Wanna know why a Big Mac should cost $200?

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The Value of Nothing

Why Everything Costs So Much More Than We Think

By Raj Patel

HarperCollins, 237 pages, $27

THE title of this new work of pop economics comes from an Oscar Wilde epigram: "Nowadays people know the price of everything and the value of nothing."

It nicely captures the essence of his argument.

Author Raj Patel is an economist who at one time or another worked for the World Bank, the World Trade Organization and the United Nations. British-born, he currently teaches in California.

His previous book, Stuffed and Starved (2008), criticized inequities in the food chain that links producers to manufacturers to distributors and finally consumers. The result, argued Patel, is obesity at one extreme ("the stuffed"), and malnutrition at the other ("the starved").

This volume ups the critical ante. It attacks the very idea of unregulated market economies.

Rarely has an assault on capitalism been so witty, fluent and lucidly argued.

No dull, dense, Marxist dialectical critique here. Sometimes it's persuasive by sheer dint of its charm of presentation.

But only sometimes.

Much of Patel's argument about the failings of markets as a yardstick of value hinges on the notion of "externalities" in modern economic theory.

Externalities are costs borne not by the firm producing a product, but paid for nonetheless via a broader social cost -- in other words "costs that somehow slip through the net of prices."

He highlights McDonald's as an example, arguing that the energy costs of its 550 million big Macs (U.S. sales alone) are picked up not by the corporation or by its customers, but by society as a whole "when we pay the costs of environmental disasters, climate change-related migration and higher health-care costs."

In considering the fast-food industry and industrialized agriculture, Patel makes a convincing argument that many of their costs -- pesticide contamination, nutrient runoff, greenhouse gas emissions -- are being off-loaded by companies onto society.

He cites one study that concludes that if all the indirect costs of making a Big Mac were factored in, a burger should sell for $200.

The heart of Patel's thesis is that markets are fragile and biased constructs, and imperfect valuators, users and allocators of the world's resources.

Transnational industrial trawlers with three-kilometre-long nets that roam the oceans and ravage everything in their paths and the Wall Street merchant banks that flogged asset-backed commercial paper (ABCP) invested in sub-prime mortgages, and which triggered 2008's global financial meltdown, are examples of market failings that differ only in form, not substance, according to Patel.

The hallmark of both is, or was in the case of ABCP, maximization of short-term profit without regard for a tomorrow, he argues.

Patel lands a lot of punches in his critique, punches that carry weight.

However, sometimes he comes unmoored from a sense of balance. Or fails to clarify who and what he's attacking.

His reflexive left-wingish and broad-brushstroke statements about "corporations" are a case in point.

Most corporations aren't the huge nationals and multinationals he's talking about that publicly trade on stock exchanges à la Exxon, IBM or Microsoft.

Most corporations are small-to-medium family-owned businesses -- think your local grocer, realtor, travel agent or dentist.

Nor is there anything inherently nefarious, unethical or illegal about corporations, as he implies. They exist, properly, to limit the liability of business owners and/or to defer taxation on earnings.

Still, Patel scores points -- often eloquently rendered points -- by underlining the unwillingness of big-time corporate capitalism to engage in compromise about, or even acknowledge, the hidden consequences of its actions.

Douglas J. Johnston is a Winnipeg lawyer and writer.

Republished from the Winnipeg Free Press print edition January 2, 2010 H3