Four Points for the Next Generation

For my visit to my friend Simon Hauger's new school earlier this month, the Sustainability Workshop down at the Navy Yard, I was expecting to get a tour, meet some students, and grab lunch. I was not expecting to give an impromptu talk to his eager beavers. But within minutes of arriving, Simon has informed me that I was to address his school before we headed out to lunch. Needless to say, I couldn't help but think about what to say, even as I was being toured around by one of Simon's star students and hearing about the projects she and her classmates were working on. (Did you know one of the student teams even downloaded, read, and incorporated my vacant land study in their presentation? There are people in my own firm who haven't looked at my vacant land study!)

Anyway, I pulled something together and the students seemed to enjoy it. Here's what I focused on:

1) Competition matters. Everywhere I was toured, student teams were prepping for some competition. And that's good, because it's a huge motivator. That's what makes capitalism so effective, as the old ad goes, because when businesses compete for your business, you win. I happen to think competition is good in the public sector, too, like President Obama's Race to the Top in education reform.

2) Innovation matters. Another fundamental aspect of capitalism is its disruptiveness. At some point, someone decided to stop making horses and buggies a little bit better than the next person, and decided to start making the engines needed to power cars. Of course, the invention of the car put the horse and buggy manufacturers out of business and cost a lot of jobs, but no one would say we are worse off as a result. Innovation is what is needed to power our economy, and I was heartened by the amount of innovative energy among these students.

3) Sustainability matters. Walmart, however vilified, finally got religion a few years back, when they realized that being green is good business, and is at the core of its business model, which is to wring inefficiency out of the system and thus drive down costs. I liked that many of the student projects focused on how to get rid of waste (example: the waste involved in a light blub giving off heat rather than just light) and do so in a way that turned a profit.

4) Policy matters. Being a nerdy economist, I mentioned the word "externalities" at the end of my 10-minute talk. But externalities are why policy matters, because the private sector doing its bidding doesn't always get to an efficient outcome for all, since sometimes regulations and policies and taxes and subsidies are needed to make sure that the public good is being preserved even as private gains are being extracted. Think open space preservation or pollution regulation or public education, things we are better off for as a society but which we would not have if we left things to the free markets to clear.

I concluded my talk by saluting the students for their moxie, and encouraged them to keep on exploring. I also asked them to keep working hard, because us old heads need their blood, sweat, toil, and tears to keep our economy going. If there are more of these great young kids out there, my hope for the future of this country is high.