some traits of capitalism are inherent

35_{Pinker, Enlightenment Now, 207; Jason Hickel, “Bill Gates Says Poverty Is Decreasing. He Couldn’t Be More Wrong,”}

The Guardian, January 29, 2019,

https://www.theguardian.com/commentisfree/2019/jan/29/bill-gates-davos-global-poverty-infographic-neoliberal [Accessed June 24, 2020].

36_{Rosling, Rosling, and Rönnlund, Factfulness, 31.}

37_{Bjørn Lomborg, The Skeptical Environmentalist: Measuring the Real State of the World (Cambridge; New York: Cambridge}

University Press, 2001), chap. 1; Rosling, Rosling, and Rönnlund, Factfulness, 74.

38_{Mariana Mazzucato, The Value of Everything: Making and Taking in the Global Economy (London, UK: Allen Lane, an}

imprint of Penguin Books, 2018), Preface.

39_{William McDonough and Michael Braungart, Cradle to Cradle: Remaking the Way We Make Things (London: Vintage}

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to humankind and might be without a possible alternative.40_{He thinks that the “impulse of} acquisition, pursuit of gain” is a part of human nature and not particularly to capitalism; he also denies “greed” being “identical with capitalism.”41_{Also Deirdre McCloskey claims capitalism and} the urge to compete to be inherent to human behavior, and suggests that it be considered as “an ancient human practice.”42_{Alfred Marshall concludes that “human wants and desires are} countless,” but also that the human being does not just desire “larger quantities of the things […], but better qualities of those things,” supporting that the quest for growth seems to be inherent, but also acknowledging that the “kind of growth” matters.43

Looking at the most commonly discussed alternatives, socialism or communism, the debate often surrounds world history’s failed attempts.44_{As Boris Yeltsin, long-term member of the Communist} Party in Soviet Russia and later Russia’s first president, said in 1991 about the “Marxist experiment”: “it has simply pushed us off the path the world’s civilized countries have taken. This is reflected today, when 40 percent of the people are living below the poverty level.”45_{The question} arises, therefore, whether a real socialist society can even exist, or whether it remains an “ingeniously conceived structure […] but a house of cards.”46_{Observing, for instance,} self-declared socialist China, their opening up to the world’s markets and installing stock-markets contradict the socialist understanding of ownership and confirm what Ludwig von Mises argued, that “there can be no true socialism if such a [stock-]market is allowed to exist.”47_{According to} Francis Fukuyama, “despite the bad moral odor that capitalism had had […] its ultimate victory as the world’s only viable economic system” is nowadays clearer than ever.48_{Even Karl Marx and} Friedrich Engels acknowledged that “the bourgeoisie, during its rule of scarce one hundred years, has created more massive and more colossal productive forces than have all preceding generations together.”49_{That massive productive forces do not necessarily mean more prosperity in a society,} or a healthy environment, is one of the factors that will be discussed hereafter.

40_{Weber, Protestant Ethic and the Spirit of Capitalism, xxxi.} 41_{Weber, xxxi–xxxii.}

42_{Deirdre N. McCloskey, Bourgeois Equality: How Ideas, Not Capital or Institutions, Enriched the World (Chicago: The}

University of Chicago Press, 2016), chap. 11.

43_{Alfred Marshall, Principles of Economics, 8th ed. (Houndmills, Basingstoke, Hampshire: Palgrave Macmillan, 1920), 73,}

http://link.springer.com/book/10.1057/9781137375261.

44_{There are of course more alternative concepts such as feudalism, participatory economics, anarchistic economics,}

Kibbutz etc.

45_{Fukuyama, The End of History and the Last Man, 89.}

46_{Gottfried Haberler, “Marxian Economics in Retrospect and Prospect,” Zeitschrift Für Nationalökonomie / Journal of}

Economics 26, no. 1/3 (1966): 81.

