Young People Tired of Old Economic Models

Andrew Revkin‘s post reminds me of my time at Notre Dame. He quotes Michael Sandmel, who is graduating this year from NYU:

We had around 140 attendees from universities around the country.  Many of us study in mainstream neoclassical economics departments where interdisciplinary ecological-economics, and the questioning of G.D.P. growth as a primary (or, depending on who you ask, desirable) objective, is still very much fringe thinking.  I don’t attempt to speak for all of my peers, but I know that many of us share an enormous frustration with the way in which our supposedly leading institutions teach us about the economy in a way that is myopic, ahistorical, and devoid of nearly any critical conversation about sustainability or human well being.

This is particularly troubling as we regularly see our schools accredit future leaders in business, finance, and government, sending them into a world of 21st century problems with a 20th century toolkit.

Well said!

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Churches Seeking to Become Economic Alternatives

The New York Times has an excellent article about a new effort by churches in my current residence, Washington DC, to organize themselves and buy energy as a group, simultaneously saving money and using those savings to promote green energy. The effort is a collaboration of a community organizing group, Washington Interfaith Network, and the DC Project, which promotes green alternatives (disclosure- I am heavily involved with both organizations, and a member of a Luther Place church, which is part of WIN and the energy collaboration). Here’s what they are doing, in brief:

11 churches and a nonprofit youth group got together to solicit reduced-rate bids for electricity — most of it from renewable energy sources — from local suppliers. In the first year of its contract, which ends in May, the group expects combined savings of nearly $100,000.

As the good word has spread, and it gears up to negotiate a second contract, the original group has swelled to 40 members. The bigger alliance plans to exercise even more leverage in the next round of negotiations by requiring bidders to extend the same discounted rate to individual parishioners and members.

And more revenue is on the way: the group is planning to take a cut of those residential savings as a kind of eco-tithe…

The churches in Washington forged their alliance with help from the Washington Interfaith Network, which does community organizing for member congregations and is now receiving a 10 percent cut of the overall electricity savings. The other group that helped bring the churches together, the DC Project, is a nonprofit that promotes weatherization and green energy jobs.

Felipe Witchger, the lead organizer with the DC Project, said that the next contract will require participants, which now also include synagogues and affiliates like unions and advocacy groups, to either buy renewable energy or commit to energy-efficiency upgrades. For the upgrades, he said, workers from neighborhoods with high unemployment and poverty rates would be hired.

Needless to say, I think this is a great initiative, and may lead to even greater things.

I’ve written a lot about Catholic Social Tradition on this blog (well, not lately), and we have also written a lot about alternative ways of envisioning the economy. Generally, CST is a reaction to the broad economy, and promulgates ways for individuals to live in relation to the economy and to seek to change the economy. However, because CST is more philosophical in nature, it doesn’t go the extra mile of thinking about how individual churches can simultaneously be in the economy and change the economy.

Community organizing, on the other hand, has been practiced through churches for decades. It is a direct response to seeing the world as it is, and the world as it should be, and seeking to bring the two closer together. Churches in cities across the country, and increasingly the world, join forces to shape the political conversation around real economic issues. Often, community organizing is about marshaling a small (but still significant) amount of money from within, and a lot of people from within, to move a few people outside (politicians) to deliver a lot of money on the outside (like affordable housing projects, neighborhood revitalization, etc.).

Notice that neither CST nor community organizing speaks directly to the churches themselves being or becoming part of an alternative economy. And yet, churches are employers, social service providers, and consumers- often large ones at that. Realizing that they are economic units, and have autonomy over how they act as such (especially in tandem), can potentially be transformative. What started as an 11 church group-buying initiative is blossoming into a 40 church green energy effort. Who knows what may come next- an alternative energy co-op that creates green jobs? A joint-church solar generation effort? When churches realize that social justice can occur within and in collaboration with neighbors, we can begin to see an alternative economy, closer to the world as it should be, aspiring to the gauntlet that popes and prophets alike have set forth.

