Why do we have an economic theory the stresses rationality and a market that stresses irrationality?
Why we probably won’t cut co2
Each person is enmeshed in
Cut in fossil fuel use will disrupt parts of each person’s pattern, and because things are interconnected, it would disrupt probably all. So where is a person to go, how to cope?
The result is we will not cut fossil fuels.
So what do we do?
We need to develop a global capacity to impose uncomfortable actions. This will cross constitutional lines.
This will create local disruptions and loss of life
We need to develop local responses that can respond to local details.
Economics has developed the management of the market but not the management of society in its relationship to nature. Corporations have been active in extracting wealth, while claiming it is creating it.
Putting two and two together – we will understand it but not act. The NewYorker has
“Really waking up, and not just dreaming to ourselves that things will be O.K., has become urgent—beyond urgent, in fact. To paraphrase Victoria’s fire authority: The world is in danger, and we need to act immediately to survive.”
But only a few try to describe what that means – the act and the terrible consequences. My own conclusion is that we need world government with regulatory muscle to cut extraction and stop the use of fossil fuels.
Provocation 240 Development without growth
With climate change (and problems with oceans, governance, population) we need serious thinking, including economics.
If it is true that we must cut co2 7.5% per year and we are still dumping more, not less, then we are in the situation where we are either killing ourselves or must do something we can’t and wont. Any serious cut would cost jobs, lots of them, and cascading effects from there. The jobs proposed in GND are mostly energy and resource intense, and hence counter productive.
Aristotle wrote (in his book named either Coming to Be and Passing away, or more literally On generation and Corruption) that we can grow without development (adding water to wine) or develop without growth. A value creating rearrangement of what we have would be an example.
Would this be a model for no growth? Well, a value creating rearrangement is growth still. Who owns that new value? But if we did the rearranging without any further extraction (or dumping trash into the ground or into the atmosphere) we would be acting in the spirit of what he proposed.
But it would be hard. Repairing housing would take tools and materials, nails, piping. Insulation would be even more based on extractions. Bill McDonough has developed a design and development practice around making sure that the trash from any process be 100% useable as input to another project. “Cradle to cradle”.
If we did this really well: well thought, well managed, could we actually do the cut in co2? Economics, by modeling this process, could seriously help. Economics is mostly an analysis of input output input output…. , or, in the old Marx vocabulary MCMCM.. but tends to be limited to circles among the capitalists and the workers and consumers, avoiding the details for income and consumption, not noticing that the workers are the consumers, and willing to drive down wages thereby limiting consumption in a self destructive circle. Economics also avoids the obvious, that the input output circle includes the earth so that we go from earth to product to earth to product…
With the no growth approach is that many assets lose their value. For no growth to work the high earnings of the 1% up need a new model, not forthcoming from economics (I don’t see it in the AEA program abstracts.) Lots of resistance and politics at play.
Imagine that we have a four tier income regime.
Annual salaries starting with Yang’s $12,000 per year and then jobs limited to the following annual salary in 4 steps:
In such a regime would people not work hard to move to the next level and appreciate the value of the work they were doing? Perhaps voted to move up by the whole workplace or community. Be aware that cars, planes, yachts, big houses, would be very limited under any serious co2 cutting regime so the rich would have to have already given up much of what money is currently used for. Obviously this is very sketchy, but it would be terrifically helpful if it could be fleshed out.
Changes in social accounting might make this easier. In the old material culture mind-body favored body, things, fixed assets. Mind was treated as an artifact, without causal consequences. In the emerging economy digital favors mimd and the old feeling for stuff is dissolving. In the old economy change was difficult. In the new economy change is programming. Anything can change quickly in the digital culture.
For cradle to cradle https://en.wikipedia.org/wiki/William_McDonough
Provocation 239. De-growth.
If economics were acting more as a science it would take on the difficult problems. As it is most economic research tries to add baby steps on top of some existing research. I have just read all the abstracts of the papers to be given at the AEA in San Diego. What struck me was the attractiveness of session titles but the failure of most included papers to follow through. One difficult topic for the future is narratives about de-growth. (models would be hard because so many variables at play at the same time. The paper by Peter Dorman is quite good). It seems that discussing de-growth is taboo, or maybe just bad for your career , but Skidelski writes in Project Syndicate last Friday,
The deeply economistic nature of the current debate excludes the possibility of a life beyond work. Yet if we want to meet the challenges of the future, it is not enough to know how to code, analyze data, and invent algorithms. We need to start thinking seriously and at a systemic level about the operational logic of consumer capitalism and the possibility of de-growth.
In this process, we must abandon the false dichotomy between “jobs” and “idleness.” Full employment need not mean full-time employment, and leisure time need not be spent idly. (Education can play an important role in ensuring that it is not.) Above all, wealth and income will need to be distributed in such a way that machine-enabled productivity gains do not accrue disproportionately to a small minority of owners, managers, and technicians.