47_{Rothbard, Making Economic Sense, 426.}

48_{Fukuyama, The End of History and the Last Man, 90.}

49_{Karl Marx and Friedrich Engels, The Communist Manifesto, ed. Jeffrey C. Isaac, Rethinking the Western Tradition}

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2.2.2. It Is Not That Simple

Doubt of capitalism’s success story remains, and there are many valid reasons to believe that the story of capitalism is incomplete or even untrue. Even when accepting that the quality of life, based on health care advances, technological progress etc., might have improved, the question of subjective well-being has to be raised. Contrary to what the positive representation of growth in the ‘Preston-curve’ suggested, Richard Easterlin first empirically showed that income and happiness are not necessarily related.50_{The seemingly objective presentation of quality-of-life} indicators disregards an important possibility, that “maybe the world is getting better, but not better enough, or in the right ways.”51_{This problem is also addressed by Marxism, recognizing} that capitalism and its models consider the “explanation of the social world” as irrelevant.52_The social world, i.e. well-being and unquantifiable factors like happiness, is ignored and replaced by quantified indicators and the concept of presumably rational agents, which are seen to strive only for individual utility maximization, creating models that try to simplify the world forgetting about the “social reality.”53

Maybe this social world, the environment and the well-being of its individuals, are exactly what matters. Considering the economy as the enabler for the “pursuit of happiness,” the question arises whether, instead of this, extensive rent-seeking of elite individuals has become the main goal; as Ha-Joon Chang says: “the means have become the ends.”54_{As long as this social reality, the social world}

and the well-being within it, is externalized in the economic system, capitalism will not lead to more happiness, but just to financial wealth accumulation. A fundamental replacement of the goals of capitalism, away from

its individualism, towards a collectiveness, is desirable, but difficult. However, acknowledgment of the social world and the environment within the capitalist system can already shift the general mindset – where true prices step in, they aim to extend the pure economic function of prices and call for an inclusion of all costs and benefits to nature and society. We have to accept the pluralistic nature of our existence and apply and include it in economics, moving away from a pure financial focus, the simplifications of the “homo economicus,” its rational decisions and humans’ supposed

50_{Richard Easterlin, “Does Economic Growth Improve the Human Lot? Some Empirical Evidence,” in Nations and}

Households in Economic Growth: Essays in Honor of Moses Abramovitz, ed. Paul A. David and Melvin W. Reder (New York:

Academic Press, Inc., 1974).

51_{Joshua Rothman, “Are Things Getting Better or Worse?,” The New Yorker, July 23, 2018,}

https://www.newyorker.com/magazine/2018/07/23/are-things-getting-better-or-worse [Accessed June 24, 2020].

52_{Wallerstein, “The Rise and Future Demise of the World Capitalist System: Concepts for Comparative Analysis,”}

387.

53_{Wallerstein, 388.}

54_{New Economic Thinking, The Nature of Economics: Economics for People with Ha-Joon Chang, 2019,}

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egoism. We have to imagine an “economy based on satisfying human needs instead of profits.”55 Adapting pricing could be a way to reflect more than just profit-oriented factors in the capitalist system, while sticking to the main workings of it.56_{What prices reflect currently is just a bit too} simple.

2.2.3. Inequality and Unfairness

While the first part of this chapter highlighted that capitalism had opened the path towards greater equality, the reality is that there remains a tremendous economic, social and political inequality in capitalist societies all over the world. By placing economic wealth as the highest good, instead of overall well-being, we have come to face high levels of inequality that are visible in discrimination and a widening gap between rich and poor. Nobel laureate Angus Deaton acknowledges that outcomes of market processes can be inequal, but he further specifies the problem and highlights that the “unfairness” that people perceive, such as the unfavorable treatment of minorities, is an even larger problem.57_{Inequality is also famously discussed by Thomas Piketty, who observes the} cleavages between income and purchasing power of different groups and concludes that, e.g., in the United States “the top thousandth […] increased their [income] share from 2 to nearly 10 percent over the past several decades,” while at the same time the “average person’s purchasing power stagnated.”58_{Also other researchers, such as Mariana Mazzucato highlight that “between} 1975 and 2015 real US GDP – the size of the economy adjusted for inflation – roughly tripled from $5.49 trillion to $16.58 trillion. During this period, productivity grew by more than 60 per cent. Yet from 1979 onwards, real hourly wages for the great majority of American workers have stagnated or even fallen.”59_{Piketty underlines the permanence of this problem, further analyzing} that as long as the return on capital is higher than the economic growth, the rich will just become richer, because “inherited wealth grows faster than output and income.”60

The implications this has for power relations, resulting in discrimination, exploitation and abuse, are large. Following Marxist thought, who has the power, i.e. the capital, will succeed because the

55_{Fred Magdoff and Chris Williams, Creating an Ecological Society: Toward a Revolutionary Transformation (New York:}

Monthly Review Press, 2017), chap. 11.