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How I Would Reinvent Capitalism

The Nation had 16 activists respond to the question, “If you had the ability to reinvent American capitalism, where would you start? What would you change to make it less destructive and domineering, more focused on what people really need for fulfilling lives?” Three of them resonated with me in particular: Chris Macklin on employee ownership, Dirk Philipsen on how we measure prosperity, and Eugene McCarraher on our “moral imagination.”

I’m not going to block-quote them, however- instead, I’ve put in my own reader submission (limited to 400 words), which the magazine is soliciting from its readers. You’ll see that it attempts to weave together concepts from all three of these columns:

Capitalism’s defining quality is evident in its name- capital, not labor, nature, or morals, is put above all else. This preeminence of capital has ramifications for how we produce, consume, earn, save, and tally it all up; I argue that it causes problems in each of these facets of our economic life. Often, people confuse capitalism with markets (free ones in particular). Instead, I think capitalism has a few distinctive consequences: 1) surplus is distributed by those who own, not those who work and make; 2) more consumption is always better; and 3) anything “outside” the economy, like the environment, may as well not exist.

Capital is relevant to these features because it means that the production process can be owned, and thus the fruits of it can be immediately taken from the hands that produce it. As a corollary, this means that to profit, those who own capital must sell as much as possible, some of which is indeed bought back by those who make the goods. And finally, capital seeks its return without any regard to destruction that it doesn’t have to pay for, like ozone depletion or disappearing wetlands.

As long as capital remains preeminent, we cannot remake capitalism. Instead, we need to gradually remake economic structures to chip away at capital’s power. Giving workers stock ownership is one small step, but giving workers complete control over their enterprise is a more radical fruitful step. It would mean that production and consumption would be more tightly linked, as the amount one consumes would be more in line with what one produces. Lavish consumption would not disappear entirely, but would be made scarce. Remeasuring economic value to include environmental externalities is another small step, but forcing these externalities into pricing through democratically-decided taxes is a larger and more fruitful step (and I guarantee, a worker-run Chamber would fight it a lot less).

These steps must be supported by increased class consciousness through education.  The value of worker ownership and environmental stewardship are obvious to their beneficiaries; demonstrating that capital’s dominance stands in the way of these benefits is critical. A class-conscious society will support economic structures that value labor and value nature, not just profits. Changing capitalism does not mean removing markets or destroying property, but rather reshaping production and consumption markets so economic value is not distorted by power divides between capital and other.

How would you remake capitalism?

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Earth Day Musing- Clean Energy, Local and Global

David Roberts at Grist has a post about underground environmentalism in East Germany. The whole thing is interesting, but his conclusion is the really important part:

First, what happened to industry under GDR is what happens when decisions are controlled by a small group of people, usually people who own — or have financial or political ties to those who own — the means of production. The focus inevitably turns to rapid growth, gigantism, pollution, and profits. The poor and defenseless (a large class in the GDR) have no voice and so they suffer while a small group benefits. Those who profit always claim to be acting in the public interest, but given a real choice, the public puts a far higher premium on health and safety.

Now, here in America we don’t live under a communist dictatorship. So that’s good. But if there’s one sector of our economy that comes closest to socialism, it’s energy. Decisions are made by a small group of owners, regulators, and politicians; there’s nothing approximating a free market and very little in the way of public participation.

Sure enough, the results tend toward the big, dirty, and hostile to regulatory constraints. This kind of centralization and gigantism has become so familiar to us in energy that we scarcely notice it. We have become accustomed to thinking of our future in terms of ever-rising demand and ever-larger power plants (despite the recent failures of that approach).

But when communities own their own means of energy production, when they live next to it, they are willing to pay extra and consume more conscientiously in exchange for cleanliness. Something new is happening in Germany now: Of all the country’s renewable energy, just 4 percent is owned by the four big utilities. The remaining 96 percent is owned by private households, small municipal utilities, rural and energy cooperatives, and people’s wind parks.

