Category: Economics

Matters of money

Hale on why climate stability advocates are often confounded

The combination of uncertainty and low salience, in turn, enables obstructionism, the ability of interests tied to the status quo to maintain their interests. Consider the hurdles of a policy entrepreneur would have to overcome to create and implement a policy addressing a problem with distant effects like climate change. First, that policy entrepreneur would have to herself see value in pursuing an obscure issue, one that is unlikely to garner her a quick win and the associated political benefits. Few will have incentives to pursue such causes. Second, she would have to mobilize a sufficient coalition of interests to be able to influence policy. This would require each of those interests choosing to focus on a distant topic over their more urgent priorities. Third, this interest coalition would need to force the issue onto the broader political agenda, competing for limited space with numerous immediate priorities. Fourth, the coalition would need to somehow overcome, compensate, or neutralize political opponents.

To the extent those opponents are worried about the short-term costs of action, everything that is hard for the long-sighted policy entrepreneur will be easy for them. Opposing long-sighted policy—that is, promoting short-term outcomes—will give them the opportunity for quick wins on issues that are relatively easy to mobilize interests around. And even if the long-term-oriented policy entrepreneur wins a battle, she must preserve and maintain those gains permanently, as opponents will seek to reverse any defeats they face. A one-off victory may be important, but long problems often require sustained policies over time, while it only takes one victory by opponents to block them. The longer a problem’s effects reach into the future, the more friction the policy entrepreneur will face at every stage, and, should she get a win, the more enduring her victories will need to be.

Hale, Thomas. Long Problems: Climate Change and the Challenge of Governing Across Time. Princeton University Press, 2024.

Related:

Humans struggle with allocating losses

Canada seems to have a weird atmosphere of being in a recession, but without that term being used and without the definition (in terms of GDP growth or contraction) being met.

This starts to make more sense when you see that the GDP growth is largely the result of population growth and growth in the labour supply – not increased output per worker. GDP per capita was $58,304 in Q1 of 2020 and $58,111 in Q4 of 2023. Meanwhile, according to the Bank of Canada’s inflation calculator, inflation has averaged 4% per year over the span, so C$100 in 2024 buys what C$85.48 would have bought in 2020. The average Canadian is getting poorer, even with all the stimulus that was given out over the pandemic and with all the new debt which has been accumulated. I personally think governments have been pulling out all stops to keep asset prices (especially stocks and houses) high since the 2008 financial crisis, with very little consideration of what those measures are doing to the non-affluent and those in future generations.

This is worrisome both in the immediate context and as a broader signifier. Daniel Kahneman’s Thinking Fast and Slow stresses how people experience gains differently from losses, and find a loss of any size more aversive than they find a gain of that size pleasurable. He comments on the social and political implications:

If you are set to look for it, the asymmetric intensity of the motives to avoid losses and to achieve gains show up almost everywhere. It is an ever-present feature of negotiations, especially of negotiations of an existing contract, the typical situation in labor negotiations and in international discussions of trade or arms limitations. The existing terms define reference points, and a proposed change in any aspect of the agreement is inevitably viewed as a concession that one side makes to the other. Loss aversion creates an asymmetry that makes agreements difficult to reach. The concessions you make to me are my gains, but they are your losses; they cause you more pain than they give me pleasure. Inevitably, you will place a higher value on them than I do. The same is true, of course, of the very painful concessions you demand from me, which you do not appear to value sufficiently! Negotiations over a shrinking pie are especially difficult, because they require an allocation of losses. People tend to be much more easygoing when they bargain over an expanded pie. (p. 304)

Globally, this pattern is alarming too. Humanity is choosing to persist in activities which we know will cause catastrophic climate change, loss of wealth, and unprecedented damage to the natural world which sustains us. We are also massively failing to invest enough in non-fossil energy sources to retain our current standard of life. This is setting us up for brutal inter- and intra-national fights over allocating losses.

