Cheaponomics

Subtitled 'the high cost of low prices', this informative and entertaining book shows that cheapness is in fact an illusion and that hidden costs show up elsewhere in the system, which he calls cost socialism as opposed to cost externalities. He begins by observing that cheap has two meanings, as illustrated by the remark of his daughter when some plastic toys broke, that these cheap toys sure are cheap! In two telling examples, he points out that Walmart was selling a microwave for $10 so that one could say that one had bought it but not really paid for it. The second example relates to the amount of materials used in the manufacture of a computer: 1000 lb of rock and ore waste, 529 lb of fossil fuels, 49 lb of chemicals and 3,307 lb of water; in addition, there is 772 lb of CO2 equivalents over the life cycle of the machine. It is also worth noting that a Google search is the equivalent of 7 g of CO2 emissions due to the high electricity cost of servers. Another arresting statistic is that the top 3,000 companies in the world created $2.2 trillion worth of environmental damage in 2008.

The three sections of the book cover cheap stuff, cheap economies and communities, and transitioning towards affordability. Two chapters in the first section deal with plastic bags and the high cost of cheap foods. Apparently, 137 million barrels of oil are required to produce a year's supply of plastic bags, which makes it all the more important that more and more jurisdictions are introducing taxes. On the food front, one of the hidden costs is obesity, given that cheapness is associated with the kind of junk foods largely responsible. Already in 2005, $190 billion was spent on obesity related health care expenses in the US, or 21% of the total. Large companies also destroy smaller local shops and, as a consequence, less money is recycled back into the local economy. Cars also have costs to public health and the environment, with 1.3 million deaths annually. The author suggests that we need to redefine prosperity and, in the last chapter, offers 10 recommendations for the good and the affordable. These include reforming political processes by increasing transparency and enhancing democracy, which many other people have also called for. Other important recommendations include encouraging the kind of full employment that creates just and sustainable communities, strengthening policies that protect people, implementing a maximum wage and bringing in more accurate pricing. Overall, this is an important and thought-provoking book and a useful contribution to new economic thinking.