The Fatal (for Civilization) Confluence of Flaws in Markets Concerning the Environment
Thanks to, among others, Will Lockett and Faisal Khan here in Medium, I keep abreast of developments in alternative sources of energy. In the last few years there have been a plethora of astonishing advances in that area of technology. It has become abundantly clear that we have the capacity to develop all the clean, cheap energy humanity will ever need. Moreover, it will be produced and delivered in ways that disturb the natural world less and less.
The problem is that these developments have come too late for civilization as we know it. For that I blame a reliance on speculation in markets for the funding those technologies have needed to be developed. (It must be said that reliance on markets has been far more pronounced in the U.S., where I have always lived, than it has in most other nations.)
People who are proponents of speculation in markets often hail the ‘animal spirits’ that pertain to participants them. That goes directly to the heart of the problem.
There is much discussion on the spiritual, philosophical, and theoretical planes concerning what (if anything?) distinguishes human beings from all other ambulatory creatures in Creation. I have argued that the (first) account of creation in Genesis (there are two) is an attempt to answer that question. (The other account goes, I would say, to the implications for humanity of that answer to that question.) For present purposes, the point is that we have squandered the most vital trait that makes us ‘human’.
To my mind, the most important difference between us and other(?) animals is that we have a capacity for foresight. They can only react to whatever the immediate physical environment puts before them. We, on the other hand, have the capability, at least, to see what is coming and to act proactively to avert undesired outcomes. To be sure, the process of doing that can generate unexpected negatives outcomes with which we must then deal. Though unexpected positive outcomes do happen, too, the point is that we cannot act proactively with absolute certainty as to the ultimate result. Even so, there are times when we can see absolute disaster looming and really have no choice but take action to avoid it.
It is true of many people that the degradation of the natural environment is not even recognized as a problem. Even now, with constantly mounting evidence that human beings are destroying habitats, generating dangerous waste, and even altering the climate to an extent that, at a minimum, the continued existence of civilization has been called into question, there are many people who refuse to recognize that any such problems exists. [Most of them refuse to acknowledge those problems for the simple(ton’s) ‘reason’ that recognizing them is something ‘libs’ do.]
Yet, people participating in speculative markets are obviously some of the most forwardly focused people on the planet. How is it, then, that relying on markets has resulted in reactivity, not proactivity, even when it comes to dealing with the existential problem of environmental degradation?
That brings us to a part of this problem that is technically economic, not psychological.
Markets, including markets for speculative investment, are processors of information. Like, say, wild dogs, investors can only react to the information in front of them. The information investors rely on is current economic activity.
Back in the day, when the transition to the mass manufacturing of goods and services was getting underway, it was easy to overlook the environmental consequences it ultimately portended. As a result, businesses were allowed to ignore the environmental costs they were generating. That practice got embedded in the entire economic structure, such that subsequently requiring them to clean up the messes they were making would require a change in the way the system functions. Yet, that practice corrupted the information available to markets.
The single most important data points in the economy are prices. The structure of prices is the economy’s nervous system, conveying necessary signals to all participants in it. Prices determine the flow of money throughout the economy, to include speculative investments of all kinds.
Prices are based on costs. Environmental costs have been largely deleted from the calculation of prices (in the U.S., at least, as a part of a wider program of privatizing profits as much as possible while putting as much of the cost of doing business as possible on the public tab).
So: to rely on markets to determine the flow of money — including money in speculative investments, which will determine, among other things, which technologies attract money for their development and implementation — based on prices, based in large part on costs, then leave environmental costs out of the data, then rely on markets to render decisions that affect the environment, is like putting a blindfold on the lead dog on a sled. You are as likely to go off a cliff as as you are to get to where you want to go.
Of (very) late in the U.S, the federal government has stepped in in a big way — over the objections of the simpletons among us. It had dabbled in policies and programs intended to fight environmental degradation, but those were always falling prey to the political imperative that always exists in every nation to maximize total output in order to maximize employment, total income, and the collection of taxes — within the economy as it is structured, including prices, based on costs. With the ‘Inflation Reduction Act’ of 2022 that government finally moved to put tens of billions of dollars of public investment into addressing the problem of environmental degradation, especially in the production and consumption of energy. As a result, private investment in ‘green’ initiatives has begun at last to flow in that direction in a significant way.
So now the capability to avert environmental disasters of various kinds is finally emerging. The problem is that, for civilization, at least, it is going to prove to be too little, too late — when it is obvious that the necessary technological knowledge to have averted disaster has been present, lying dormant for the lack of a flow of money in that direction, for years if not decades.