Insurance on the FDI frontier

Jelmer writes*

If one were to ask a group of economists, policymakers, and other public intellectuals how to solve The Great Issue™ of stark global inequalities in wealth and development, they may very well yell “Foreign Direct Investment!” This is exactly what the World Bank has been preaching for the past thirty or so years. After all, neoclassical economics dictate that the private market should find these massive stocks of human capital, natural resources, and an untapped market to boot too good to pass up on. Considering the globalization of the economy at large it would be suboptimal at best and un-capitalist at worst not to jump on the opportunity these resources offer. Of course, it never was this easy. Resource allocation is a game we play, and when the rules and outcomes are unclear costs potentially outweigh benefits. This is often the case in poor countries; therefore, private parties keen on profits get cold feet and back out. They are wary of expropriations and (government) parties defaulting on payments. In other cases, social unrest, terrorism or even war may destroy a company’s operations abroad. Political Risk Insurance (PRI) encompasses a range of products designed to ameliorate the costs associated with these risks.

As stated by Iftinchi and Hurduzeu [pdf], PRI is offered by two main groups; public and private insurers. Public insurers are often linked to, or are an immediate part of, a development bank or government initiative. They tend to be in the market for relatively long-term investments and are less flexible due to their alignment with governments’ foreign policy or sustainability goals. Private parties, on the other hand, insure short- and medium-term projects at highly variable premiums and often with little regard for the (socio-economic) environment. As can be seen in the graph, the main public player is the World Bank’s Multilateral Investment Guarantee Agency (MIGA), with significant market share in countries with the highest risk rating (BB and worse). Zurich Group is the largest private party, insuring PRI across the board and outperforming MIGA in the, quite relevant from an international development standpoint, ‘CCC and lower’ rated market.


At its very core, the public provision of PRI is supposed to improve global resource allocation. It allows firms to engage in markets which they previously may not have considered. This very idea was central to the initiation of MIGA by the World Bank [pdf]: “sustainable economic growth in many developing and transitional countries would require stimulation of private enterprise and foreign direct investment.” Albeit easy to get behind, there are definite questions to be raised about the World Bank’s interference in this market. As market shares show, private insurers do not necessarily have a problem with fulfilling the demand in place. This issue was already being raised at the very establishment of MIGA; Stefan Sinn dealt with it extensively in his 1986 “Second Thoughts on MIGA” [pdf] paper. Furthermore, he raises fundamental concerns about the role of insurance provision in resource allocation. As with any type of insurance, risks such as moral hazard may, in fact, worsen allocation. Yes, there are obvious benefits to FDI; its size potential in comparison to other forms of development aid [pdf] says as much. And yes, its flow may very well be improved by PRI products. However, the fundamental questions raised by Sinn remain unanswered some 30 years later.

Over the next few weeks, I will further research the growing market of PRI, and the role of public provision specifically. To stay updated and receive the final report, please contact me by e-mail.

* Please help my Growth & Development Economics students by commenting on unclear analysis, alternative perspectives, better data sources, etc. (Or you can just say something nice 🙂

The BRI in Malaysia

Yeseong writes*

China’s influence on other countries is hard to grasp so this post focuses on President Xi’s biggest and most ambitious foreign policy: The Belt and Road Initiative, or BRI. The BRI is an effort to link some 70 countries through a trillion dollars of investment in roads, ports, pipelines, roads, and other infrastructure. Xi claims that this initiative will work magic like the ancient silk routes, opening “windows of friendly engagement among nations, adding a splendid chapter to the history of human progress.”

Malaysia supported BRI under the rule of the former Prime Minister Najib Razak. Malaysia signed deals for infrastructure to be funded by the Chinese state-owned and commercial banks. The people of Malaysia supported these deals as they had nothing to lose from more jobs, and better infrastructure. They believed the BRI would help the economy and raise their quality of life.

