In light of the planetary challenges we are faced with, what role do you see economics playing in working towards sustainability?

I recently participated in a panel put together by Boise State’s Hazard and Climate Resilience Institute as part of their Resource Nexus for Sustainability Grand Challenge. Together with 3 other economists (including the moderator), we met virtually to talk about the role of economics as a discipline for advancing the social goal of sustainability put in the context of the climate crisis. The name of the event was “Can economics help save the world?” (I’ll add the link to the video when it’s available.)

The discussion was pleasant, I think. Although to be honest, I can’t say I truly remember what went on. It was very dynamic and “real-time” in the sense that we tried addressing participant’s questions as they appeared in the chat–thus serving for a kind of authentically and beautifully chaotic episode of collective consciousness.

In preparation for the event, a few questions were distributed for panelists to organize their ideas around central topics chosen by the moderator. These questions were not easy and my answers to them kept evolving through the couple of weeks we had to prepare for the event.

So much of what I wanted to say may not have come across the way I wanted to or may not have been said simply by the very non-curated nature of live events. I want to post my evolving thoughts around these questions because the process of discovering those answers was truly edifying and spurred what felt like a moment of self-actualization. I’ll post them one at a time to keep things tractable, but I’ll add links to other reflections at the bottom of each commentary.

Without further ado, please join me in the discovery of some quite provocative questions put together for us by someone who genuinely was seeking to find new ideas and host a fun but illuminating discussion.

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Question 1: In light of the planetary challenges we are faced with, what role do you see economics playing in working towards sustainability?

Answer:

I think economics is going to be critical.

First, climate change is the result of GHG emissions, and GHG emissions are the result of economic actions. Thus, to address climate change, we need to study the economics of actions in the realms of production, trade, redistribution, and consumption.

Second, whether we like it or not, climate change is a crisis of economic inequality as much as anything else. The richest 10% of the world are responsible for 48% of the world’s emissions depending how you count, and the top 1% emit 100 times more than the bottom half. The bottom half, that’s 50% of the world’s population emits 7% of the world’s emissions (see the figure below). This means there are going to be a lot of questions about redistribution or resources and responsibilities, and if we are going to address some of the root causes of climate change, we are going to have to think about how to turn around the Neoliberal economic agenda that has been driving economic inequality for the last 40-50 years.  

Third, the role of government is going to be HUGE in managing the climate crisis and other planetary crises, not only because government is going to have to make decisions about how to spend money on disaster mitigation and disaster response actions but also because most emissions come from actors that have increasingly more political power. We reach a moment where economics will have to stop denying its origin and come back to “political economy”: the political management of the economy. We’re going to have to take a careful look at conflict of interests within governments to ensure good governance–which is a key ingredient, together with sound economics, to manage risk and manage disaster in an equitable manner.

Finally, for better or worse things have evolved in such a way that economics is the language of policy, and policymakers listen to economists more than they listen to other social scientists when it comes to making decisions about economic interventions.

NOTES:

* The economy is essentially the organization of how material stuff gets produced, consumed, traded, or assigned. So economics is the study how things gets produced, how people go about selling and buying those things, and how the government goes about influencing those relationships between buyers and sellers (or how my hero Dr. Ha Joon Chang says: 95% of economics is common sense—made look difficult with the use of jargon and mathematics). Economics will be critical because it is precisely the production technologies and incentives for choosing production technologies and targets what have caused climate change.

Commentary on the role of consumers: As consumers, we have some power over what we consume, but I personally believe that whole idea of consumer choice and consumer power is overstated. I learned recently that the whole idea of the carbon footprint calculator that we can use to find how to reduce our carbon footprint was a marketing trick from BP to have the public believe they are largely responsible for halting climate change! Without denying the fact that consumption is problematic, we don’t choose to be part of the current version of the consumption system.