In Goodwin Company

Neva Goodwin, Tufts University ecological economist.

Would an effective movement to get people to consume less really cause our economy to go into a tailspin? If it wouldn’t, how do we convince those who are so concerned about stimulating the economy? If it would, what’s the sustainable answer?    — Cathy Turner, Portland, Ore.

This is a key issue. Right now, our economy is, indeed, dependent on what we think of as growth. Most capitalist economies are. A sudden drop in consumer spending will have very negative effects in any economy in the world today. That’s a major issue we need to address: We need to figure out how to either (1) glide off the growth path, or (2) redefine what it is that grows — not more “stuff,” but maybe better medical care, better education, more of the less environmentally harmful kinds of recreational activities. The last of these is important if more free time is the result of less production of stuff. (An increase in leisure, and better understanding of how to use it, was what John Maynard Keynes predicted should be happening about now as a result of rising productivity and better education.)

Is the economic change of decreasing our reliance on oil going to be catastrophic, or will it be something that the world can endure?    — Hugo Lentze, Denver, Colo.

Let me add another question: How suicidal — or not — is the human species? If we are genuinely interested in maintaining our civilizations, and the possibility of good lives for our descendants, we will shift away from hydrocarbons soon; if we ignore the realities, the shift may not come until we have used up a lot of the remaining hydrocarbon sources and altered the climate of the planet to a destructive degree. Whether it is sooner or later, the shift is inevitable. Will that shift be economically catastrophic? I don’t believe it needs to be. Indeed, it could create jobs that can take the place of jobs now dedicated to producing destructive goods for a destructive lifestyle. The Apollo Project is dedicated to this last proposition — that we can replace the wrong kind of growth with the right kind.

Does the work you do build on Herman Daly’s steady-state economic theories?    — John Faust, Sierra Vista, Ariz.

We have been greatly influenced by Daly’s work, especially his essential idea of the finitude of our ecosystem, and hence of our ultimately ecosystem-dependent economies. But there are many possible interpretations of “steady-state” — including the idea that we can shift from more throughput to better outcomes, gradually exchanging positive or neutral income sources for destructive ones. It’s not certain that this will be possible — but it seems to be the best option, and worth trying to find a way to get to.

Do you see the elimination of corporate personhood as a key to the structural changes that need to be made to our current capitalist system? Is there another way?    — John Faust, Sierra Vista, Ariz.

The elimination of corporate personhood would be extremely helpful. (For readers who are not familiar with this debate, check out the Program on Corporations, Law & Democracy). However this change is going to be very hard to bring about, so we need a variety of plans. The socially responsible investing movement is gathering momentum; along with efforts to get corporations to be more transparent about their impacts (as in the Global Reporting Initiative), this has the potential to achieve a lot of the needed change in the system.

I know that you have been a prominent member of the Ceres board and that you were recently at the UN Institutional Investor Summit on Climate Risk. You’ve played a part in helping change the notion of fiduciary duty so that a lot of pension-fund leaders and state treasurers are starting to ask their Wall Street managers and the heads of their portfolio companies to assess the financial costs of climate change. I have two questions: What does this mean for the average person-on-the-street environmentalist? And where do you think this trend might be headed?    — Bob Massie, Somerville, Mass.

It is sometimes said that at least half the adults in this country have some stake in the country’s publicly traded corporations through pension plans, if not direct ownership of stocks. In addition, if you own any kind of insurance, the likelihood that the insurance company will be able to make good on any claims you make depends on the investments of those companies, as well as on the number of catastrophes the insurance company is trying to cover. (Insurance companies have noticed that climate-related disasters are increasing at a rapid rate, with huge costs for them.)

Every person-on-the-street who participates in this “ownership society” (which is already coming about through our stakes in pension funds and insurance companies) — not just environmentalists — have good reason to care about how companies assess their potential risks from climate change, and how they respond to those risks. This is most obvious with the fossil-fuel companies, whose profits could dip sharply if sane government policies (here and overseas) make it more expensive to use fossil fuels than renewables. But “climate risk,” as it was dubbed by Ceres, affects most industries — agriculture, real estate, almost anything you can think of — in various ways, some more and some less.

Thank heavens a number of pension funds — and a number of big insurance companies, too — have started to realize how tightly the future health of business is bound up with the continuing health of the planet’s ecosystem. Where is this heading? There may be some backlash against the pension-fund leaders in this movement, but it is likely to be short-lived. The realities of sea-level rise, increased severe-weather events, tropical diseases moving north, etc., will become undeniable, and then the pension-fund leaders’ emphasis on climate change and business health, which right now is new and surprising, will soon become obvious and taken for granted.

