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.)