With the recent failure of the Durban climate talks, the collapse of carbon prices in Europe, and news that emissions grew a record 6% in 2010, it’s time to re-evaluate the economic approach to climate that now dominates the conversation. The creation of carbon markets, carbon offsetting and the valuation of eco-systems are premised on the idea that marketization and reliance on economic incentives will yield sustainable outcomes. Many environmentalists like these policies because they seem to work with, rather than against our existing economic institutions and incentives. But as market-thinking expands with eco- and carbon-footprints, an obvious question is whether economics in command has become part of the problem.
It’s a conclusion one might draw from analyzing the Occupy Wall Street movement. In a few short weeks a rag-tag group of under-thirties has been able to transform the global conversation about economic issues by focusing on three basic points, all of which are essential for stopping runaway climate change and ecological overshoot.
First is the principle of anti-economics: Not everything has, or should have a price. Occupy has reminded us that there are more important things than money. These include human dignity, solidarity, freedom of expression, and morality. By contrast, standard economic thinking rests on the premise that anything can be monetized and that losers can always be bought off by winners. Compensation occurs via the medium of cash, the all-purpose equalizer. This may work for the garden-variety resource cases that economists started with, such as valuing a local park or a minor species, but it’s clearly wrong in the case of climate. The value of unpolluted atmosphere is approaching infinity. We are also reaching that part of the “curve” for water, arable land, and ocean eco-systems. The hijacking of the climate conversation onto the terrain of prices, costs and benefits has obscured the real issues and prevented fair solutions. We should be discussing moratoria on new oil and gas exploration and the timetable for phasing out fossil fuels altogether, rather than how rich people can bribe poor people to let them keep polluting.
The issue of rich and poor is the second of Occupy’s insights. On environment, distribution is primary. It may not be exactly the 1% and the 99%, as the protestors have it, but they’re not too far off. The top 7.5% of the global population are responsible for half of all emissions; the bottom 50% don’t emit anything at all. That should be a starting point for the global conversation on climate.
But in the economic models that dominate the policy-making debate, that crucial reality is ignored. Instead, modelers start by achieving an “efficient” outcome. If they worry about distribution, it’s only at a later stage. After all, as per the standard approach above, losers can always be compensated by the gains achieved with better policy. This is standard operating procedure in mainstream theory, as any student of Economics 101 can attest. But it’s a flawed approach.
One reason is that lack of attention to fairness at the beginning torpedoes chances of implementing policies. Just ask US Congressmen like Ed Markey and Henry Waxman who embedded giveaways to polluters in their climate legislation. It would yield efficient outcomes, their economist supporters assured us. The legislation failed in the end, in large part because of distributional implications that opponents rightly noted were blatantly unfair.
The less obvious reason is that distribution does affect outcomes, unlike in the textbook model. There is now a large body of research on the ways in which income inequality affects health, well-being, social mobility, and the quality of social connections. Emissions and sustainability need to be added to that list. While there’s less research on this connection, we do know that commons management is more successful with a more equal distribution, that land reforms reduce deforestation, and that equality is related to other variables that reduce emissions, such as shorter hours of work.
Occupy’s final point is that the 1% have captured the state and distorted democracy. They’ve mostly talked about monetary and fiscal policy, but in most countries, it’s no less true on climate and environment. In North America, the economic power of the mega-polluters has allowed them to buy politicians and legislative and regulatory outcomes. Flush with cash from the Kochs, coal companies and other polluters, Republicans in the US House of Representatives have moved from climate denial to attempts to shut down the EPA, while the Harper government in Canada, drunk with tar sands profits, has pulled out of the Kyoto Process. But curiously, as the political power of the energy industries has grown, economists’ (along with psychologists’) explanations of political inaction have gone in a completely different direction: to “neuro-economics” and stories about the inadequacy of the human mind to process risk, think abstractly, or delay gratification. Policy paralysis is seen as a shared human failure of brain functioning. But this is an implausible explanation in a world where seemingly similar humans have marshaled widely divergent responses. Occupy has it right. The most obstructionist nations are the ones with powerful energy sectors, not an excess of people whose pre-frontal cortexes are too small.
As grim as the latest ecological news has been, the successes of the Occupiers should be generating a new wave of optimism among environmentalists. Their challenge to economics in command has radically re-framed the debate. With fairness and democracy as our leading values, rather than efficiency and costs, we may yet have a chance.