56_{Concepts like Gross National Happiness, or pricing socially valuable activities, could support this approach; the}

focus of this thesis lies, however, on the environmental world.

57_{Angus Deaton, “Unfairness, Not Inequality, Is the Real Problem,” The Sunday Times, December 24, 2017,}

https://www.straitstimes.com/opinion/unfairness-not-inequality-is-the-real-problem [Accessed June 24, 2020].

58_{Thomas Piketty, Capital in the Twenty-First Century, trans. Arthur Goldhammer (Cambridge Massachusetts: The}

Belknap Press of Harvard University Press, 2014), 319–20.

59_{Mazzucato, The Value of Everything, Preface.} 60_{Piketty, Capital in the Twenty-First Century, 25–26.}

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ideological narrative can be easily influenced.61_{Steven Lukes explains this with the idea of a “third} face of power” and argues that an actor can control another’s “thoughts and desires” and “also exercise power over him by influencing, shaping, or determining his very wants.”62_{This power} cannot just be exercised by states, but also the “world of business.” 63_{It is not unlikely that this} has solidified the idea of an inherently unequal meritocratic society in which the wealthy and educated deserve their elite status because of a superior work ethic and abilities. While this thesis focuses more on reducing environmental damage, true prices can have the power to change this as well, in the form of, for instance, proper true wages. This highly ideological and political question is undoubtedly one of the most pressing failures of capitalism that urgently needs to be addressed.64

2.2.4. “Growth for the sake of growth is the ideology of the cancer cell”65

The pure focus on instant monetary profit through growth raises the question of whether it would not be “better to halt the relentless pursuit of growth in the advanced economies and concentrate instead on sharing out the available resources more equitably?”66_{We have reached a point where} “financial rationalism often overcomes common sense,” where the idea is “that profit itself is a good thing whatever the activity, whenever the occasion.”67_{This is problematic, because the} current idea of profit fulfils a purely economic goal, and disregards the earlier mentioned well-being of people and the environment we are living in. The problem is a systematic one, because “today’s industrial infrastructure is designed to chase economic growth,” and at the same ignores, or even worsens, “vital concerns, particularly human and ecological health, cultural and natural richness, and even enjoyment and delight.”68_{The focus on economic growth can only result in} “never-ending, ever-increasing consumption.”69_{It is sad that we have reached a state as society} where growth of having more things is valued higher than “growth” of time to do the things one really values.70_{Also, the way we currently consume is linear and not executed in a circular fashion,}

61_{Andrew Heywood, Political Ideas and Concepts: An Introduction (New York: St. Martin’s Press, 1994), 100.} 62_{Steven Lukes, Power a Radical View (London: Macmillan Education UK, 2005), 27.}

63_{Doris Fuchs and Markus ML Lederer, “The Power of Business,” Business and Politics 9, no. 3 (December 2007): 1–}

17, https://doi.org/10.2202/1469-3569.1214.

64_{Thomas Piketty, Capital and ideology, trans. Arthur Goldhammer (Cambridge, Massachusetts: Harvard University}

Press, 2020), 7.

65_{Edward Abbey, The Journey Home: Some Words in Defense of the American West (New York, NY: Plume, 1991), 183.} 66_{Tim Jackson, Prosperity without Growth: Foundation for the Economy of Tomorrow, 2nd ed. (Oxon: Routledge, 2017), 4.} 67_{Magdoff and Williams, Creating an Ecological Society, chap. 3.}

68_{McDonough and Braungart, Cradle to Cradle, 43.}

69_{Magdoff and Williams, Creating an Ecological Society, chap. 2.}

70_{Rutger Bregman and W Hansen, Gratis geld voor iedereen: over het basisinkomen, de 15-urige werkweek en een wereld zonder}

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wherein consumed products are reclaimed so their resources can be used again and add value (back) to the lifecycle from which they were taken.

