The essential premise of the superior role held by economists for competitive markets is that the price of a good or service properly reflects its true costs. Just like placing black tape over your check-engine light does not fix your motor, these costs don’t go away simply because we decide to ignore them. Instead, they are paid by others, often by us all. 

We have discussed many times the significance of food and energy in our economy and our measures of inflation. Let us look at perhaps the two most glaring examples of a violation of the premise that prices include all costs. 

Let’s begin with the price of a hamburger. Here’s something I did not know until recently. For tens of thousands of years, there was nothing special about humans within the mammalian population. We lived within our resource constraints and we could not tailor nature to serve us - until the last couple centuries. 

All of a sudden, the mass of humankind and the domesticated world we harnessed to serve us expanded dramatically. Our human ecosystem now constitutes over 90% of the mammalian world. 

Yet, humans are not the largest component of our ecosystem. By a slight margin, that belongs to cows and steers harnessed to feed us. The human ecosystem dominates terrestrial mammals, and is of a combined mass comparable to the world’s insects. 

The largest component is livestock. Cows live a rather bucolic life, at least until they don’t. Most cattle grown for human consumption live a little less than three years. In their end, they provide us with about 450 pounds of meat. While that steak or hamburger we may enjoy seems like a good value to us, it is underpriced. I’m not referring to the value of any living being that a Buddhist may wish to preserve, nor the health care costs of a diet rich in fat and animal protein. I’m not even describing the cost of diverting land to agriculture destined to be consumed by cows. Today I am only going to describe the hidden carbon costs we incur when we consume goods that are carbon intensive. 

A steer will be harvested at an age of about 30 months on average, and yields about 450 pounds of meat. In the process, it belches, on one end or another, about a quarter metric tonne of methane and breathes out 10.3 metric tonnes of carbon dioxide. Since methane is 28 times more potent as carbon dioxide, this results in emissions of 17.3 tonnes of carbon dioxide equivalent. Domesticated livestock alone produces about 14.5% of greenhouse gas emissions. 

Researchers have calculated the cost of a tonne of carbon dioxide to be approximately $200. This cost imposed on humankind will rise as global warming becomes more acute and costly A single cow then imposes an environmental cost of $3460. Steer sell for about $1,000, so the carbon tax on a steer would almost quadruple its price and raise the price of meat by about $6 per pound. Putting aside other environmental costs such as the energy and emissions arising from growing feed crops and raising and harvesting cattle, humans pay only a small fraction of the costs of meat production. 

We do the same with gasoline. When combusted in our engines, a gallon of gasoline produces about twenty pounds of carbon dioxide. Using the same $200 per metric tonne of carbon dioxide emissions, this equates to an additional cost of gasoline of about $2. Again, this calculation does not include various emissions to explore, extract, refine, and transport gasoline. 

Even the purchase of an electric car does not alleviate our carbon costs. As of October of this year, 60.4% of US electricity is generated from fossil fuels. About 1.65 billion tonnes of carbon dioxide is emitted by fossil fuel power plants, at an additional cost of $330 billion in global warming damage. Our electricity charge would have to rise by about $.12 per kilowatt-hour to internalize this cost. An electric vehicle owner is imposing an environmental cost of about three cents per mile driven, unless they are fortunate enough to consume renewable power or run their home chargers from solar panels. 

These costs avoided by producers of cattle and hydrocarbons are an implicit subsidy. Meanwhile, despite all the pledges of our leaders to curtail petroleum production and hold global warming to 1.5 degrees Celsius (well, we can forget that goal) or 2 degrees Celsius, we continue to drill for more oil. This exploration is despite the fact that we have already discovered sufficient oil and natural gas to meet the needs consistent with keeping global warming at or below two degrees. 

Economists affirm that such production is not environmentally unethical if they are priced at their true social costs. It is unlikely that our nation has the appetite to pay for the true cost of meat and motor vehicles. But, while we may wish to continue to heavily subsidize these activities, we should realize that we will someday, and likely someday soon, begin to pay the legacy costs of these subsidies. Nations make decisions. Economists only ask that we thoughtfully include the cost of our decisions up front so we set the correct priorities to behave efficiently and ethically in the future, with no regrets that we did not respond sooner.