Saturday, March 2, 2013

Green Keynesianism, De-Siloed

Here are two positions I think have big problems:

1. What we need are green jobs.  We can revitalize our economy by steering massive investment into alternative energy technologies and conservation.  That way we can have growth and sustainability, together.

2. What we need is to reject the growth paradigm.  Economic growth can’t go on in a world of finite resources.  We have to shrink our economy, starting now.

Each of these demands more time and space to debunk than I can provide right now.  (As usual I am up against harsh deadlines.)  Suffice it to say, the first is not green enough, the second too single-mindedly so.  I agree with Yves Smith that the scale of retrenchment we are going to need to deal with climate change on a viable schedule (if there is a viable schedule) can’t be offset by greentech.  There is an absorption problem: we cannot replace a century of fossil fuel-oriented investment with a decarbonized alternative in the space of a decade or so.  This is not an argument against greentech, of course, just that, from the point of view of growth and employment it simply isn’t enough.

On the other side, the anti-growth crowd really doesn’t get it.  If you’re against growth, you should be tickled by the sequester, the Eurozone’s austerity policies and all the rest.  Recession does wonders for reducing carbon emissions and other forms of pollution, as well as reducing the stress on nonrenewable resources.  But the whole point of being green is to improve our long run standard of living, not reduce it.  And the key insight is that economic growth is growth in value, which means anything people are willing to pay for, and not necessarily “stuff”.  The goal should be to rapidly shift production, especially in rich countries, away from resource-intensive goods to things (design, service) that replace physical throughput with human intelligence.

So that should clue us in to the third alternative: yes, we need to curtail investment and consumption in resource-intensive goods, especially those that will condemn us to the likelihood of horrific climate change, and promote expenditure-switching, and not only to clean energy-related goods, but also anything else that can improve our quality of life.  The alternative to more highway construction and ICE cars is not only cars with other fuel systems or even mass transit, but also better-designed and longer-lasting appliances, fresh bread at the corner bakery, more yoga (or economics) teachers or whatever sustainable forms of economic value people come to prefer.

And how to do that?  1. Massively and quickly raise the cost of unsustainably produced goods, especially by putting a stiff price on carbon.  2. Recycle the carbon revenues as frictionlessly as possible back to consumers, so they can switch demand to other things.  (This is one reason why carbon permits need to be auctioned.)  3. Maintain during the transition an especially watchful and vigorous macropolicy designed to ramp up public consumption and investment during periods in which private spending falls short.  #3 requires forward planning, so that governments at all levels have a portfolio of nonpolluting projects–-and not just those relating to energy---that can be initiated at short notice.

Note that this vision of Green Keynesianism is based on the rejection of silos.  Spending withdrawn from the carbon-dependent economy does not all have to be redirected to alternative energy, efficiency, or other officially “green” items.  We might have to make do with less energy and forego some of the things that energy is used for.  We might have to travel less, especially by plane.  We might have to change our diet if some foods, like meat, become a lot more expensive.  Not all energy-based problems can be solved within the time frame we have to cope with.  The Keynesian part, which is also (and this was definitely Keynes’ own view) about maintaining the quality of life, is making sure that, despite whatever constraints we face, we adopt policies that promote more and better income, employment and consumption.  Thinking about what those policies ought to be is the job for Green Keynesians today.


Sandwichman said...

"On the other side, the anti-growth crowd really doesn't get it."

Maybe the anti-growth "crowd" doesn't get it but there are some of us who are severely critical of the growth paradigm who "get it" with far more precision than you seem to, Peter. First, let's consider what "grows" in growth: GDP. GDP is the bastard child of a hybrid accounting -- part social accounting (Pigou, Clark, Kuznets) and part plain old managerial accounting aggregated. If you factor out the aggregated noise in GDP you get very little "growth," particularly over the last 30-40 years. I won't go into details here regarding why but you can draw your own conclusions about material throughput and embodied energy from some classic contributions to ecological economics such as Ayres and Kneese (1969) and Costanza (1980).

It is entirely plausible that a good dose of "green Keynesianism" could generate a temporary burst of GDP growth... and I see nothing wrong with that. But the point of a genuinely green Keynesianism would have to be to displace the necessity for "perpetual" growth -- otherwise it wouldn't be genuinely green.

I don't know who you read in the "anti-growth crowd" or if you just take your "anti-growth crowd" hearsay from what you read in the papers. But if you ever want to engage in a dialogue, the first step would be to listen to what the crowd you're disparaging actually has to say.

Peter Dorman said...

Well, S-man, I really seem to have pushed your buttons. Very briefly (again, alas), (1) I have read Daly, Ayres, Costanza and others. I actually teach ecological econ as well as mainstream; I review for the journal, etc. I mean it that I’ve never seen a persuasive argument that growth in economic value has to mean growth in resource consumption, pollution, etc. (2) As a practical and political matter, I’ve never seen green anti-growth types successfully differentiate themselves from other austerians. If it’s not an argument for “good” austerity, show how and why. (3) I realize my writings don’t get around as widely as the folks you cite, but anyone who knows what I’ve written over the last 20 years knows that I reject welfare economics root and branch. I don’t want to adjust economic accounting to make it about well-being; I don’t think economists have anything to say about well-being at all. That’s for other people who study the matter rigorously—psychologists, public health researchers, philosophers etc. I just want people to have the resources to make the life for themselves they want to make, individually and collectively. I certainly understand that aggregate growth, to the extent it’s unequal, leaves a lot of people out, and that defeats the purpose. Do I have to say more?

Sandwichman said...

When you say you "reject welfare economics," I wonder which welfare economics you're referring to. There's more than one. If you're referring to Pigou, the main issue is not just some fuzzy "well-being" but a quantitative difference between an allocation of investments that would be "best for the national dividend" and the investments that take place through the "free play of self interest." In today's terms that would translate into roughly the difference between "Keynesians" and market fundamentalists.

So if you actually "reject welfare economics root and branch" you're rejecting Keynesianism, which is clearly not what you meant to say. Or is it? Similarly, J.M. Clark's arguments about overhead costs and cost-shifting are about dead-weight losses to total economic production, not about some philosophical, psychological or public health notions of well-being.

Kuznets may be famous for contrasting national income accounts with well-being but his criticisms of the Commerce Department's 1947 National Income and Product Accounts was based on what he saw as "double-counting" of intermediate goods that gave a false picture of final consumption. Again, these were all, in the main, strictly economic arguments, regardless of being seasoned with allusions to well-being.

When I refer to GDP as a bastard hybrid of social and managerial accounting, I mean that it counts economic production wrong, not that it values the wrong things. It adds 2 + (3-2) and gets 5 instead of 3. That was Kuznets's point and it is Hueting's point.

At some points in the miscalculation it even goes beyond just leaving a lot of people out. It also counts as "growth" when the rich take something that used to belong to everyone (and thus to "no one") and call it their own.

You have never "seen a persuasive argument that growth in economic value has to mean growth in resource consumption." I'm not sure that it has to mean that. In fact I would argue that it would be quite possible for growth in economic value to occur without growth in resource consumption. But that where it is possible is precisely where capital puts up the greatest resistance. Why? Because the growth in economic value would not accrue to capital but would, on the contrary, undermine the relative power of capital. See Kalecki's superb essay on "The Political Aspects of Full Employment."

If capital won't give us a full-employment pony, what makes you think it'll give us a green pony to go with the pink pony it won't give us? I've never seen a persuasive argument that capital is going to just throw in the towel when it doesn't even have to.