Yet, the new government, led by PM Mahathir Mohamad, did not feel this way. The former government was corrupt, and Mahathir believed that Najib began unnecessary ventures the country could not sustain, which led to the cancellation of $22 billion of BRI projects for rail links and gas pipelines. As a cautionary tale, consider that Pakistan borrowed from Chinese commercial banks until it needed an IMF bailout.

There are clear opportunities and risks involved with the Chinese effort to bring countries together. A successful BRI would improve Eurasian trade connectivity, boost the economies of developing countries, and raise living standards for millions of people. On the other hand, trade processes might be hindered by cumbersome policies; large infrastructure projects may be ineffective due to many reasons including corruption (which is the case of Malaysia under Najib Razak); and accumulating debts in developing participants may be on an unsustainable level. Some also worry that the BRI is an excuse “to establish a comprehensive system to shape the world according to China’s interests.

Bottom Line: China’s BRI promises investments to link numerous countries. It would be wonderful if the BRI’s promises materialized, but the reality is different. Thus, countries need to be careful of BRI risk, as Malaysia discovered with corruption and excessive debts from unnecessary projects.

* Please help my Growth & Development Economics students by commenting on unclear analysis, alternative perspectives, better data sources, etc. (Or you can just say something nice 🙂

Microfinance: Is it a trap?

Jeroen writes*

Microfinance (MF) was invented in the 1970’s as a means of uplifting the poor. Since then, it has been widely pursued by NGO’s and even international organizations such as the World Bank. Its inventor, Muhammad Yunus, even earned a Nobel Prize for it. But does microfinance really deliver on its promise? Or are there adverse effects that outweigh its benefits? This post will examine microfinance’s effect on entrepreneurs’ prosperity. In the blog’s one-handed tradition, I will be fairly biased, in that I zoom in on a drawback of microfinance: displacement effects.

Displacement refers to when microloan entrepreneurs crowd other business out of the market, as Milford Batesman argues in his book Why Doesn’t Microfinance Work? Displacement occurs when microfinance entrepreneurs compete with other small businesses over limited jobs for self-employed workers in developing nations. Exceptions to this rule exist, such as in newly formed Bosnia-Herzegovina, where many unemployed were highly educated and could therefore perform a wider variety of tasks. However, in many developing countries, such as Bangladesh, MF workers stick to jobs like farming, craftmanship or keeping a small shop.

This competition has two adverse effects for workers in the sector. First, it pushes prices down. For example, more barber shops open, but the demand for haircuts hasn’t necessarily changed. Thus, as illustrated in the figure below, the supply curve moves outward and prices drop. Second, the new barber shops steal away customers from the old barber shops. Even though the quantity demanded of haircuts rises slightly, that quantity has to be shared among more workers. The result of both these mechanisms, is profits decrease, as Honohan discusses.

Price falls as microloan entrepeneurs enter the market. Source: Batesman

The shrinking of profits due to displacement has two implications. First, it is a key limitation to many studies examining MF’s economic benefits, as Honohan points out. Second, it means that capital accumulation for the poor becomes much harder.  Microfinance advocates themselves admit that capital accumulation is key to poverty alleviation. They use anecdotes of entrepreneurs that put their profits into their children’s education, or the expansion of their business. Displacement undermines this ability.

The story of rent reduction seems to be one of collective-action failure. Microfinance benefits individuals who take a microloan and start a business. However, it hurts all workers in that business by pushing their profits down.

One might object to the displacement argument, that microloans can also be used to make investments that boost productivity, thereby boosting the profits made by businesses. Honohan provides an example of this: a trader buying a bike, making him faster (and more efficient) than other traders on foot. Here, the bikeless trader is outcompeted and replaced by a more efficient service (i.e. creative destruction). There is no literature about how these productivity loans compare to the loss of profits for entrepreneurs. However, I would argue these examples are less frequent. Micro-finance loans tend very small, typically around $27. This is often enough to buy the basic supplies for a business, but not to make additional investments. Thus, entrepeneurs might use microcredit to improve on the margins (i.e. buying a bike), but it is uncertain whether this will create enough value to compensate for profits lost due to displacement.

