From the CEO
I’ve been thinking a lot about fairness lately, probably because I’ve heard the word used in a few surprising contexts. Now, I suspect that for many people it may not be easy to define as it’s one of those words that sits as much in the heart and stomach as the head. It really is genuinely visceral – which is why you feel it in the gut when it’s used jarringly. And that’s what happened to me recently.
I was in a meeting room and heard someone talking earnestly about the “cost of fairness”. Aside from the immediate questions – how much?, to whom? – it felt a weird phrase to me and so it got stuck in my head.
I now realise that it reminded me of an economic orthodoxy from my student days: the winningly titled ‘equality/efficiency trade-off’. The prevailing view at the time was that the pursuit of equitable/fair outcomes within societies created inevitable system inefficiencies. Why? Because it led to diminished incentive and a ‘leaky bucket’.
Take, for example, a welfare system: the idea is that both the person paying and the person receiving the welfare lose their incentive to work, and that the system itself costs significant sums to administer. In other words, you can have all the fairness you want, but there’s always an economic cost to pay. I think this “mercy arithmetic” is not far below the surface in a lot of the discussion over the energy transition.
I think one result of this way of thinking is that a lot of decision-makers have felt they couldn’t make an economic business case of fairness but nonetheless knew it was too important to ignore. This led to fairness being placed squarely in the category of values and social policy. While I guess that makes some sense, it does rather limit fairness to a strictly moral, rather than also an economic, virtue. It also opens the gate for competing ‘fairnesses’ – i.e. my fairness can differ from yours.
What’s interesting in this context is that the ‘equality/efficiency trade-off’, which 50 years ago was canonical, has now been solidly disproven. Time and again, it’s been shown that while promoting fairness might result in an initial cost to production, this reverses in time.
Importantly, it’s also quite clear now that while inequitable outcomes might create occasional growth spurts, they eventually stunt efficiency. Fairness and efficiency, it turns out, are relational and additive. (In this context, I am reminded that on President Biden’s first day he directed the Office of Management and Budget to ensure that in addition to a standard cost benefit analysis, all regulation must have regard for negative impact on vulnerable people and communities.)
So: I now realise why I had a visceral response to hearing about the ‘cost of fairness’. It wasn’t because I had some moral aversion; it was because the thinking is simply disproven. Fairness isn’t a cost; it’s an investment. And every time my team and I hear someone talking about how much the needs of exposed consumers are costing the transition, it is our job to show that today’s investment is tomorrow’s reward.
Brendan French
Chief Executive Officer
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