Of course he is building in Keynes, and so interesting. It contains a hint toward a better future. Graeber took on debt and Piketty inequality. Big issues can be taken on and still make a career, but it takes scope and depth and awareness of false assumptions..
Umair Haque is good. (article in Medium)
But he has very little about cause. He stresses the feedback between poverty and lack of investment in social goods which leads to more poverty. I think he is mostly right (but the US remains more dynamic and unknown than he describes).
So the causes and what to do are not getting enough attention.
The West became, with the breakdown of feudalism, materialistic as society shifted to craft, trade, colonialism, empires.
The French Revolution tried, but failed, to increase distribution and participation.
Coal and oil gave a boost to the manufacturing commercial society.
Capitalism is a parallel system to democracy as the way to distribute resources, but capitalism in every transaction tends to take a house cut as in roulette, and becomes over time more powerful and able to buy the remnants of the democratic system.
In fact the American Revolution was in many ways a counter revolution, aimed at restoring property to the center of the political process. We are in a period which can be seen as an incomplete French Revolution during which elites have been struggling to reestablish the old society. The result has been wars, colonialism, poverty and the corruption of earth and of society. Representative democracy gave the power to those who chose the representatives the rest of us are allowed to vote for.
Neither capitalism nor democracy are positioned to govern the whole. An old argument for monarchy was that it was the only system where leadership was interested in every aspect f the kingdom. Perhaps china can with its elite at the top and democracy at the bottom deal with whole system issues.
We have whole-system problems: population, climate, inequality, but no whole-systems management. Creating such would be an amazing contribution. The 1648 Treaty created competing nations.
Individualism was married to consumerism and society came to believe, through the media that self fulfillment was found in shopping (Adam Curtis).
Consumerism broke the community, the family, social caring. People are isolated. And the despair is terrible and paralyzing. We are in a period which can be seen as an incomplete French Revolution during which elites have been struggling to reestablish the old society. The result has been wars, colonialism, poverty and the corruption of earth and of society and people have neither wealth nor democracy nor family.
The Democrats moved from representing (somewhat) the working class to representing the professional class. Nobody represents the people. The Republicans moved from representing private property and business to outsiderdom where the votes are.
The question now is, what to do?
Provocation 237. Unregulated economy (no long term view nor strategy) vs managed economy (with concern for values and goals).
Economics discusses equilibrium and the desirability of non-interference by regulations. But as a result there is little discussion in economics of the goal of an economy, nor, for this economy, of its values. I read last week a comment that China thinks long term and strategically, but the West, especially the US, has no strategy, putting it in a weak position vis a vis China.
Robert Skkidelski in Project Syndicate just wrote “China’s quest for legitimacy.” He quotes from the piublisher of “The Quest for Legitimacy in Chinese Politics”:
Xiang explains the nature and depth of the legitimacy crisis facing the government of China, and why it is so frequently misunderstood in the West…Arguing that it is more helpful to understand the quest for legitimacy in China as an eternally dynamic process, rather than to seek resolutions in constitutionalism(regulations), Xiang examines the understanding of legitimacy in Chinese political philosophy. He posits that the current crisis is a consequence of the incompatibility of Confucian Republicanism and Soviet-inspired Bolshevism. The discourse on Chinese political reform tends to polarize, between total westernization on the one hand, or the rejection of western influence in all forms on the other. Xiang points to a third solution – meeting western democratic theories halfway, avoiding another round of violent revolution.
In the same issue of Project Syndicate we have, from the West:
“In today’s globalized world, falling behind technologically carries major costs. That is why the world need a comprehensive understanding of the digital revolution’s effects on individual and social welfare as soon as possible. … From mobile Internet to artificial intelligence, blockchain to big data, digital technologies have the potential to bring about dramatic improvements in human wellbeing. But they also pose serious risks to communities and individuals in their roles as consumers, workers, and citizens. Reaping the digital revolution’s benefits, and avoiding its pitfalls, will require us to manage an unprecedented structural transformation for which the world is woefully unprepared. Given the transformational effects of digitization, it may seem prudent to think through the risks before allowing new technologies to take hold. ‘
Comparing the scope of one and the technocratic focus of the other would be worth a conversation. Not to put too rosy a picture on China, its problems are in part its forced emulation of the West, or to be overcome as in the Opium Wars.but strategic conversation and issues are more a part of Chinese civilization.
Market equilibrium,, homeostatic thinking, are taken to support values of freedom but in reality free market is a mechanism for wealth concentration we are advised to keep our regulations away from. In every transaction the wealthy are likely to gain and the poor lose. The poor buy Cornflakes and the rich buy stocks.
