The Solution Economy: Problem Solving Everyone Can Agree On

Oct 29, 2013Azi Hussain

The public-private partnerships of the solution economy could allow conservatives and liberals to agree on solutions to social problems, for once.

There is a quiet transformation of our society going on that is redefining how we solve our most entrenched problems. A recently published book, The Solution Revolution by William Eggers and Paul Macmillan, tracks this transformation, the rise of the “solution economy.” The solution economy is a paradigm in which societal problems are addressed not only by the government, but also through multi-sector approaches. The public, social, and private sectors are all involved.

One fascinating example of the solution economy at work is Recyclebank. Recyclebank is a company founded in 2004 by two young people with a simple, but important environmental goal: increasing recycling rates. Instead of operating through government, they created a viable business model by partnering with recycling bin makers, waste hauling companies, and businesses to incentivize recycling. Households in neighborhoods in which Recyclebank operates have recycling bins that are equipped with a chip that weighs the goods in the bin. When the waste hauling companies come pick up the recycling, they take the data from the chip and send it to Recyclebank. Recyclebank then credits that households account with points that can be spent on discounts offered by the network of business that Recyclebank has partnered with. Recyclebank’s model has proven to be devastatingly effective, raising recycling rates in some neighborhoods from under 10% to over 90%. Governments have rightly supported Recyclebank by helping expansion and enrollment. Recyclebank exemplifies how a social mission can be achieved through the private sector and with government support. You can see some more examples of the solution economy at work here.

In the solution economy, markets are created around the very problems considered to be market failures. Participants leverage technology, use innovative business models, and trade in novel currencies such as reputation and social impact to create these markets. Traditionally, government’s role has been to address these market failures, but the solution economy shifts this burden to society-at-large.

So we are at a point where problems traditionally left to the government are increasingly being shouldered by the private and social sectors. It may seem that the solution economy is making government less and less relevant. On the contrary, government policy and partnerships are essential to fostering the solution economy. The question becomes: why should we support the solution economy?

Broadly speaking, the case for the solution economy is a progressive one. The solution economy is the next step in social organization. We are moving from institutions such as governments operating in silos, to creating entire ecosystems to solve problems. The problem-solving capacity of the solution economy is far greater than that of government’s alone. With governments, social organizations, businesses, and individuals all working toward a solution, the results are far more impressive. In fact, it would be nearly impossible to tackle some of our most complex challenges, such as human trafficking, without a multi-sector approach. We need to take the next step forward and fully embrace the solution economy if we want to resolve our deep-seated societal problems.

The case for the solution economy also fits both liberal and conservative ideologies. For liberals, the solution economy can address many of the social issues they care about, such as poverty and opportunity for immigrants, at a much lower cost. This can free up money for governments to concentrate on issues that need greater resources. Plus, when smaller or local programs funded by the solution economy are shown to be effective, governments can incorporate them into various levels of public policy to bring them to scale, introducing a whole new source for government innovation.

Conservatives can also applaud the cost savings introduced by the solution economy, as well as the market mechanisms at play. Not only does the solution economy solve problems, but it also generates tremendous economic value. But most importantly, the solution economy reduces the need for heavy-handed government policy by creating lightweight solutions. Let’s take a look again at Recyclebank. Governments could also impose penalties and slap fines on households with low recycling rates to try to incentivize recycling. The administrative costs would be huge and political support for such policies would be dismal. Recyclebank achieves the same outcome but without burdensome government intervention and much more efficiently. The solution economy can at times be a substitute for the big government policies that conservatives oppose. Supporting the solution economy might be the one thing that both of our political parties can agree on.

Azi Hussain is the Roosevelt Institute | Campus Network Senior Fellow for Economic Development. He is a junior in the School of Foreign Service at Georgetown University majoring in International Political Economy.

 

Business people with jigsaw banner image via Shutterstock.com

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