Monthly Archives: April 2010

Values-based vs. Market-based Approaches to the Economy

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Time for a little more “stumbling towards.”
(see blog subtitle)

As we saw last week, in Krugman’s world you start by assuming that the market basically works and then you deal with exceptions — “market failures” or “negative externalities.

What if we stopped bowing down to the Market Gods? What if we stopped saying the sun revolves around the earth except on Mondays, Tuesdays, Wednesdays…?

What if we asked instead, is this jumbled mess of a system we call our economy working for us? If we think it isn’t, what values do we think it should support that it currently isn’t? A strong middle class? Justice? The survival of the human race and our responsibilities as stewards of the earth? In short, rather than starting from the market, we start from our values.

Put it another way. Right now we say, we want a strong middle class and the best way to do it is using “free markets” — except in agriculture and transportation and housing and computers and health and finance and so on. What if we start by saying, we want to have a strong middle class. Given the way the economy works now, how do we help make it happen?

I think starting from our values instead of from the market-except-on-Tuesdays-Wednesdays-etc. buys us two big advantages:

1) Debating What Really Matters to Us. Let’s take Finance. Right now, the main debate is over avoiding another massive “market failure” — not giving Wall Street incentives to push the economy over a cliff. That’s obviously a good thing.

But if instead of asking why did the market fail we were asking what values do we want to encourage, we’d be debating a much broader set of questions. What do we really want from Finance? What should its purpose be ? Is it to create good jobs for everybody who’s willing and able to work — to reward hard work? Is it to strengthen our communities over the long haul?

If the debate centered around those values, we wouldn’t just be asking how we stop Goldman Sachs from deliberately screwing over everyone who doesn’t run a powerful hedge fund. We’d also be asking how we can shift Wall Street so it rewards companies that create good jobs over companies that fire thousands of people even when the company is raking in record profits.

2) Debating Who Decides. If you start from the market-except-on-Tuesdays-Wednesdays-etc, it’s easy to avoid talking about power. It makes it easier to obscure backroom deals. And as we just saw in the healthcare debate, it makes it easier for people to successfully pretend they are against “government” that doesn’t directly benefit them — a.k.a. “keep your government hands off my Medicare.”

Or to put it another way, when you pretend negotiating over values isn’t happening, the people who lose out are the people with the least power.

If you start from a value-based approach, it’s going to push you to ask who currently decides which values should shape the economy and who should get to decide. Is it just the owners of the fossil fuel plant belching toxic fumes in Chula Vista? Or is it also the people in Chula Vista’s neighborhoods whose homes and elementary schools are in striking distance of that plant?

In turn, these questions will encourage the debate to focus on the balance of power. It will lead us to ask what we can do to create strong environmental groups, strong unions, etc. — folks who are in a position to act as a dynamic check on corporate power. You’re less likely to ask these kinds of questions about checks and balances and power if you start from Up with Markets. As Krugman said at the beginning of his pro-market based article:

If there’s a single central insight in economics, it’s this: There are mutual gains from transactions between consenting adults.

In other words, a market-based framework starts from the implicit assumption that the owners of the fossil fuel plant in Chula Vista and the poor folks in the neighborhood are on a level playing field.

You might think, isn’t this a bit much? Do I really want to imply that Krugman is rooting for the fossil fuel plant over the poor folks?

Obviously not. The point I’m trying to make is not that folks who use a values-based framework are more virtuous than those using a market-based framework. That would be stupid (not to mention unbelievably arrogant).

Deciding which framework to use isn’t about good vs. bad or right vs. wrong. It’s about focus. A value-based framework pushes the debate towards the issues that matter to us most deeply. And it makes it harder for the wealthy and big corporations to hide what they’re really fighting for.

Up next week: why a value-based framework is also more “efficient” than a market-based framework.

On Sale This Spring: One for the Price of Two!

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For the next month or two, I’m going to try to really take care of my hands so I can reduce the amount of pain medication I’m on. I’m also going to try to push myself hard to make some progress in my theorizing — and to do it by writing about the issues I’m struggling with rather than waiting till I figure out the answer, which gives me the willies (yes, I am a web 0.5 kind of boy).