Related:

Kahneman on risks from excess confidence and optimism

Organizations that take the word of overconfident experts can expect costly consequences. The study of CFOs showed that those who were most confident and optimistic about the S&P index were also overconfident and optimistic about the prospects of their own firm, which went on to take more risk than others. As Nassim Taleb has argued, inadequate appreciation of the uncertainty of the environment inevitably leads economic agents to take risks they should avoid. However, optimism is highly valued, socially and in the market; people and firms reward the providers of dangerously misleading information more than they reward truth tellers. One of the lessons of the financial crisis that led to the Great Recession is that there are periods in which competition, among experts and among organizations, creates powerful forces that favor a collective blindness to risk and uncertainty.

The social and economic pressures that favor overconfidence are not restricted to financial forecasting. Other professionals must deal with the fact that an expert worthy of the name is expected to display high confidence. Philip Tetlock observed that the most overconfident experts were the most likely to be invited to strut their stuff in news shows. Overconfidence also appears to be endemic in medicine. A study of patients who died in the ICU compared autopsy results with the diagnosis that physicians had provided when the patients were still alive. Physicians also reported their confidence. The result: “clinicians who were ‘completely certain’ of the diagnosis antemortem were wrong 40% of the time.” Here again, expert overconfidence is encouraged by their clients: “Generally, it is considered a weakness and a sign of vulnerability for clinicians to appear unsure. Confidence is valued over uncertainty and there is a prevailing censure against disclosing uncertainty to patients.” Experts who acknowledge the full extent of their ignorance may expect to be replaced by more confident competitors, who are better able to gain the trust of clients. An unbiased appreciation of uncertainty is a cornerstone of rationality—but it is not what people and organizations want. Extreme uncertainty is paralyzing under dangerous circumstances, and the admission that one is merely guessing is especially unacceptable when the stakes are high. Acting on pretended knowledge is often the preferred solution.

Kahneman, Daniel. Thinking Fast and Slow. Random House Canada, 2011. p. 262–3

Whose agenda are you devoted to?

I have never seen George Monbiot’s bettered as career advice, though it will not lead to an easy life. For instance:

What the corporate or institutional world wants you to do is the opposite of what you want to do. It wants a reliable tool, someone who can think, but not for herself: who can think instead for the institution. You can do what you believe only if that belief happens to coincide with the aims of the corporation, not just once, but consistently, across the years

Also:

How many times have I heard students about to start work for a corporation claim that they will spend just two or three years earning the money they need, then leave and pursue the career of their choice? How many times have I caught up with those people several years later, to discover that they have acquired a lifestyle, a car and a mortgage to match their salary, and that their initial ideals have faded to the haziest of memories, which they now dismiss as a post-adolescent fantasy? How many times have I watched free people give up their freedom?

What he cheers for and takes satisfaction from is inspiring too:

Most countries have a number of small alternative papers and broadcasters, run voluntarily by people making their living by other means: part time jobs, grants or social security. These are, on the whole, people of tremendous courage and determination, who have placed their beliefs ahead of their comforts. To work with them can be a privilege and inspiration, for the simple reason that they – and, by implication, you – are free while others are not. All the money, all the prestige in the world will never make up for the loss of your freedom.

Autonomy, not authority, is the only way to escape the many traps of the status quo.

Twelve years of commercial photography

At the suggestion of a musician friend, since 2011 I have had an accountant to keep track of all my commercial photography paperwork and prepare my taxes. I just send invoices for every gig I do, and receipts for expenses like lens rentals.

Unfortunately, this year he retired and I have not been able to find a similar alternative, so I am left trying to figure this out myself.

It occurred to me that I have literally never added up the total for how much my photography business has made. This is prior to all expenses and taxes:

All told, gross revenues have been $20,268.75. I have had between 18 (2016) and 0 (2021) gigs per year.

PhDs and job prospects in history

Previously I wrote about Bret Devereaux’s important and informative post: So You Want To Go To Grad School (in the Academic Humanities)?