Bringing the production of energy closer to its consumption is one way to rationalize the externalities unseen in everyday life. This idea can be applied to many spheres, especially labor. The only weakness is that communities need to be well-organized and somewhat well-resourced to take the first step in owning their energy production. This financial reality necessitates policies from the top that also encourage social costs to be recognized personally.

Of course, when one looks to policy, there is a wide debate. For example, a recent NBER paper received some attention. The authors use common integrated assessment models, and find a central value of $21 per ton of CO2 emissions. Another paper, by two heterodox economists, criticize the IAMs used in this paper, because of heavy discounting and aggressive assumptions about how damages fall across countries. Indeed, they cite a UK study yielding $83 as the central value, 4x as high as the more mainstream value.

I’m not going to belabor the nuances of mainstream versus heterodox approaches to valuing carbon; the clear takeaway is that assumptions vary widely and matter greatly.

In absence of the consensus and political will needed to implement policies reflecting the true social cost of carbon (on which I tend to side with Ackerman and Stanton), one needs local action like that described by Roberts. Energy purchasing cooperatives are one example of ordinary citizens taking more ownership over their consumption. However, localizing and owning the production of energy, which is easier with renewables like solar and wind, is a definite pathway to sustainability. Local alternatives can also pave the way for broader acceptance of the true costs of dirty energy. Ultimately, we will need the local and global to align for a sustainable energy future.

Happy Earth Day!

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Economics in 2036

I tried to avoid block-quoting in my last post, which was intended as more of an essay. Here are some follow-up points on the question of where and how economics can go.

Nassim Taleb, whose black swans I mentioned minutes ago, has a post with some predictions about our world in 2036. I think that he and I may think alike on how to approach the environment:

Science will produce smaller and smaller gains in the non-linear domain, in spite of the enormous resources it will consume; instead it will start focusing on what it cannot—and should not—do. Finally, what is now called academic economics will be treated with the same disrespect that rigorous (and practical) minds currently have for Derrida-style post-modernist verbiage.

Of course, Taleb doesn’t offer much of a vision for economics and science going forward, because that wasn’t in the scope of his post. Now, my last post certainly offered one vision for what a different economics can look like, but is limited by the scope of my own knowledge and understanding. Julie Nelson, on the other hand, is an accomplished economist and has a great open comment to the NSF on next-generational research challenges. You should read the whole thing, as she gets at many of the points I made in my previous post, but elaborates on them better than I ever could. Here’s are some of her best sentences:

There is, however, another solution, which involves recognizing the inescapable intertwining of fact and value, while continuing the systematic search for reliable knowledge. Amartya Sen has called this “transpositional” objectivity.  This (in fact more exacting) standard of objectivity requires that the viewpoints and values underlying the analysis be brought out into the open and subjected to scrutiny…

Re-evaluating the role of ethics in economics challenges assumptions that are deep-seated in the mainstream of U.S. economics. Accordingly, improving economic analysis of climate change will require a multi-pronged effort…The rising generation, given their energy and larger stake in the outcomes of  climate change policy, should be a key part of this transformation…

As Nelson points out, shifts like this one require funding bodies like NSF to embrace a new vision for economics. If more economists like Nelson speak up and NSF pays heed, economics in 2036 will look a lot more like an economics of Stewardship, and today’s academic economics will indeed look simply arachaic.

P.S. I wrote my entire last post without mention of the Catholic Social Tradition in stewardship. It would be an understatement to say it’s greatly informed my thinking of these issues. The best starting point on that topic is JPII’s Sollicitudo rei socialis. The USCCB’s pastoral letter is also helpful on these issues.