Bottom line: Microfinance can reduce entrepeneurial profits and thus slow the poor’s rise out of poverty. From this perspective, Microfinance looks more like a trap than an escape.

* Please help my Growth & Development Economics students by commenting on unclear analysis, alternative perspectives, better data sources, etc. (Or you can just say something nice 🙂

Brazil’s new direction: Bolsanaro

Tom writes*

Brazil experienced high growth from 2000 until 2014, when the country was suddenly in an unprecedented recession. Although the country’s GDP showed some recovery in 2017, Brazil elected far-right politician Jair Bolsonaro as president in a response to “rising crime and two years of political and economic turmoil”. As what follows will suggest, the election of Bolsonaro is not so much a result of the stagnation of economic growth, as it was rooted in the lack of development following the past decades’ growth.

To assess economic development, Sen and Nussbaum’s capabilities approach will be used as a definition to measure economic development in Brazil. Two of his most important political promises that explain why Bolsonaro gained so much support are his plans to fight corruption and reduce crime rates. The former deals with capability 10A, the political aspect of control over one’s environment, whereas the latter aims at tackling violations of capability 3, bodily integrity, and capability 10B, the material component of control over one’s environment. One might argue that a tougher policy on crime even relates to the first capability, life, in a country where homicide rates are among the highest in the world. The lack of economic development is also visible in the extreme income inequality and the over 23.3 million Brazilians, over 10 percent of the population, living below the poverty line, which inhibits almost all aspects of human development. This also explains why many people from minorities, such as people of colour and women, voted for him, despite his countless insults; they are overrepresented in the poorest groups of Brazilian society. It is important to note here, though, that many of Bolsonaro’s plans will probably not enhance human development as defined by Sen and Nussbaum, the argument is rather that the reason why people voted for him, are the obviously lacking aspects of development that he addresses.

What gave to rise Bolsonaro, however, started five years before his presidential election, in 2013, when all across Brazil, people took to the streets “with a range of demands from affordable public transportation to fixes to the government bureaucracy”. These demands are rather aimed at enhancement of quality of life than at quantity and seem to have more to do with development than growth. Popular discontent in Brazil was mainly centred around issues of development, but many of them are related to economic growth issues, such as stagnation and a drop in inflation that threatens the position of the middle class.

At the same time that development is lacking, the prospects for economic growth in the next years are also critical, especially since Bolsonaro, in an attempt to recover Brazil’s economy, wants to break most economic ties with China, while trade with China grew with 4000% between 2000 and 2013, largely contributing to Brazil’s economic growth. The irony is that at the same time that the ‘Trump of the Tropes’ wishes to copy Trump’s strong anti-China economic policy, it was exactly this American trade war with Beijing that has boosted Brazilian exports to China.

Bottom line: The rise of Bolsonaro as Brazil’s new president is rather a response of human development falling behind for years than just a response to the lack of economic growth between 2014 and 2016.

* Please help my Growth & Development Economics students by commenting on unclear analysis, alternative perspectives, data sources, etc. (Or you can just say something nice 🙂

Is mass consumerism a choice?

Floris writes*

We all know we live in a consumerist society, but what are its origins and did it develop naturally? This post explains the surprising influence of Freud on our consumerist society. It all started at the 1929 Easter March in New York when a group of women lit their cigarettes— an act publicly unacceptable at the time, and even considered rebelliously feminist. For many, including the women, the lighting of their cigarettes seemed to indeed be part of a greater struggle for power; the Women’s Liberation Movement. However, few were aware that the actual intention behind the action was for the American Tobacco Company to increase cigarette consumption among women. These women were paid by Edward Bernays, Sigmund Freud’s nephew, to light their “torches of freedom”— the cigarette became symbolic of women’s freedom. I argue firstly that this event marked only the beginning of the implementation of Freudian psychoanalysis as a tool used to promote consumerism in America, and that still today, we are living in a society full of passive consumers.