Today I came across another strong summation of the dismal prospects for those considering PhDs in the ‘social sciences’ and humanities: Why You Should Not Get a History PhD (And How to Apply for One Anyway)

For decades the relentless message from parents, schools, and governments has been that higher levels of education will almost certainly mean more money, a place in the middle class, and long-term financial security. As the number of people with advanced degrees and the sizes of programs producing them has exploded, that trajctory is now seldom possible. And for people who do complete a PhD and then get a good job which does not require it, it’s likely they got the job because of the skills they already had and despite the PhD, instead of the other way around.

Our leaders are killing our kids

Oceans of ink have been spilled arguing that social media and smartphones are the reason young people around the world are not doing well.

While there may well be truth to that, to me the whole discussion seems like an evasion of the real issue: we are living in a world where our leaders are killing our kids, because they are unwilling to act on climate change even though it could bring about the end of our civilization. We live in a world where the people in charge are willing to condemn everyone who follows them to torment and destruction, all because they are unwilling to give up the conveniences of fossil fuels. The ‘leaders’ who are doing this are committing history’s most egregious crime against future generations and the natural world, yet our media and society keep treating them as the best of their kind: deserving of praise, wealth, and fancy state funerals when they reach the end.

The lesson that sends to young people is that the system does not value them in any way, and is happy to sacrifice their most vital interests for the sake of further enriching those who benefit from the fossil fuel status quo – which is not just billionaire fatcats, but billions of consumers in rich societies who take it for granted that big trucks and airplanes are the way to get around and who insist on political leaders who pretend to care about climate change, while being privately committed to keep supporting the fossil fuel industry.

Even the RCMP – an institution that sees itself as an ally (p. 41) of the fossil fuel industry – is warning about how our societal disregard for the interests of the young is fueling instability:

There is a notion of the social contract in which each generation is obligated to consider the interests of those who will come after. This covenant has been totally broken, with the almost inescapable consequence that intergenerational conflict will become more and more severe as the damage we have done to the Earth keeps destroying our ability to provide the well-off with what they feel entitled to.

Related:

What if we never respond adaptively to climate change?

A central assumption of many climate change activists and advocates for climate stability is that once people experience how destructive and painful climate change will be, they will become more willing to take actions to limit its severity – chiefly by foregoing fossil fuel production and use.

The Economist reports on how this assumption may not be justified, in discussing the threat of sea level rise to The Netherlands:

The longer-term issue, of course, is climate change. The North Sea has risen about 19cm since 1900, and the rate has increased from about 1.7mm per year to about 2.7mm since the 1990s. This makes it ever harder for riverwater to flow into the sea. With a quarter of their country lying below sea level, one might think that Dutch voters would be exceptionally worried by global warming and choose parties that strive to end carbon emissions. Yet in a general election last November they gave first place to a hard-right candidate, Geert Wilders, who wants to put global climate accords “through the shredder”. Mr Wilders’s party got 23.5% of the vote; a combined Green-Labour list got just 16%.

All across Europe this winter, as the effects of climate change grow starker, the parties that want to do something about it are getting hammered. In Germany, where the floodwaters hit first, the Green party’s popularity has plunged. Portugal’s Algarve is parched by drought, but with elections due on March 10th polls show the green-friendly left running well behind the centre- and far right. Southern Spain has declared a drought emergency, yet the pro-green Socialist-led government is teetering. Snowless ski resorts in Italy have done nothing for the fortunes of environmentalist parties; Italy’s Green party is polling at around 4%. In winter the Swiss Alps appear on heat-anomaly maps of Europe as a streak of red, 3°c above historical averages. But the hard-right Swiss People’s Party (SVP), the biggest in parliament, won even more seats in an election last autumn, while the Greens shrank.

I feel like the norm in human civilizations is that we are incredibly badly governed. People are easy to fool and deeply divided into tribes, and that provides ample opportunities for political leaders to claim credit and avoid blame.

If politics as usual is the self-serving and incompetent ruling in their own interests while putting together enough of a story to sustain public support, politics when the world is coming to an end promises to be even more dysfunctional and incapable of resolving problems.