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Toward an Economics of Stewardship, Humbly Thankful

I apologize for my light and sporadic posting recently. I transitioned jobs on Monday, and right now is the first chance I’ve had to sit back and think, relaxing in my old bedroom at the Krafft (suburban) homestead.

It’s always nice to have a chance to gather with family, reunite with old friends, and give thanks. The symbology of Thanksgiving, though, gives one pause- it’s mainly full of myriad ways in which we as people have become masters of our domain, breeding and slaughtering domesticated turkeys, conjuring something known simply as “stuffing”- yes, we’ve mastered the art of celebrating our abundance. Now, don’t jump off the boat here- this isn’t some environmentalist rant. Ok, it kind of is.

I thank Mark Thoma for linking to a blog I haven’t seen before, the Ecological Headstand. Its most recent post reexamines the idea of our economy and our ecological footprint. Reading it this morning flipped my mental approach to this day of abundance. Rather than taking for granted the gifts that the lucky among us reap from the Earth, I think it’s important to examine our attitudes towards this abundance, and how our economics of abundance reflects this attitude.

In the interest of evading nuance, I think there are essentially two approaches economics can take to the environment- an economics of Mastery, and an economics of stewardship. The economics of Mastery is best exemplified with standard cost-benefit analysis, measuring the costs without respect to externality and distribution, and the benefits without respect to hidden damages and long-run scarcity. It’s curious that at introduction, most present economics as a study of scarcity, because when it comes to our environment and natural resources, our typical economics of Mastery seems to presume nearly boundless abundance. Any abundance, of course, can be overcome by our mastery of the environment- there will always be a better fertilizer, a new fuel cell, by which we can circumvent natural limits- until, of course, we simply can’t.

What, then, is an economics of Stewardship? I’d make three main points, all borrowed from previous posts on other thinkers. The Headstand post I linked earlier, which inspired this post, makes the key first point- we cannot double count environmental destruction. That is to say, if we destroy the environment in time period 1 and ignore that loss, we can’t simply add again to GDP in time period 2 when we pay for the recovery (and we will pay). So, an economics of Stewardship will make every effort to measure and incorporate costs of depletion and destruction. Of course, we will struggle to accurately assess natural value streams, so an economics of Stewardship will recognize the limits of its methodology, and treating the environment as an equal to the economy, give it the benefit of the doubt.

The second issue is how we weight benefits and costs over time. Economists of mastery argue for higher discount rates, pegged near real GDP growth or real return on capital. They show that if you do otherwise, set it too low, then we will end up with a paradox of greater environmental value in time period 50 or 60 than GDP. This is ok, because remember, it’s GDP that’s flawed and can’t internalize the environment. Low discount rates are an embrace of stewardship because they recognize that others in the future are to benefit equally from abundance as us in the present. Worry not that they might be richer, smarter, or stronger- natural abundance is still the inheritance of all.

Third and finally, an economics of Stewardship embraces the uncertainty in the natural world. Black swans can exist in the environment, and they are not limited to possible effects of anthropogenic global warming. There are unknown unknowns here. An attitude of uncertainty is a key break from the economics of Mastery, which mainly traffics in knowns, and occasionally in known unknowns. Humble stewardship, though, recognizes that abundance is fragile and complex, and events can occur that are outside the bounds of our current scientific knowledge.

It’s easy to become complacent about what we have and what we are used to. Mainstream economics claims to be about scarcity, but is really about mastery. A humble attitude toward our environment must inevitably lead to a new economics, in which we methodologically embrace our roles as stewards, simultaneously parts and guardians of the abundance around us. I hope you’ll join me in taking part in humble thanks on this wonderful day, and examining your role as a steward, and not a master.

Happy Thanksgiving.

Update: I reflect a bit on some others’ thoughts on the future of economics in my next post. Consider it the substantive compliment to this more emotive essay.

