I was flipping through Alec Nove’s The Economics of a Feasible Socialism (revisted) today, looking over my old underlined quotes from 20 years ago. This book is probably one of the dozen or so I’ve read that fundamentally changed the way I think about things. Looking back, this line in particular stands out:
Externalities arise not because of separation of ownership, but because of separation of decision-making units (p. 74).
Tiny sentence with huge implications. This idea is one that, when I read it, I had never seen articulated so clearly or forcefully. The implication is that some of the pathologies of capitalism do not arise because of the ownership structure of firms, or the profit-orientation, but merely from the decentralization of decision-making. As far as I’m concerned, this is something that every environmentalist needs to understand and grapple with, especially those who think that moving away from capitalist firms towards cooperatives is going to do anything for the environment. (Incidentally, the entire chapter in which this line occurs, “Socialism and the Soviet Experience” is invaluable reading.)
I’ll take that as a book recommendation. Always neat to see what texts had a fundamental impact on other people’s adult development. Do you think you could post a list of recommended titles like this one? Even if I never get around to them myself, interesting academic books can make surprisingly good gifts.
Definitely an interesting quote, and sounds like it could be an interesting book.
That said, it seems to me that (lacking context) the quote could as easily indict centralization of decision-making as de-centralization. Reading that, the problem I would expect it to be pointing to is of the decision makers being separate from those impacted by the externalities.
It’s odd, because no doubt with context it turns out that’s not what he’s driving at, at all–but for me that reads as a rendition of one of the core critiques of centralized socialism by anarchists: The viewpoints and motivations of any separate decision-making elite, whether an ownership elite, a technocracy or whatever, will necessarily be different from those of the people on whose behalf they make the decisions. If the people deciding about what to do with the mine tailings are distinct from the people who will get poisoned by the mine tailings, the importance of the mine tailings’ environmental impact will be undervalued. Ergo, the only way to make decisions in people’s interests (environmental or otherwise) is for the people to make the decisions themselves. Some degree of decentralization certainly follows from this.
It should read: separation of decision making units from consequences. Centralisation actually tends to make thing worse, it is not decentralisation which is the problem.
It may make things worse, but not by creating externalities. Rather, bigger decision units have more trouble with internalities.