Tis but thy name that is my enemy;
Thou art thyself, though not a Montague.
What’s Montague? it is nor hand, nor foot,
Nor arm, nor face, nor any other part
Belonging to a man. O, be some other name!
What’s in a name? that which we call a rose
By any other name would smell as sweet
But if thine enemy is the fossil fuel industry,
And one would name a rose as ‘tax’,
then television, and radio, and newspapers
and twitter and a multitude of social media
would declare such rose as smelling most foul,
like vomit, or excrement or the pustulent sores
of a pox-ridden hag in the lowliest of taverns
In truth, Juliet was wrong. Names do matter. They frame narratives, just as the names Montague and Capulet did.
We live in a neoliberal world where both ‘tax’ and ‘subsidy’ are framed as evil. So whatever you do don’t talk about introducing a carbon ‘tax’, talk about eliminating a carbon ‘subsidy’. And this is what the IMF has done in a widely publicised report issued yesterday (here):
A key factor in estimating the magnitude of current subsidies is which definition of “subsidies” is used. Pre-tax consumer subsidies arise when the price paid by consumers (that is, firms and households) is below the cost of supplying energy. Post-tax consumer subsidies arise when the price paid by consumers is below the supply cost of energy plus an appropriate “Pigouvian” (or “corrective”) tax that reflects the environmental damage associated with energy consumption and an additional consumption tax that should be applied to all consumption goods for raising revenues.
Generally, when we talk about externalities, we talk about costs rather than subsidies, but, like double-entry book keeping, these are two sides of the same concept. When consumer A transfers a cost to consumer B, we can think of consumer B subsidising consumer A. Continue reading
Apologies for my blogging hiatus: I’ve been otherwise engaged for the last few weeks in academic activities, some economics consulting and (most timing consuming of all) grassroots campaigning in the run-up to the UK general election.
I am not a natural ‘party political animal’, being too eclectic in my ideological views. Indeed, I like bits of each party manifesto but find other parts bonkers. Nonetheless, being back on home turf for an election for the first time in over 15 years, I wanted to get involved.
My own personal ‘wedge’ issues in this election were twofold: climate change (as would be expected from this blog) and anti-austerity. Climate change is still, to me, the central risk of our times. It has the potential to overturn everything within my children’s lifetime, not least of which is democracy itself. Unfortunately, neither climate change nor the environment in general feature in the top 10 concerns of the UK public (click for larger image):
Of the five main political parties that competed in the UK general election–the Conservatives, Labour, Lib-Dem, UKIP and Green–three have an aggressive commitment to act over climate change (Labour, Lib-Dem and Green). Unlike the Republican Party in the US, the Conservatives have in the past also had a forward-looking approach to carbon emission mitigation (as evidenced by their continued support of the UK’s Climate Change Act). The leadership, has, however, grown increasingly lukewarm over leading on the climate-change issue.
With regard to austerity, my stance is more nuanced. In short, why prioritise reducing debt at a time when interest rates on long-term government debt are at rock bottom levels? The following chart is taken from the Bank of England‘s latest “Inflation Report” published on the 13th May, Continue reading
One of America’s greatest living authors Jonathan Franzen has a provocative article in The New Yorker arguing that the environmental movement’s infatuation with climate change has been detrimental to local environmental initiatives. I am a huge fan of Franzen: “The Corrections” and “Freedom” are two of my favourites books. Yet I find his analysis muddled. In fact, I disagree with almost everything he says.
Franzen presents the ‘wicked problem’ of climate change as almost insurmountable.
Climate change shares many attributes of the economic system that’s accelerating it. Like capitalism, it is transnational, unpredictably disruptive, self-compounding, and inescapable. It defies individual resistance, creates big winners and big losers, and tends toward global monoculture—the extinction of difference at the species level, a monoculture of agenda at the institutional level. It also meshes nicely with the tech industry, by fostering the idea that only tech, whether through the efficiencies of Uber or some masterstroke of geoengineering, can solve the problem of greenhouse-gas emissions. As a narrative, climate change is almost as simple as “Markets are efficient.” The story can be told in fewer than a hundred and forty characters: We’re taking carbon that used to be sequestered and putting it in the atmosphere, and unless we stop we’re fucked.
Against this background, Franzen believes that the concerned citizen is being bounced into caring about only one true environmental ill.
The question is whether everyone who cares about the environment is obliged to make climate the overriding priority. Does it make any practical or moral sense, when the lives and the livelihoods of millions of people are at risk, to care about a few thousand warblers colliding with a stadium?