As argued earlier, capitalism might by now take “more from less” and has become more efficient, “since raw materials cost money, profit maximizing companies are particular keen to find ways to use few of them.”71_{However, this does not make the overall resource consumption effectively} sustainable and ignores that non-regenerative resources remain finite – the economy is still far from the dream of decoupling growth from environmental destruction. As long as economies need to grow this way, they will consume more resources. If this growth, and its indicators, such as GDP,

would include societal well-being and environmental health, this could realign the focus away from pure economic success. Currently, the GDP still means that “car accidents, hospital visits, illnesses and toxic spills

[Exxon Valdez oil spill in 1991 increased Alaska’s GDP] are all signs of prosperity.”72_{As the case} study will discuss later, the GDP of “any country has a direct correlation with the amount of e[lectronic]-waste” that is produced in that country. 73_{We have to “change the goal,” because growth}

can be qualitative and regenerative: “more trees, more species, greater diversity and more complex

resilient ecosystems” are all something we should strive for instead.74_{True prices that include what} we actually value would enable this healthy growth.

2.2.5. Privatization of Profits and Socialization of Costs: Negative Externalities

The main point of criticism of capitalism that this thesis deals with are the costs that arise through economic activity, but which are not considered.75_{This is mainly because the costs do not directly} affect the individual producer’s profit. Hence, while voluntary exchange and markets usually deal with costs through prices, “they don’t deal well with externalities.”76

Since profit orientation usually seeks for instant gratification, it also means that shareholders or investors “often care the least about the long-term future.”77_{For instance, electronic product} producers’ use of unrecyclable plastics only starts to become a problem once the product reaches the end of its lifecycle. A more prominent example are airlines emitting large amounts of

71_{McAfee, More from Less, 234.}

72_{McDonough and Braungart, Cradle to Cradle, 37.}

73_{Amit Kumar, Maria Holuszko, and Denise Crocce Romano Espinosa, “E-Waste: An Overview on Generation,}

Collection, Legislation and Recycling Practices,” Resources, Conservation and Recycling 122 (July 2017): 32, https://doi.org/10.1016/j.resconrec.2017.01.018.

74_{McDonough and Braungart, Cradle to Cradle, 92; Kate Raworth, Doughnut Economics Seven Ways to Think like a}

21st-Century Economist (London: Penguin Random House UK, 2018), chap. 1.

75_{Hashimzade, Black, and Myles, Oxford: A Dictionary of Economics, 192.} 76_{McAfee, More from Less, 186.}

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greenhouse gases, which fuels the climate crisis, but might not be visible right away. Just because the negative impact of economic activity is not immediate does not mean it does not exist and that it will not have a negative impact on the initial producer. In general, the capitalist market economy largely ignores what cannot, or is not, quantified. “Loss of resources, cultural depletion, negative social and environmental effects, reduction of quality of life – these ills can all be taking place,” because it is difficult to quantify the suffering of people, animals, or the environment.78_{This leads} to the main claim of this thesis, that by internalizing these negative side-effects into the price system, they could be reduced or, because of sustainable and fair alternatives, done away with completely. How this looks in practice will be discussed in chapter 4 and more concretely in the case study in chapter 5. Before that, the economic concept of a Circular Economy, which will be used as the framework for this theory will be explained.

The conclusion of the previous two sub-chapters is that the system must change. However, “progressophobia” and destructive capitalism critique do not help as long as no alternatives are developed.79_{Maybe, we can appreciate that capitalism has shown us the power of innovation and} competition, or the beauty of peace through interdependence, and learn from it to correct the system and maintain the positive developments within a new form of it. Starting with correcting prices might be the most pragmatic step in this direction. The most fitting framework, that is able to guarantee a sustainable future is the concept of the Circular Economy that will be described in the following sub-chapter.

2.3. Circular Economy: A Sustainable Future

The goal of the previous sections was to show that capitalism is flawed, but also acknowledge that it has achieved positive developments in certain respects. To diminish the flaws, and especially to counter environmental destruction, I suggest changing the system from within. The Circular Economy concept works within the capitalist system and strives to make it sustainable and regenerative. The use of true prices can be the crucial stepping stone towards a more sustainable world in which the Circular Economy constitutes the economic framework. This framework will now be defined and explained.