In part one and part two of the brilliant documentary The Century of the Self, we see how Freud’s ideas were employed in order to create a mass consumption society. Freud believed that humans are irrational, governed by their subconscious fears and desires. Bernays, through his work as a Public Relations Counsellor to American corporations, applied these theories in his advertisements. These ads appealed to people’s innermost desires, leading them to consume more. For example, Bernays suggested to remove an egg from an instant cake mix which consumers had to add in themselves. He believed this would help eliminate the sense of guilt housewives felt for not having made a cake themselves from scratch. This seemingly simple change had the desired effects and sales increased massively. This strategy turned people into passive consumers. However, this passivism turned into activism when people began to notice and discover the selling strategies and conditioning. In 1962, awareness increased especially after celebrity and high-profile psychoanalyst patient Marylin Monroe committed suicide.

In part 3, it is shown how corporations in the 60s and 70s turned activism into a new kind of consumerism based on individual rather than mass needs. During the 60s, an alternative psychoanalytical perspective regained popularity, it was originally developed by Wilhelm Reich who believed the opposite of Freud. In his view, humans are good in and of themselves and that society repressed their inner selves which made them violent and mentally unstable. He argued that people should express their fears and desires which would allow them to be freed of the conditioning and control by society. This created individuals with individual desires, which meant the end of mass consumerism and a problem for corporations who couldn’t sell their mass-produced homogenous products to individuals. But then a different psychologist, Abraham Maslow, argued that people’s different desires could be categorized in a hierarchy of needs. This meant that corporations could now develop products based on categories in the hierarchy of needs. Therefore, the products seemed highly personalized which emphasised the feeling of individuality in consumers, which made them buy them.

By the end of the century, society had experienced an ideological shift from a mass consumerist society to an individual consumerist society which allowed companies to supply products for ever-changing needs which allowed consumerism to flourish like never before. A report by the US Department of Labor and Statistics [pdf] looked at consumption statistics in the US between 1901 and 2003. From 1918-19 to 2002-03 household expenditures grew from around $1,500 to roughly $41,000. On top of that, from 1959 to 2001, consumer spending on non-essential goods and services increased from 4% to 9.3%.

Today, nearly 50 years later, we are still living like passive consumers. From 2003 to 2017 US consumer spending increased from $41,000 to $60,000 a year. The only exception being a slight drop in the years after the financial crisis of 2007-08. Consumer spending on non-essential goods and services as a percentage of total spending also increased. From 2001 to 2011 this grew from 9.3% to 11.2%. Therefore, not only do we see a persistent but a growing passive consumerist society that over a time period of nearly 100 years was fabricated through Freudian psychoanalysis.

Bottom line: We are still passive consumers in society, influenced through the theories of psychoanalytic thinkers.

* Please help my Growth & Development Economics students by commenting on unclear analysis, alternative perspectives, data sources, etc. (Or you can just say something nice 🙂

Review: How Rivers Made America

Martin Doyle’s 2018 The Source: How Rivers Made America and America Remade Its Rivers educates you on politics, economics, technology and society by telling you the history of how rivers defined America’s development in five areas: Federalism, Sovereignty & Property, Taxation, Regulation and Conservation.

As usual, I will provide a series of notes and thoughts that came up while I was reading rather than a chapter-by-chapter summary of the book. 

1. Rivers in the New World had important recent impacts compared to rivers  the Old World has known for millennia. These impacts came as white settlers displaced First Nations with their technology, expectations and institutions. In some cases, those paradigms were helpful (e.g., shipping or producing power), but most focussed on short-term profit (e.g., pollution, depletion, and deviation) over long-run sustainability.

2. Rivers played a major role in economic and political development. Settlers used rivers to explore the vast country, ship goods from the frontier to the settled East, and join growing cities into what became — before rail roads — a national market.

3. Plenty of companies went broke trying to take over shipping routes, build canals, etc. Their troubles often undermined state finances, which forced states to set strict budgets and the Federal government to get involved in unforeseen and increasingly invasive ways. These origins explain why the US Army Corps of Engineers plays such a big role in building dams, “controlling” rivers, and settling flood plains.