I am one of the Grist moms trying to start a publication to encourage American moms to live more greenly. I’d like to know which changes in the American lifestyle would have the biggest impact on emissions. What do you think?    — Rosemary Gould, Charlottesville, Va.

I won’t try add to the many lists and books that tell you about personal actions like recycling, driving less, etc. Those are all good. I sometimes fear, though, that this focus diverts attention from some basic characteristics of our economy that require change. We need some fundamental reexamination of values — not aiming for a puritanical denial of a good life, but taking advantage of recent social work about well-being. What really makes people happy? What can elevate the well-being of a whole society? A competitive game, where the winner is the one who dies with the most toys, is fun for some, but lousy for the losers (the large majority).

Our society has more than doubled its material standard of living since the 1950s, but overall well-being, by a number of very credible measures, has either stayed flat or gone down. If this body of research is correct, there is much truth in the idea that lower consumption can go along with greater well-being, but this is especially true if these values are taken on in groups, not just by individuals.

A good place to start thinking about how these micro and macro issues interplay is with Robert Frank’s excellent, highly readable book, Luxury Fever. More academic writers on these topics include Ed Diener, Daniel Kahneman, David Myers, Mihaly Csikszentmihalyi (one of the more readable, if not pronounceable), and Tim Kasser. ‘

What do you think is the best way (or at least a few productive and efficient options) for an individual person to help increase worldwide sustainability?    — Mike Dollhopf, Brookfield, Wis.

Building on some of the answers I’ve given above: 1) If you are a participant in a pension plan, or own stock in any other way, get involved in knowing about shareholder resolutions addressed to the companies you own (directly or through your pension plan). Recognize that failure to vote on such resolutions (often called “proxy resolutions”) is counted as a vote for management. Find out what you can do to see that well-informed people are thinking about each such resolution and voting on them with the intention to move corporations toward more social and environmental responsibility. 2) Reflect on the things that really make your life better. That awareness often helps people make choices that are good for the world’s needs.

The problem I have with classical microeconomics is the failure to account for “externalities” that relate to fundamental human and environmental values. What do you propose to do to incorporate the breadth of human activity and resource use into the economist’s paradigm and avoid us living out the “tragedy of the commons”?    — David Hohmann, Bexley, Ohio

Many people who are critical of economics say that the problem is that economists don’t take account of externalities. In fact, this is one of the most hopeful areas of agreement between economists and environmentalists. Externalities are costs or benefits that are “external” to the market system — that is, they don’t come back to affect the economic actor that caused them. This is very distressing to economists, because the presence of an externality means that the market is not working as theory says it should. Economists used to mostly ignore the prevalence of externalities — they can justly be criticized for that — but since environmentalists discovered the word and began to bring examples to the attention of economists, they have been working hard to figure out ways to “internalize the externalities.” If this effort could fully succeed, we would have a world in which any polluting firm would bear the full cost of its pollution, rather than leaving individuals to bear the cost in terms of ill health, etc., and every family whose children grow up to be constructive members of society would be fully compensated for the foregone earnings and other costs involved in devoting time and resources to raising children.

That’s the positive part. The negative is that, even while mainstream economists are actively (and sometimes successfully) wrestling with efforts to internalize (into the system of market signals) the costs of economic activity that have been externalized to the natural world or onto societies, there’s something bigger going on — which I suspect is behind your question. There are “meta-externalities” — unwanted side-effects of the whole economic system on its physical and social contexts — which continue to be invisible to the theory. Critical meta-externalities show up in the impact of the economic system on the social context. Productive enterprises need a workforce that has been socialized to be able to defer gratification, to think independently and sometimes creatively, and to be honest and responsible. Citizens and politicians need to care about the long run, and to be able and willing to address intelligently the myriad highly complex issues that face modern societies. But the sales efforts within modern enterprises are focused on a different set of requirements. From the sales point of view, the self-interest of business is served by a culture of instant gratification and simplified thinking that urges material purchase as the answer to any discomfort. A serious, as yet insufficiently recognized, set of meta-externalities are the selfishness, short-term thinking, cynicism, and impatience with complexity that are cultivated in the populace at large — even though these are not characteristics that will best contribute to a healthy society or a healthy economy.

What do you see as political strategies for getting some pollution taxes in place?    — Don Parker, Golden, Colo.