We seem to be witnessing an important shift in societal values that puts issues such as the environment, well-being and equality into the center of discussion. In the current COVID-19

78_{McDonough and Braungart, Cradle to Cradle, 37.} 79_{Rothman, “Are Things Getting Better or Worse?”}

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pandemic it is becoming more visible than ever, and a variety of institutions and individuals are demanding that we should use this situation to develop capitalism further and move forward with innovations such as plural economics, the de-growth movement, or ecological modernization.80_A concept that had already gained traction before is the Circular Economy, which “aims to overcome the take-make-dispose linear pattern of production and consumption,” and tries to reach an economic state in which resources are maintained in the cycle as long as possible, and products reused, repaired and recycled.81_{The European Union (EU) plans in its renewed “Circular} Economy Action Plan” from March 2020 to create “regenerative growth,” limit “resource consumption” and double “circular material use rate.”82_{Also the Chinese National People’s} Congress in its “11th_{and 12}th_{five-year plans for National Economic and Social Development”} aims to stimulate “the activity of reducing, reusing and recycling in production, circulation and consumption.”83_{Thus, the concept appears to be popular, but especially the EU’s definition brings} up questions about how continuous economic growth and consumption are compatible with the sustainability goals. The essential features of the Circular Economy concept that will be discussed are: the acknowledgment that all resources are finite (2.3.1.); to “close the loop” in order to not destroy resources and achieve sustainability (2.3.2.); and the demand for policy measures that do not just support efficiency, but rather decouple economic growth from natural destruction, creating regenerative growth (2.3.3.).84

2.3.1. Limits of Nature

Acknowledging the finiteness of resources can unfortunately not be taken for granted as our current economic behavior shows. While the worry of limited resources was already famously addressed in the report Limits to Growth by the Club of Rome from 1972, especially the global fossil fuel consumption has been growing rapidly since the 1950s (see Appendix 2).85_{While also the} limits of resources such as fossil fuels can to some extent be “expanded” by new discoveries or

80_{Andrew Simms, “Economics Is a Failing Discipline Doing Great Harm - so Let’s Rethink It,” The Guardian, August}

3, 2019, https://www.theguardian.com/commentisfree/2019/aug/03/economics-global-economy-climate-crisis [Accessed June 24, 2020]; “Seize the Moment,” The Economist, May 23, 2020, 7; Kate Whiting, “How the World Can ‘reset’ Itself after COVID-19 - According to These Experts,” World Economic Forum, June 3, 2020, https://www.weforum.org/agenda/2020/06/covid19-great-reset-gita-gopinath-jennifer-morgan-sharan-burrow-climate [Accessed June 24, 2020].

81_{Roberto Merli, Michele Preziosi, and Alessia Acampora, “How Do Scholars Approach the Circular Economy? A}

Systematic Literature Review,” Journal of Cleaner Production 178 (March 2018): 703, https://doi.org/10.1016/j.jclepro.2017.12.112.

82_{European Union, “Circular Economy Action Plan: For a Cleaner and More Competitive Europe,” 4.} 83_{Merli, Preziosi, and Acampora, “How Do Scholars Approach the Circular Economy?,” 704.}

84_{For more information on the history, an extensive literature review and discussion of the definition, see Rizos et al.,}

The Circular Economy: A review of definitions, processes and impacts, (2017), 2-8.

85_{Donella H. Meadows, ed., The Limits to Growth: A Report for the Club of Rome’s Project on the Predicament of Mankind}

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technological innovations (e.g. fracking), they remain finite, or cannot regenerate quickly enough. In the case of collective or public goods Paul Samuelson’s definition can help understand why some resources are considered to be infinite. The idea of “public goods,” which is central in classical and neo-classical economics, is that “each individual’s consumption of such a good leads to no subtraction from any other individual’s consumption of that good.”86_{This leads to the fact} that resources such as water, air, soil, or the atmosphere are considered to be so abundant that their pollution makes, at least economically, no difference. However, it has to be acknowledged that these goods are not endless, and in fact, their pollution and destruction can have large negative impacts, as the pollution of the oceans, the destruction of the ozone layer, or the pollution of the air and atmosphere with greenhouse gases show.