4. Shipping companies lobbied against tolls on rivers, which aided navigation and lowered shipping costs, but also shifted their private costs onto society. These subsidies and distortions grew in 1860s (when the Swamp Acts encouraged settlement in wetlands) and 1930s (when jobs mattered more than productivity).

5. Technology and ideology jointly destroyed any notion that rivers should be left to their own course and flow:

…the 1930s were the apex of the Progressive Era, when leaders were enamored with systems planning, optimization, and engineering… which meant that a central agency—the Corps of Engineers—had to be in charge of planning, engineering, and coordinating. [snip] In the late twentieth century, flood control infrastructure had created an enormous sense of hydrologic security. But it also unintentionally created a perverse incentive that drew people into areas previously considered too high risk for developing. [Locations 1077 and 1224]

6. A small step in Federal involvement often led to massive influence, spending and harm. In 1950 disaster relief meant repairing a local, flood-damaged bridge. By 1988, the Stafford Act “explicitly prohibited the use of ‘arithmetic formulae’ (such as benefit-cost analysis) as a basis for disaster declarations. Disaster relief became codified as a solely political decision, outside traditional economic evaluation.” [Location 1254] The resulting flood of federal money meant that locals didn’t have to pay for recovery, which encouraged “moral hazard” (i.e., ignoring risks) and thus larger  disasters.

7. When Doyle goes west, frontier mentalities clash with historic institutions, and miscalculations multiply:

…water in the West is a zero-sum game. The tribes can’t keep enough water in the river to sustain the salmon if the farmers upstream divert all the water they need for crops and cattle. Someone has to lose. [snip] Downstream groups inevitably prefer rights based on historic use, like those outlined in the appropriation doctrine. For their part, upstream users tend to prefer rights based on contribution to river flow, like those of the riparian doctrine. [snip] In 1976, Stockton and Jacoby showed that the decades of data used to estimate flow on the Colorado River and then divvy it up in the Colorado Compact were in fact the wettest years in half a millennium. The basis of the Colorado Compact was an estimated mean annual flow of somewhere around 16.5 MAF per year; tree-ring data over a much longer period of time suggested that a more realistic estimate would be about 3 MAF per year less than that [meaning the CC is flawed]. [Locations 1598, 1761 and 2121]

8. A tradition of cleaning drinking water (“my problem”) but not sewage (“your problem”) led to public health disasters in the late 19th century and an ongoing battle over water quality that continues to this day. Too few polluters pay, so public waters are often abused in ways that laws allow but the public (if asked) would never support.

9. We can see the switch from local to federal control in the tax system:

In 1902 local government tax revenues exceeded state revenues by 260 percent and national government revenues by almost 40 percent. [snip] Because local city governments bore the burden of providing most services in the early twentieth century, by 1902, property taxes accounted for 42 percent of all government revenues (national, state, and local levels combined). [snip] Before the Depression, there was general consensus that federal funds should be spent only on projects of national need, and local funds would be spent on projects of local interest. Property taxes would be linked to municipal projects, tariff taxes to national projects. But the New Deal created a fiscal system through which the federal government collected income taxes nationally and then spent that revenue via grants to state and local governments—an enormous redistribution of funds and government power across the country. [Locations 2543, 2571, and 2702]

10. Women played a big role in promoting water quality. Although it’s clear that Rachel Carson’s Silent Spring raised awareness, it was the efforts of thousands of women across the country that brought laws and funding, but not an end to the problems:

Even FDR’s New Deal, with its expansive building programs, had been minor compared to the spending spurred by the Clean Water Act. In the first twelve years after the act was passed, the federal government spent over $40 billion on wastewater treatment. [snip] For all the benefits of the Clean Water Act, it had an enormous blind spot: Farmers and suburbanites with Irish-green lawns were let off the hook. When a farmer fertilizes a field, or a homeowner uses a bag of fertilizer from the local garden store, they play a role in changing the chemistry of the planet. [snip] By the turn of the twenty-first century, the EPA had classified just under half of the 3 million river and stream miles in the United States as either threatened or impaired, and the cause was fertilizer from agricultural and suburban runoff. [snip] by 1991 the federal share of spending on wastewater infrastructure had dropped to 5 percent. This was a jarring reality for local governments, which suddenly faced the reality of paying for the requirements of the Clean Water Act on their own dime.  [Locations 2852, 2867, 2897 and 2928]

11. The plethora of special-interest districts with poor governance, vague goals and taxing authority resulted in projects that were bad or ruined via corruption and amateur errors (e.g., Flint).