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TED Talk: Nic Marks on the Happy Planet Index

I blogged last year about the Happy Planet Index, a seemingly promising way of measuring propserity. Here’s Nic Marks, who started the Centre for Well-Being at the New Economics Foundation, making an impassioned case for the metric in a TED talk:

Efforts like Marks’ remind us that other worlds are possible, but that our conception of prosperity affects our ability to get there. Most of his focus on the costs of well-being lies on CO2 and climate change. He does take some swipes at consumption-oriented society, but it seems that Marks’ aim is to move the mainstream.

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Cold Water for Locavores?

An Op-Ed yesterday by Stephen Budiansky in the NYT argues that the local food movement is not necessarily as green as it seems:

Studies have shown that whether it’s grown in California or Maine, or whether it’s organic or conventional, about 5,000 calories of energy go into one pound of lettuce…

It takes about a tablespoon of diesel fuel to move one pound of freight 3,000 miles by rail; that works out to about 100 calories of energy. If it goes by truck, it’s about 300 calories, still a negligible amount in the overall picture. (For those checking the calculations at home, these are “large calories,” or kilocalories, the units used for food value.) Overall, transportation accounts for about 14 percent of the total energy consumed by the American food system…

The real energy hog, it turns out, is not industrial agriculture at all, but you and me. Home preparation and storage account for 32 percent of all energy use in our food system, the largest component by far…

Agriculture, on the other hand, accounts for just 2 percent of our nation’s energy usage; that energy is mainly devoted to running farm machinery and manufacture fertilizer…

Don’t forget the astonishing fact that the total land area of American farms remains almost unchanged from a century ago, at a little under a billion acres, even though those farms now feed three times as many Americans and export more than 10 times as much as they did in 1910.

The best way to make the most of these truly precious resources of land, favorable climates and human labor is to grow lettuce, oranges, wheat, peppers, bananas, whatever, in the places where they grow best and with the most efficient technologies — and then pay the relatively tiny energy cost to get them to market, as we do with every other commodity in the economy.

Budiansky argues that there is nothing good per se about locally grown food. I really don’t know where I stand on this. I’m also unsure whether the industrial farming yields cannot be matched by best-practice organic techniques. It is certain that fertilizer and pesticides have a range of environmental costs. Either way, I think Budiansky has a point. The broader abstraction from this story is that consumers are easily fooled by green buzzwords. Redefining values on positive, reality-based terms is certainly the way forward. Anna Lappe provides some in Grist.

When we talk about our ecological food values, we’re focusing on the importance of interconnections and of the complexity of a truly sustainable food system. As agroecological farmers like to remind us, sustainable food is not just defined by the absence of chemicals — it’s about the creation of a healthy ecosystem, especially healthy, carbon-rich soils.

As for the locally-grown movement,

The answer, Kim explained, has to do with values — community values. “Our producers see themselves as responsible for the health and well-being of the consumers. And the consumers, they know the farmers and see very clearly how they’re responsible for their well-being,” he said.

I think there’s real value in people being closer to what they eat for this reason. Rather than being alienated from food that we buy in a grocery store, we can have a relationship with something that is grown in our backyard or a community garden down the street. Focusing on misleading energy-use statistics, as Budiansky rightly points out, is not the way forward. Neither, though, is dimissing the locavore movement out of hand. There are very real and meaningful values behind these shifts in consumer preferences. It’s best that they be harnessed for good and not co-opted by Monsanto and Wal-Mart.

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Economics for a small planet

When the Polynesian inhabitants of Easter Island first began to carve Moai, the enormous monolithic human figures, their island was lush and filled with birds and animals. Erecting Moai, which could be up to 10 meters high and weighing up to 75 tonnes, were truly a sophisticated intellectual and physical feat. But soon, tribes began competing to erect larger and more sophisticated sculptures. A lack of foresight left them using resources at increasingly unsustainable rates:

Forests were clear-cut for canoes, ropes and firewood. Farms producing sweet potatoes, taro and sugarcane stripped soils of available nutrients. Bird, fish and porpoise populations dwindled to extinction by overhunting. Blind to the impact that a growing population would have on the environment, inhabitants used up the island’s resources until there was nothing left.

