Why has progress in climate change policy been so slow? If you read five books, you will find six theories. Perhaps this is because the public is poorly informed. Or because the science is so hard. Or because industry is putting up such a vicious fight, and policies are being blocked by the oil and coal lobbies. Or because climate deniers have captured the Republican Party. Perhaps because a solution is so expensive. Or because costs must be incurred in the present while benefits accrue far in the future.
Doubtless, each of these plays a part. But the fundamental reason for the lack of progress is the strong incentives for “free-riding” in current international climate agreements... A crucial aspect of the club is that countries who are outside the club—and do not share in the burden of emissions reductions—are penalized. Penalties for those outside the club are central to the club mechanism, and penalties are the major difference from all other proposals from Kyoto to the upcoming meeting in Paris. Economic modeling indicates that the most promising penalty is uniform percentage tariffs on the imports of nonparticipants into the club region. A country considering whether to undertake costly abatement would have to weigh those costs against the potentially larger costs of reduced trade with countries in the club.
Two Cheers for Capitalism
Anand suggested that in these days of growing income inequality, this approach is no longer good enough. “Sometimes I wonder,” he said, “whether these various forms of giving back have become to our era what the papal indulgence was to the Middle Ages: a relatively inexpensive way of getting oneself seemingly on the right side of justice, without having to alter the fundamentals of one’s life.”
The winners of our age, he continued, may be helping society with their foundations, but in their business enterprises, the main occupation of their life, they are doing serious harm. First they are using political and financial muscle to enact policies that help them “stack up, protect and bequeath the money.”
Second, they offload risks and volatility onto workers. Uber’s owners have a lot of security but they deny any responsibility for their workers’ “lives, health, desire for career growth.”
Third, the owners of capital are increasingly remote from their communities. “In the old days, if a company C.E.O. suddenly dumped the defined-benefits pension, you knew who to go see to complain. Today it may be an unseen private equity fund that lobbies for the change.” The virtualization of ownership insulates the privileged from the “devastating consequences” of their decisions.
The Structure of Gratitude
In the capitalist economy, debt is to be repaid to the lender. But a debt of gratitude is repaid forward, to another person who also doesn’t deserve it. In this way each gift ripples outward and yokes circles of people in bonds of affection.
.. If you think that human nature is good and powerful, then you go around frustrated because the perfect society has not yet been achieved. But if you go through life believing that our reason is not that great, our individual skills are not that impressive, and our goodness is severely mottled, then you’re sort of amazed life has managed to be as sweet as it is.
.. Gratitude is the ability to see and appreciate this other almost magical economy.
The M.I.T. Gang
This open-minded, pragmatic approach was overwhelmingly vindicated after crisis struck in 2008. Chicago-school types warned incessantly that responding to the crisis by printing money and running deficits would lead to 70s-type stagflation, with soaring inflation and interest rates. But M.I.T. types predicted, correctly, that inflation and interest rates would stay low in a depressed economy, and that attempts to slash deficits too soon would deepen the slump.
.. On other fronts, however, the M.I.T. gang’s good advice has been ignored. The I.M.F.’s research department, under Mr. Blanchard’s leadership, has done authoritative work on the effects of fiscal policy, demonstrating beyond any reasonable doubt that slashing spending in a depressed economy is a terrible mistake, and that attempts to reduce high levels of debt via austerity are self-defeating. But European politicians have slashed spending and demanded crippling austerity from debtors anyway.