A comprehension of finiteness is therefore a fundamental prerequisite for the Circular Economy concept. The goal is to reuse instead of over-exploiting resources or having to dispose and literally bury them.87_{It is, however, also made clear that, as long as resources can regenerate, their} exploitation is acceptable and needed for economic development. This is, for example, the case for wind-, sun- and hydro-generated energy, which give hope for regenerative energy. The finiteness of other resources and materials, like rare earths, will most likely constitute a bigger challenge to regeneration in the future, making increased recycling rates inevitable.

2.3.2. Close the Loop

The central goal of the Circular Economy is to close the loop of product- and resource-lifecycles. Resources will have to be used for economic growth, and especially for infrastructure or food production, but what is being used has to remain in the Circular Economy and not leave the loop, for as long as possible. This is visualized in Figure 1. On the left the lifecycle of organic-/renewable-, and on the right that of technical-/finite-materials, such as metals, are pictured. A closed system is achieved on the left when everything is consumed and naturally renewed. In the case of technical materials, everything should be reused, repaired or recycled.88_{In its ideal state,} the cycle would work as a “perpetual motion machine.”89_{Hereby, it should always be kept in mind} whether it is “actually recycling, or maybe downcycling.”90

86_{Paul A. Samuelson, “The Pure Theory of Public Expenditure,” The Review of Economics and Statistics 36, no. 4}

(November 1954): 387.

87_{Merli, Preziosi, and Acampora, “How Do Scholars Approach the Circular Economy?,” 704.}

88_{Some scholars even go as far as to reject the idea of a “consumer” because, besides food and liquids, most products}

are not consumed but disposed at the end of the lifecycle (McDonough and Braungart, Cradle to Cradle, 28).

89_{Raworth, Doughnut Economics Seven Ways to Think like a 21st-Century Economist, 222.} 90_{McDonough and Braungart, Cradle to Cradle, 38.}

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Figure 1: Ellen MacArthur Foundation, Infographic: Circular Economy System Diagram. https://www.ellenmacarthurfoundation.org/circular-economy/concept/infographic [Accessed June 24, 2020]

Other related concepts, like “cradle to cradle,” take the idea a step further and aim to not just close the loop. They criticize that “environmental approaches are still based on the idea that human beings are inevitably destructive.”91_{They demand a shift of thinking, towards where human beings} do not just “not-harm” but contribute and add value to the environment. Economic activity should be “like good gardening, it is not about saving the planet but about learning to thrive on it.”92_In practice that means being “climate positive” by, for instance, capturing greenhouse gases or contributing to environmental prosperity through (re)forestation.93

2.3.3. Regenerative Growth

Regenerative growth means that economies should keep growing and profit from the positive developments economic growth can enable (see chapter 2.1.). However, the resources that this growth requires have to receive enough time to regenerate – regeneration has to be larger and faster than consumption. Because of a lack of regenerative growth and policies to deal properly with depletion and pollution, current attempts to create more sustainability often aim for more efficiency but lack overall efficacy.94_{For instance, designing airplanes that emit lower emissions is}

91_{McDonough and Braungart, 155.} 92_{McDonough and Braungart, 4, 11.} 93_{McDonough and Braungart, 241.} 94_{McAfee, More from Less, 73.}

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good. Nevertheless, they keep emitting large quantities of greenhouse gases, which are usually not compensated, leading to efficient airplanes being overall ineffective. To avoid this, the Circular Economy concepts calls for a decoupling, i.e. economic growth without corresponding growth of environmental destruction.

Even though the concept is often connected to de-growth or post-growth theories, the Circular Economy does not per se oppose growth.95_{It sees the striving for growth as a motivation to} innovate. For example, business models related to the “sharing economy,” or more accurately, “access economy,” sell access to their products – or the “product-as-a-service” – instead of ownership, as can be seen in car-sharing, or leasing schemes.96_{While the initial production still} requires resources, the producer remains in possession of the product and can, hence, reuse, recycle and not contribute to the linear make-take-dispose behavior. 97_{The same accounts for the} internet, thanks to virtual accessibility and reproduction that comes – aside from energy costs – almost without the use of resources, e.g., in the case of music and movie streaming.98_{Since the use} of the product or service is still being sold, a more qualitative economic growth and consumption is enabled. At the same time, it reduces the amount of resources used. Nevertheless, there is no guarantee that the resources that are being used will be put back into the cycle of the Circular Economy, calling for enforcing regulations.

