I spoke at the Economist’s Sustainability Summit last week. I have written up my notes and added some more details into a more coherent post. This is a bit wide-ranging – even rambling, but I have a bunch of observations I want to make or remake.
Is rapid transformational change possible? Yes, but it is not explainable by economics
I woke up in the night thinking of the desert blooms in California. Where for years there is nothing but sun and sand, and then after rare rain the landscape is magically transformed by blooms and becomes a hive of life.
Can such a rapid and fundamental transformation happen in human affairs? Such is needed if we want to sustain life on the planet.
The answer is yes. But it is nothing to do with the economy or with economics, unless you redefine economics accordingly [see earlier blogs on belief economics].
Until 18th December last year, Manchester United’s performance was dismal and dreary. Our team of stars, who had cost something like half a billion pounds to assemble, played like lead soldiers: dull, unimaginative, going through the motions with no desire. We were led by a morose and arrogant Portuguese man (apologies to Jose Mourinho here – I am only being personal for the sake of the planet).
Then Mourinho was sacked and Ole Gunnar Solskjaer took over. This cheerful, modest and open fellow instantly transformed the team. The players became ballerinas, agile, creative, beautiful, passionate, full of desire and drive.
And yet no economist or economic theory would explain this. I dare say Solskjaer’s salary is lower than Jose’s was. Nor did Solskjaer learn to be nice at university. No, it was surely learnt in the first few years of his life.
The second transformation, even more relevant: in August last year a single Swedish teenager went on strike from school to protest against adult inaction on climate change. Last Friday one and a half million school children followed her worldwide.
Again, nothing to do with economics. She was not funded by an EU grant. It’s not the Coca Cola School Strike.
But there is a connection to economics. Belief, drive, passion, values, commitment – these are all about the human mind and the human mind is the source of our utility function which shapes the demand curve.
Policy in terms of supply and demand curves
In economics you have a supply curve and a demand curve, and where the two lines cross gives us the price and volume at which trade in goods and services is transacted. Today almost all environmental policy is about changing the supply curve – making “bad” things more expensive through taxes, and making “good” things cheaper through subsidy.
We have been trying to tackle climate change with such policies for some time, but emissions are stubborn. Meat and dairy eating (15% of greenhouse gas emissions and over 90% of Brazilian deforestation) and transport are politically immune to carbon pricing. Home insulation is too difficult. If you manufacture ammonia, cement or steel, you have to emit CO2 whether it is priced or not: alternative carbon-free technologies are not imminent. Even if you run a power plant, it can be easier to pay the cost of carbon emissions than work out what to do about them.
The trouble is, our current instincts are for faster, easier, more convenient, more filling. So policies are about paying people to go against their instincts, while at the same time marketing and advertising is all about whipping up their basic instincts. This is like having the foot on the accelerator and the brake at the same time. It is not economically efficient, despite the claim that “pricing carbon”, for example, is the most economically efficient approach to cutting emissions.
What if, as well as shifting the supply curve, we also looked at shifting the demand curve by shaping the preferences of people. By shifting the supply curve and the demand curve at the same time, you move the quantity and price point even quicker than just moving the supply curve alone. I am suggesting we change people’s preferences so that they actually want to tread more lightly on the planet.
Economists and politicians shy from this area for good reason: in the past very bad people have tried to change preferences through brainwashing. Some bad people still do. But at the same time we know that it can be effective – hence the billions spent on advertising and, in a clunky awkward way, our education system.
Relevant earlier posts: Changing demand for emission reductions, Policies to change demand for emissions; Ten policies to increase demand for low carbon living; Ten policies to reduce demand for emissions
Priming children to love and care for the natural world
The most important time for shaping preferences is the first ten years of a child’s life. This time, particularly between the ages of five and ten, is when the capacity for empathy develops. This is when a person is “primed” and fundamental values are crystallised which accompany the person throughout adulthood. If, during that period, a young person has repeated exposure to the natural world, and experiences awe of its beauty and ineffable mystery, then their soul will be shaped accordingly. In later life they will be more likely to care for the natural world and to vote for green policies.
