In the midst of my current search for a job to serve as the basis of my Life after the MBA, one question has been weighing heavily on my mind: what is the best way to use my skills to do “the right thing”? I’m concerned my desire to “change the world” must seem suspiciously naïve, like the glassy-eyed answer of a Miss Universe contestant. But it’s still worthy of consideration.
In The Wealth of Nations, economist Adam Smith proposed that an “invisible hand” guides the market towards the best course of action, based on individual’s motivation to increase their personal well-being. Individuals in the market exchange goods of their own volition based on the benefits they receive from buying and selling goods, and therefore everyone wins. In this context, “the right thing” would appear to be making anything for which people are willing to pay. Free market rules, right? By this logic, any job for which I can get paid must be worthwhile to society, so I should quit my worrying and move on.
It seems simple, but there’s something wrong with this picture: people buy a lot of stuff from which they don’t really gain any real benefit, prodded by misinformation, celebrity endorsements and general consumer lunacy. In short, Smith’s “invisible hand” would appear to be missing a finger or two, allowing unproductive transactions to slip through its grasp and into the market. In addition, the “invisible hand” model fails to value the side effects of transactions which cannot be easily monetized. For example: when I buy gas from a gas station, both I and the station owner gain a benefit – I get gas (and access to convenient transportation), and the owner gets money for his product. However, the side-effect of this transaction to the environment is an un-priced externality – hence, the system is inevitably unbalanced: I buy more gas than I might if I had to pay the “true” cost of gas production and combustion on the environment.
In the context of this example, I think I’d rather be the guy building new engine technology to eliminate those un-priced externalities than the guy selling the gas.