12. America’s obsession with profits (and relaxed view towards the damages resulting from those profits) can be traced to the water-powered mills that turned from grinding grain to generating electricity in an assault on property rights that eventually backfired:

…the desire for economic progress in the early nineteenth century was so strong that it shifted government regulation from favoring established property to supporting whichever use best served economic development. Thus, with the government’s encouragement, dams and mills proliferated in number, complexity, and economic output. As a result, textile manufacturing via hydropower in America quickly surpassed that in England. [snip] When a private power company built a dam or a steam power plant, it had to recoup all those construction costs through higher rates. But when the TVA [Tennessee Valley Authority] built a dam, the federal government covered some of the costs in the name of broader public interest such as navigation and flood control. This support reduced the cost of power generation and thus reduced the rates TVA needed to charge, so Lilienthal could set far lower power rates than his for-profit private power competitors could afford. [Locations 3173 and 3406]

13. The TVA used to be pretty good. Then it got too big.

14. It took decades of mistakes and wasted effort before “in-channel river restoration” was replaced by allowing the river to move and evolve. Sadly, many rivers are handicapped by Army Corps barriers protecting farms and towns built in flood plains. 

Meanders like those seen in the Mississippi, with their varied flows, depths, and sediments, are considered by ecologists to be the root of the extremely high biodiversity of rivers. Physical diversity begets biological diversity. Yet there are few reasons for industrial society to tolerate meandering rivers [snip] Rivers could be taken from complex, unruly tangles of swamps and floodplains and converted into straight, linear, trapezoidal forms. Channelization made rivers rational. These benefits, however, came with enormous impacts and losses to ecosystems. From destroying fish habitats to eroding banks, channelization inflicted ecological havoc. [Locations 3826 & 3844]

15. A combination of naive-optimism and broker lobbying led to the creation of a market for “river offsets” that would encourage river restoration as a way to pay for destruction elsewhere. This system looked successful on paper, but its emphasis on quantity meant that quality, let alone sustainability, was ignored. 

16. The best way to restore a river is to leave it to flow in its own bed according to seasonal variations, with its own mix of flora and fauna. #CaptainFuckingObvious

My one-handed conclusion is that this book provides a welcome portrait of the many ways that rivers shaped — and were shaped by — America’s urban development and environmental condition. I highly recommend it, and thank JT for the tip.

Read all my reviews here.

Stuff to read

  1. The ongoing impacts of China’s refusal to accept American garbage
  2. Edinburgh is charging a tourist tax (£2/head/night) to offset congestion. I think Amsterdam needs to charge €10/head/night.
  3. An update on meat substitutes (looking good)
  4. No, You Can’t Ignore Email. It’s Rude” (I agree with these reasons)
  5. Living without Apple, Amazon, Facebook, Google, and Microsoft
  6. The military lost the war in Afghanistan
  7. Touch in China is disappearing…
  8. Pokemon Go is the first stage of our entry to the Matrix.
  9. Chris Anderson (TED) on community, ideas and our future as humans.
  10. Jaron Lanier on where Silicon Valley went wrong (and many other ideas)


Jive Talking launches

I started thinking about doing a podcast last year because I wanted to find a new way of learning, catching up with people in my network, and bringing new ideas to people. I still like blogging (and will continue to write here), but podcasting provides a different perspective, most obviously because it allows conversation.