As I have looked over the years at what happens in the economy, trying to understand the causes of what happens, and then seeking the causes of those causes, it has struck me that when the onion is peeled all the way to the center, what you find are human values — what we really care about. So where do values come from? An awful lot are being dinned into infants, children, and the rest of the population through commercials, which proclaim: “getting more stuff is what will make you happy,” “you deserve it all,” and “being number one is what counts.” Those are factually false statements, designed to create dissatisfaction as the basis for a consumer society — a society that believes no one should have any obligation to pay taxes and everyone should be able to do and have whatever they want at the lowest possible (immediate, monetary) cost. I’m no politician — and this answer is hardly a political strategy — but I do believe there is an essential step required to enable people to think clearly and act on deeper values that most people probably share. That essential first step is to take back our culture from the advertisers.

How can that be done? I hope someone can figure out the answer to that!

Do you think there is another way to get people to conserve natural resources, especially petroleum products, without taxing them or otherwise inflicting financial sanctions?    — Bruce Wright, Conservation Science Institute, Wasilla, Calif.

If you can provide cost-competitive, renewable alternatives — and if you can get the infrastructure in place so that people can make use of such alternatives — there will be no difficulty in persuading people to turn in that direction. Creating such alternatives probably is feasible, though expensive at the start. Money is beginning to flow in that direction. Consider the growing popularity of hybrid cars and the availability in some places of “green” power at a slight premium.

But an economist must always emphasize that without an increase in the price of fossil fuels, market incentives will continue to promote their use, and even worse, will continue to promote investment in fossil fuel-based infrastructure which will last for many decades. It is possible to offset higher fossil-fuel taxes with tax rebates of a progressive nature (that is, favoring lower-income consumers), and this is a possible response to the social impact of higher-priced fossil fuels. Given the urgency of the climate change threat, it is very unlikely that voluntary measures alone will lead to sufficiently rapid reduction of petroleum use.

What do you think of the idea of governmental work groups such as those from the Big Deal era that would be responsible for conservation efforts and watershed monitoring/improvements? And could this be done on a local level to help offset jobs lost through any “pollution taxes”?    — Jared Webb, Rocky Mount, Va.

This could be a good program. National parks are overwhelmed with young (and some old) volunteers who will work for free or for room and board, and they regularly have more applicants than they have the paid personnel to handle. Meaningful work is a very positive element in a life. The important thing is that the program be designed intelligently to maintain this spirit, making sure that participants enjoy the knowledge that they are doing something useful. Of course, people have to be able to pay for the necessities of life, too — most can’t survive on good feelings alone. If such a program as you suggest provides decent living wages, it could play an important role in helping with the transition from an unsustainable to a sustainable economy.

One definition of a sustainable economy is that it is one in which people are paid to do things that promote well-being on all levels, and not paid to do things that are destructive to the natural, social, human, or manufactured capital that is needed to maintain a good civilization. This applies whether the source of the payment is business, government, or individuals.

Can you direct me to some resources on pollution taxes?    — Reid Betz, New York, N.Y.

A good source on economic instruments for promoting sustainable production and consumption is provided by the International Institute for Sustainable Development. They offer extensive case studies involving pollution taxes, deposit-refund systems, resource-use charges, and other fiscal policies. Another good source is David Roodman’s Getting the Signals Right: Tax Reform to Protect the Environment and the Economy, a paper written for the Worldwatch Institute.

Do you have any numbers on the economic effect of development incentives, subsidies, and tax breaks?    — Don Parker, Golden, Colo.

A great source on subsidies in general is Perverse Subsidies: How Tax Dollars Can Undercut the Environment and the Economy. Also, the Green Scissors reports that Friends of the Earth puts out have good information.

I know there are few university programs around now that offer an MBA in Sustainable Economics. How would you go about approaching a business to convince them that such a degreed employee would be beneficial to them?    — Senen Syminghton, Austin, Texas

I hear rumblings that suggest that businesses are finding that they need such people — for PR purposes, if nothing else. You might look at the record of shareholder resolutions that are asking companies to be more aware of and responsive to their environmental impact; some such resolutions even specify that the company should hire someone to oversee efforts in this direction. If the company you’re applying to has received such resolutions, that would strengthen your case. If not, you could still cite this trend, and suggest that they should get ahead of the curve.

I’m an environmentalist with an interest in economics. Besides teaching and fundraising, what career options are there for environmental economists?    — John Shelton, Brunswick, Maine

Consider working in the extensive state and federal bureaucracy of environmental departments (despite Bush administration national policies, there is still a lot of good work going on at regional and state levels) or working for some of the more socially conscious corporations on environmental policy.