Changes in Economic Theories and Climate Policy
- I've written an even longer than usual piece that I have broken up into 3 (to 4) pieces for easier posting and, I hope, reading.
Not only are we witnessing a great political shift in Washington, we are also undergoing a shift in and revision of what is accepted economic common sense. In the last 5 months, across two Administrations, we are rediscovering some form of Keynesianism, where government is not treated anymore as "the problem" but potentially part of the solution. Arising as it did in the 1980's and 1990's, I believe climate and renewable energy policy has based itself in subtle and not so subtle ways on the previous economic common sense, perhaps out of political necessity, perhaps out of the personal convictions of leaders.
In this piece,
I am claiming that a "monocular" focus on pricing carbon is attached to a partial economic theory that does not account for how technologies get developed or for how public goods like infrastructure and large pieces of capital equipment get built or installed.
In the first part of this post, I review the two somewhat opposed economic theories, one monetarist/supply-side and the other Keynesian, and explore what kind of worldview they present. I believe we are encountering in economics, through the numbers and a few dry abstractions, a clash of pictures of how society works and the nature of wealth that underlie disputes about quantities of money and methods of pricing goods and services.
In succeeding parts I will review some of the policy instruments and sketch the outlines of a comprehensive climate and energy policy.
Your thoughts and comments are welcome!
Terraverde - Energizing Green Markets
Belmont, CA 94002