The question of values, which we avoid, should be about what kind of world is being produced by the producers, and what kind of governance gives coherence to the whole without having to police a recalcitrant population.
Our leaders are not in a conversation about these and as a result have little to offer the people at elections and the people are pissed off. Economics, as the “practical” social science has played a destructive role in creating this ungovernable situation.
Thee are discussions of values in the West , but not wide spread. (From Lapham’s Quarterly):
“The warming of the planet currently spread across seven continents, four oceans, and twenty-four time zones is the product of a fossil-fueled capitalist economy that over the past two hundred years has stuffed the world with riches beyond the wit of man to marvel at or measure. The wealth of nations comes at a steep price—typhoons in the Philippine Sea, Category 5 hurricanes in the Caribbean, massive flooding in Kansas and Uttar Pradesh, forests disappearing in Sumatra and Brazil, unbearable heat in Paris, uncontrollable wildfires in California, unbreathable air in Mexico City and Beijing.
The capitalist dynamic is both cause of our prosperous good fortune and means of our probable destruction, the damage in large part the work of Adam Smith’s invisible hand, guided by the belief that money buys the future. Nature doesn’t take checks. Who then pays the piper—does capitalism survive climate change, or does a changed climate put an end to capitalism?
But they are hardly central to our thinking.
Seems to me lots for economists to talk about.
Provocation 236. Incentives and Climate Dec 4.
Over the weekend I was at a reception in Washington, and got to mill around talking with a number of economists – ten to be precise – IMF, WB, Goldman Sachs, London School. and after formalities I asked” “What’s your take on climate?”
Five said it could be coped with by coming technologies. Like what? Cheap electricity, taking co2 out of the air. How will this happen? “If we get the incentives right it will just happen. We just have to get the incentives right to get the technologies.” The other five just said incentives like carbon tax and cheap energy, no new tech involved About half held on to their view, the other half had some doubt and fear but were inarticulate about it.
This idea that incentives govern the economy is of course part of the market equilibrium model, but it stops short of material questions: Lets say humanity can produce cheap electricity. How do you produce enough and at what cost and what time frame, and what would it take to be able to use it, and what of the ugly politics? “Its just incentives” is not good enough. It is magical thinking and prevents inquiry and serious innovation.
Provocation 235 wealth
Take wealth.The preferred model in economics is that everything has a price and each thing is the private property oa a single person, or a collective defined by a contract (a corporation). This makes it easier to do calculations but impossible to do broad public policy where wealth is often not quantitative, such as the value of a culture, a landscape, a love, a family, a community. These things of real value add up to real wealth for a lived life. A clean environment has wealth that is destroyed by bad human decisions.
How would these assumptions in economics have to change to have better public policy?
Part of the history as to do with the commons.
The assumption in closing the commons to the farmers and families thta lived there was that everything must belong to someone. At the time of the closing of the commons (stealing it from communities into private estates) judges said things like
-Who owns this land?
-we all do
-Each thing must belong to someone so since you cant tell me I assign it to the largest surrounding land owner.
For lots of discussion and analysis see Customs in Common by E.P. Thompson and more contemporary, Elinor Obstrom, Governing the Commons: The Evolution of Institutions for Collective Action.
The tragedy of the commons, Hardin, is wrong because traditional farmers knew how to mange the commons. It wasn’t ruined by over grazing but by aristocrats wanting more cash for an emerging life style, so they ran sheep and rabbits on the commons.
Interesting to see the drive of the logic. Like can algorithms be either copyrighted or patented? The courts are struggling with this. But can patenting pieces of grammar in the lawyer’s sights?
“First, the U.S. Patent and Trademark Office may only require an applicant prove acquired distinctiveness if the mark is merely descriptive of the goods or services. Common words or phases that are NOT merely descriptive of the goods or services are registrable without the need to prove the mark has acquired distinctiveness. For example, there is a well-known company that chose the word “apple” as a mark for the sale of computers. “Apple” is of course a common word. However, when used in connection with the sale of computers it is highly unique and even arbitrary. Apple Computer Co. was not required to show that their mark had a distinctive secondary meaning apart from the original meaning.
a small part of the Republican Party (supported by Russia?) bullies the rest of the Republican Part.
The Republican Party bullies the rest of Congress
The resulting controlled country bullies the world.
There is no cooperation, the world is reduced to Trumptian schoolyard bullydom.
Trump cannot speak of democracy, alliances, cooperation. Not in hi psyche.
The Democrats brought this on by becoming, not the party of the working class and progressive thinkers, but by becoming the party of the professionals, abandoning the workers, the farmers, the progressive thinkers.
The result is, no party represents the larger intereests.
Those running for Democratic nomination seem to not sense the need for leadership of people, but only of limited ideas. While any one of them would be better as president than Trump, and the whole bunch would make a great cabinet, no one of them can say that on stage in the debates.