The obvious question arising is how this concept can be incentivized and replace the linear economy. Environmental destruction often takes place where the consequences are not immediately visible, hampering the awareness of the problem. This thesis argues that the problem of awareness will persist as long as the negative impacts are not putting pressure on the global market mechanism. This pressure can only be created when the damage that is done is priced and the costs are therefore assigned to the originator. The obvious step, therefore, is to internalize negative externalities, making use of the interconnectedness of the pricing system to incentivize a change and the creation of more sustainable business models. Things like putting access instead of consumption in focus, using renewable materials, and creating longer-lasting qualitative products that are repairable and recyclable require true prices that reflect true costs.

95_{Kersty Hobson and Nicholas Lynch, “Diversifying and De-Growing the Circular Economy: Radical Social}

Transformation in a Resource-Scarce World,” Futures 82 (September 2016): 15–25, https://doi.org/10.1016/j.futures.2016.05.012.

96_{Raworth, Doughnut Economics Seven Ways to Think like a 21st-Century Economist, 264.} 97_{McDonough and Braungart, Cradle to Cradle, 174–75.}

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Before this argument is made, it is necessary to look into the details of how pricing works. In the following chapter, the aggregation of prices will be explained; how costs, the market and value relate to it; as well as how past approaches have tried to internalize negative externalities.

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3. Pricing and Externalities

We have wound up mistaking our representations of wealth for the wealth itself, and our representations of reality for the reality itself […] We have built a cult of the data, and we are now enclosed within. 99

—Nicolas Sarkozy

Even though France’s former president is referring to the GDP – an accumulation of prices paid – as a wrong indicator for wealth, this quote highlights that prices, and more generally the data we use to measure gains and costs, do not reflect the reality in its entirety. This is relevant because the main goal of this thesis is the call to create truer prices that do reflect the reality, including our world’s environment, better. Therefore, the first sub-chapter 3.1. will look at what prices and costs mean, and how they relate to value in the market economy. Afterwards, sub-chapter 3.2. will go through the “History of Internalizing Externalities” to show how economic theories and past as well as contemporary policy initiatives have attempted to deal with negative externalities. This is crucial for the creation of truer prices, because policies will be needed to achieve them, as the fourth chapter will show.

3.1. Composition of Prices: The Market, Costs and Value

Prices are what a seller asks a buyer to pay. Hence the name “ask price” or “offer price.” They work as a compact information transmitter of the seller’s costs and tell us what a product or a service is worth in the market. In our economic system prices are usually expressed in the form of money, a universal commodity which does not have a value in itself. The most important currencies, like the US Dollar or the Euro, are not attached to any kind of commodity with a “real life value,” making them so-called fiat-money. Their (exchange) value exists due to a general public acceptance of it and not due to intrinsic value.100_{They have become “social facts,” something that} “exists independently of the properties of individuals, represent[ing] a determining external force.”101_{This is important, because it has implications for how prices are perceived; they are} somewhat detached from the physical world. Nevertheless, since money, and monetary debt, are able to facilitate exchange and store value, they are an effective instrument to link the present to the future. So, if we aim to keep progress in the economy, “we cannot get rid of money,” debt or prices.102

99_{Philipp Lepenies, The Power of a Single Number: A Political History of GDP (New York: Columbia University Press,}

2016), X.

100_{Hashimzade, Black, and Myles, Oxford: A Dictionary of Economics, 197.}

101_{Nicholas Abercrombie, Stephen Hill, and Bryan S. Turner, The Penguin Dictionary of Sociology, 5th ed. (London; New}

York: Penguin, 2006), 356.

102_{John Maynard Keynes, General Theory of Employment, Interest and Money. (Hertfordshire: Wordsworth Editions}

The Price of Destroying the Future How true prices can incentivize a sustainable Circular Economy: the case of electronic waste