Clearly, our small planet has limited resources and unsustainable growth can lead to a society’s demise. Amazingly, most economists have not cared to heed these warnings. One group that has, is known as the school of ecological economics, which uses the phrase “uneconomic growth” to refer to economic expansion that depletes valuable resources in a way that makes us worse off:

When the economy’s expansion encroaches too much on its surrounding ecosystem, we will begin to sacrifice natural capital (such as fish, minerals and fossil fuels) that is worth more than the man-made capital (such as roads, factories and appliances) added by the growth. We will then have what I call uneconomic growth, producing “bads” faster than goods—making us poorer, not richer.

-Herman Daly

The goal is often referred to as a “steady-state economy,” (which is different than the steady state considered in the Solow growth model). Here, the economy is stable in size, only fluctuating mildly, and it remains within ecological limits. An important aspect of such a school of thought is the interdisciplinary nature, which requires input from natural and social scientists of all sorts.

A steady state economy, therefore, aims for stable or mildly fluctuating levels in population and consumption of energy and materials. Birth rates equal death rates, and production rates equal depreciation rates.

Loads of information can be found at http://steadystate.org/

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Is Meat Green after All?

I’ve written before about the movement to reduce meat consumption as a way of reducing greenhouse gas emissions. Reading the UN’s 2008 livestock report was what prompted me to drastically reduce my meat intake (I still have chicken 2-3 times a week, the occasional deli meat sandwich, and beef once or twice a month). Anyways, I was surprised when I saw this article by Bob Holmes in the New Scientist, which, by the headline, argues that cutting society’s meat intake may not be so green after all.

A meat-free world, then, would be greener in many ways: less cropland, more forest and, presumably, more biodiversity; lower greenhouse gas emissions; less agricultural pollution; less demand for fresh water – the list goes on…

But wait. If everyone opted to give up meat there would be significant costs, too. It is true that most livestock today are fed grain that people could otherwise eat, but it doesn’t have to be so. For most of human history, cattle, sheep and goats grazed on land that wasn’t suitable for ploughing, and in doing so they converted inedible grass into edible meat and milk…

Fed in this way, livestock represent a net gain of calories and protein in the human diet while dealing with some of the estimated 30 to 50 per cent of food that goes to waste…

Another downside would be the disappearance of animal by-products.

This case seems flimsy at best, and doesn’t convincingly show the counter-factual of emissions/unit of nutrition under the less-meat scenario. Holmes also confuses things by making statements like,

There is another alternative, though: treat livestock as part of the ecosystem. Garnett envisions returning animals to their original role as waste-disposal units, eating food leftovers and grazing on land not suitable for crops. “In that context,” she says, “methane emissions per animal will be higher, but overall emissions would be less because there would be fewer animals.”

And then, towards the conclusion of the article, Holmes says,

Given the deforestation, soil erosion, water pollution and greenhouse gas emissions that will result if worldwide meat production continues to rise, some people are already choosing to eat less meat. And the message is definitely less, not none. For best results, meat should be medium-rare.

Thus, most of the article makes the case that eating less meat is greener. Statements that temper this sentiment are equivocal at best. Holmes also omits the fact that grain-fed cattle reduce world grain supply’s, as it takes 10 pounds of grain to make one pound of meat.

And of course, the headline is pretty dishonest- “why eating green won’t save the planet.” I’m going to stick to my new diet, thanks, and hope that others join me, and that the when we someday get a carbon price, it includes the environmental costs of meat. In the meantime, scientists should study the general equilibirum effects of a broad reduction in meat consumption on greenhouse gases, so we don’t have confused half-statements like this article.

Update: I meant to include “Not” in the title of this post.

Update 2: My brain must be a friday mush. I changed the title back.

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