And this is a planetary ill they can do nothing about.
To answer the question, it’s important to acknowledge that drastic planetary overheating is a done deal. Even in the nations most threatened by flooding or drought, even in the countries most virtuously committed to alternative energy sources, no head of state has ever made a commitment to leaving any carbon in the ground. Without such a commitment, “alternative” merely means “additional”—postponement of human catastrophe, not prevention. The Earth as we now know it resembles a patient whose terminal cancer we can choose to treat either with disfiguring aggression or with palliation and sympathy. We can dam every river and blight every landscape with biofuel agriculture, solar farms, and wind turbines, to buy some extra years of moderated warming. Or we can settle for a shorter life of higher quality, protecting the areas where wild animals and plants are hanging on, at the cost of slightly hastening the human catastrophe.
Indeed, I think his answer over how much emphasis we should place on climate change is wrong on many levels. First, I don’t see a trade-off. Humanity doesn’t have a finite budget of morality. If I am a good father, does that mean I have no choice but to beat my wife? In reality, those individuals campaigning against climate change are also likely to be the ones doing grass roots environmental activity. Continue reading
The one and only public debate between the leaders of seven UK political parties took place tonight ahead of the UK election May 7. Key topics were 1) austerity, the budget deficit and debt, 2) the NHS, 3) immigration and 4) education and intergenerational inequality. These are all big issues but hardly new.
Forgotten in the general election campaign to date are a series of ground-breaking initiatives taken by the coalition government over the past five years. These are examples of genuinely fresh thinking and should be applauded regardless of your politics. In no particular order:
1. Establishment of The Behavioural Insights Team
Dubbed the ‘nudge unit’ in a hat tip to the book by Thaler and Sunstein, this team has taken the idea of choice architecture into the heart of government. As a result, we have seen such policies as pension provision where your choice is to opt out rather than opt in–so the lazy amongst us create pension savings by default.
The nudge unit comes about from the explicit recognition the humans are not rationale calculating machines as they are portrayed in post-war economics and that frequently ‘wantability’ is different from decision-making that maximizes our well-being (see my post here).
2. Introduction of Well-Being Metrics
The Office for National Statistics (ONS) introduced its Measuring National Well-being (MNW) programme in 2010. We now have four questions included in the well-being survey that broadly relate to the three main ideas of happiness–life satisfaction, leading a meaningful life and feelings. As this data set builds, it will give policy-makers a far better idea as to whether what they do makes people happier (click for larger image on the chart below).
Sometimes it is best just to pilfer other people’s work– any other action feels rather pointless. This from Andy Skuce’s blog Critical Angle (click for larger image):
Bang! Marty McFly goes back to 1955 to persuade Doc to save the world from fossil fuel emissions (one can but dream).
Then again can we ask ourselves whether the relatively low energy intensity economies of the 1950s had a higher level of well-being than those that exist now (of course development has widened and population has grown). I’ll let my readers have a think about that.
Anyway, check out the Critical Angle blog here.
I’ve been mulling a name change for the blog for some time. The name the “The Rational Pessimist” was a riposte to Matt Ridley’s book “The Rational Optimist“. Ridley’s book is a paean to global free markets and human innovation–and in parts is correct. Since the industrial revolution commenced, technology coupled with capitalism has lifted the bulk of the world’s population out of a Hobbesian life that was “nasty, brutish and short”. But where I differ from Ridley is in believing that a 200-year data set of economic growth can fully capture all future risk.
Ridley’s book is Panglossian. He believes that every problem we face–from climate change to resource depletion–is relatively minor, just waiting to be solved by a technological fix. For him, price always trumps scarcity. Whenever something looks like it is running out, the magic of markets will always lead to new discoveries or acceptable substitutes.
As an economist by training, I accept that the everlasting dance between supply, demand and price is something of beauty. But I also believe that it has its limitations. A backward-looking empirical observation that things haven’t run out is different from a forward-looking theoretical prediction that things won’t ever run out. North Sea oil is running out regardless of price, and a global supply of oil is not qualitatively different from a local one.
Of course, technology may provide a perfect, or dare I say it better, substitute for fossil fuels. But then again it may not. That is uncertainty, and the consequences of that uncertainty is the concept of risk.
Posted in Climate Change, Happiness, Peak Oil, Post Growth, Resource Constraints, Technology
Tagged Daniel Kahneman, decision utility, experiencial utility, Richard Dawkins, Richard Thaler, wantability