I “soft launched” Jive Talking about one month ago with five interviews. In the past few weeks, I have had time to fix up the Soundcloud page hosting the podcast* and put a bit more time into improving “production quality.” I still have a long way to go before I am happy with these details (listen to my intro!), but they are not as important as the conversations, which are unscripted and free to flow wherever we wonder (and wander). I am not alone in liking this element to podcasting:

One of the things that’s so cool about the new media technology is that people want . . . They just want direct communication. They don’t like high-level production values, all to people on YouTube, and they’re very savvy media consumers. A highly produced television show just looks like a lie. If you’ve got something to say, they just want you to sit down and say it. They don’t even want you to edit it so that it’s smoother because that just looks like you’re spinning the content, and you probably are.

My one-handed conclusion is that you’re not going to learn anything until you try something new, so here goes! Please listen to a few episodes, tell me what you think, and/or suggest new guests (including you!)

01 // What do we mean by water privatization?
02 // Monja Esterhuizen on losing less water in South Africa
03 // Delton Chen on incentivizing carbon mitigation
04 // Marina Della Giusta on #metoo, teaching economics, and careers for millennials
05 // Walter E. Block on pollution, regulation, and libertarian ideals
06 // Michelle Wilbur on small-scale renewables, oil and living in Alaska

* Jive Talking is now syndicated via Stitcher. I’ll get Apple iTunes and Google Play links soon!

Stuff to read

  1. “Russia Is a Rogue, Not a Peer; China Is a Peer, Not a Rogue”
  2. How America welcomed Russian kleptocrats (and domestic corruption)
  3. A nice discussion of Core Economics and the quest to make economics more useful (realistic) to students.
  4. Dear Mr Zuckerberg: the problem isn’t the internet, it’s Facebook
  5. This book review on the varying and pervasive impacts of climate change leads me to think that we are moving from a world dominated by the “information revolution” (the one displacing the industrial revolution) to one dominated by the “climate revolution,” which is — as all good revolutions do — overturning our ways of living. The sad part is that most of the climate-driven change will be unpleasant, expect perhaps for those who swap reality for a virtual lifestyle (ironically, and too late, reducing the footprint of their consumption).
  6. The pay gap between skilled and unskilled workers is growing dramatically in the US. The need for basic income (as a way of preventing rebellion) is rising.
  7. Data trackers and advertiser don’t even know what they’re doing.
  8.  Interacting environmental problems mean more, worse crises.
  9. Heineken’s behavior depends on local norms (of sexual harassment)?
  10. Will these guys save the world by sucking out carbon? (Carbon tax!)

H/T to MdG

We understand money pretty good.

I’ve always nodded my head at the truth in Upton Sinclair’s insight that “It is difficult to get a man to understand something, when his salary depends upon his not understanding it!” but I recently realized its importance in the quest for sustainability.

It’s clear that many people who make their living from “freeing carbon” (oil workers, loggers, car makers, beef producers, etc.) are not interested in ideas about limiting carbon (and equivalents). As a result, we’re getting climate change and damages of $100 for each $1 these “vested interests” earn.

So now I realize the sad possibility that many of these vested interests — had they saved some of their “carbon windfall” — would be ok with a decarbonising world. That would be because their savings gave them other options for earning, and enjoying, their lives.

Compare Norway and Alberta (or Alaska). Norway saved and invested lots of its oil money, so it now has $1 trillion, or about $185k per citizen. Alberta and Alaska, I know, have saved a lot less. This difference in savings is important because savings make it easier to cope with risk. Norwegians would not be so worried if the “oil carbon was turned off.” Alaskans, Albertans, and the residents of most oil- carbon-exporting countries (including the US) would be terrified, because they make their living from freeing carbon.

It is thus that I arrive at my over-simplified, one-handed conclusion: If we’re going to turn off the  carbon, then we need to “take care” of those who profit from it. The simplest way to do this is pay them off. The easiest way to raise the funds to pay them off is to tax carbon. I would make the tax “dynamic” such that the burden fell for those who ran from carbon while it rose on those who strolled in the same general direction. 

It’s not about the planet, the future or technology. It’s about money.