We need to invest in primary education and spend money on getting children out into nature and understanding the natural world. There are many great practitioners of this – not least forest schools or the Field Studies Council in the UK – but it needs to be scaled up and intensified. Funding could be found by reducing support for universities – while universities are good at making people cleverer, they are not good at making people gooder. And now our civilisation needs good not clever. We are clever enough, by half. Note that Greta Thunberg has not been to university yet. Nor Solskjaer.
Making people gooder sooner
Not just gooder, but gooder sooner. It is fascinating that it takes people to their sixties to become kind. Billionaires who have spent their lives digging up the planet, then get to sixty or seventy and start being kind and giving all their wealth away. Or it takes them forty years to “get it”. I am thinking, for example, of Larry Fink of Blackrock. This year he wrote to his investors that money is not everything and businesses should pursue good purpose. But it took him 40 years or more to figure this out. Or Warren Buffet – giving away billions as an octogenarian. Bill Gates – thirty years a ruthless software monopolist, now all over the energy and climate change. I am not criticising these chaps, just interested that compassion becomes a priority so late in life. I wonder: what if these amazingly driven and talented people had been imbued with a love of the natural world as young people and had dedicated all that talent and drive to preserving forest, restoring wetlands and promoting regenerative farming. What if we became kind at 20 instead 60?
By instilling in children a love of the natural world, we will be able to redefine the sociological drivers of the economy: success, status and wealth: Success becomes measured in the number of trees you have planted or wetlands you have preserved; the tonnes of soil carbon that you have settled. Status is reflected in a modest and simple lifestyle. Wealth is embodied in holdings of regenerative farms.
It is done quickly and cheaply. A handful of close-to-nature experiences in youth can have a lasting effect. It takes less time to raise a child accordingly than to build a nuclear power station. (The Bustard’s third rule – Kids v nukes).
Priming children to love nature is the ultimate shaping of the demand-side. Experts should cost it out and calculate the value of its various benefits to society and nature. Since it happens within the existing education system, there are existing structures for its funding and implementation.
Priming is a long-term process and not rapidly transformational like the Greta effect. But there is something more wholesome about it that deploying the manipulative technology of social media campaigns.
I was asked what other things can be done to shape the demand curve. Rather than look at specific interventions in different areas of greenery, I suggest two systemic things: a decision-making technique and a kind of thinking.
The WMKP decision tool
Standard decision-making tools such as discounted cashflow, capital asset pricing, return on investment, and so forth usually give the wrong answer. That is, if you want to justify a green decision. An alternative tool is the WMKP model. WMKP stands for “Would My Kids be Proud?” The aim of this tool is to break down the compartmentalisation, which many adopt, between the home persona and the work persona. Many people take decisions at work which are contrary to the interests of their children. So by asking whether your children (or grandchildren) would be proud of something, you are forced to reflect on whether the decision contributes to their long-term well-being and that of their contemporaries. This could be taught at business school.
To get ahead you have to focus narrowly, to specialise. Engineers and scientists are adept at this, as are businessmen. A corollary of this is that they often forget to investigate the impact of their work, even though it is known that solving one problem can cause another problem. The men who invented and sold neonicotinoids did not bother too much about their impact on bees. The men who sold plastic packaging did not reflect on the question of its proper disposal in countries without proper waste management facilities.
If people were taught throughout school and college to think broadly, considering the implications and ramifications of things, both real and moral, and to see the world more holistically and not in little unconnected, isolated blocks, their demand for harmful things might be dampened by reflection on the harm caused. It would be most valuable to invest careful and high quality teaching into this, at cognitive levels appropriate to the students.
Remove free limited liability to force joined-up thinking among investors
A radical way of forcing investors to thinking through the consequences of their acts would be to stop automatically granting investors limited liability. If they had to purchase such limited liability from insurers, they would be forced to weigh up the potential risks of their venture with the cost of purchasing that. Fear of class action law-suits which could destroy not only their company but all their wealth, might make them think twice about launching products which cause cancer or destroy the fabric of life.
Relevant earlier posts: Limited liability as a socialist phenomenon
Letter in the FT: Time to recalibrate limited liability