So for the next few months, I’m going to lower my goal to just one post a week. If I’m moved to post more, that’s great. But heavy theory banging-head-against-walling + treading lightly on my hands mucho posts.

Krugman, Environmental Economics, and Racism

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I’ve been reading responses to Paul Krugman’s great piece last Sunday on Building a Green Economy. One of the striking things about these responses is that almost nobody seems to be talking about one glaring omission: environmental justice.

Krugman argues that when free markets do damage, there are basically two ways you can solve the problem. You can Just Say No — limit what comes out of car tailpipes, smokestacks, etc. That works pretty well for simple situations. But for more complex situations,

it does not offer any scope for flexibility and creativity. Consider the biggest environmental issue of the 1980s — acid rain. Emissions of sulfur dioxide from power plants, it turned out, tend to combine with water downwind and produce flora- and wildlife-destroying sulfuric acid. In 1977, the government made its first stab at confronting the issue, recommending that all new coal-fired plants have scrubbers to remove sulfur dioxide from their emissions. Imposing a tough standard on all plants was problematic, because retrofitting some older plants would have been extremely expensive. By regulating only new plants, however, the government passed up the opportunity to achieve fairly cheap pollution control at plants that were, in fact, easy to retrofit. Short of a de facto federal takeover of the power industry, with federal officials issuing specific instructions to each plant, how was this conundrum to be resolved?

The answer: the 1990 Clean Air Act, which created a Cap and Trade system for sulfur dioxide emissions. Instead of a blizzard of mandates covering every type of plant and unusual circumstance, the government created a market in emissions. The end result:

over time sulfur-dioxide emissions from power plants were cut almost in half, at a much lower cost than even optimists expected; electricity prices fell instead of rising.

Krugman says the Climate Crisis is a similar problem.

the very scale and complexity of the situation requires a market-based solution…. After all, greenhouse gases are a direct or indirect byproduct of almost everything produced in a modern economy, from the houses we live in to the cars we drive. Reducing emissions of those gases will require getting people to change their behavior in many different ways, some of them impossible to identify until we have a much better grasp of green technology. So can we really make meaningful progress by telling people specifically what will or will not be permitted?
…
A market-based system would create decentralized incentives to do the right thing, and that’s the only way it can be done.

But what about folks in Chula Vista who we met last week? They had to fight to block the expansion of a fossil fuel plant that would have been located 350 feet from folks’ homes and 1,300 feet from a local elementary school. In their community, a market-based system does not create “incentives to do the right thing.”

Krugman and I don’t have to worry about a fossil fuel plant being dropped in our neighborhoods. Zoning blocks those belching monstrosities. Even if it didn’t, the combination of government rules & desires price the land in our neighborhoods way out of a fossil fuel plant’s price range.

And then there’s our political power. In our neighborhoods, it’s a bear to get permission to build more housing. A fossil fuel plant near the school where kids go to? Politicians would fall over themselves to crush that project.

Ditto for a giant bus depot like the one spewing diesel pollution in WE ACT’s neighborhood. Some of my neighbors freak out when their kids’ food is exposed to plastic bottles or bags. How do you think they’d react to a depot that would send lots of our kids to the hospital with bad asthma attacks?

In short, Krugman’s market-based solution can work reasonably well for our neighborhoods. But it fails poor neighborhoods, especially neighborhoods where lots of poor folks of color live. The market puts a low value on these neighborhoods. Between their low market value and paltry political power, they’re going to end up on the shit end of the stick unless big changes are made to a market-based solution.

We don’t live in a perfect world. No solution to the Climate Crisis will put the same burdens on everyone. But there is something seriously wrong when a great liberal like Krugman advocates for a market-based solution without incorporating the need for justice.

Business Insider Tries to Blow Your Mind About Inequality in the US

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What does Business Insider consider “mind blowing“?

The rich are getting richer and the poor are getting poorer. Cliché, sure, but it’s also more true than at any time since the Gilded Age.

The poor are getting poorer, wages are falling behind inflation, and social mobility is at an all-time low.

If you’re in that top 1%, life is grand….

They back up this statement with 15 charts with titles like

The last two decades were great… except for American workers

Real average earnings have not increased in 50 years

Poor Americans have a SLIM CHANCE of rising to the upper middle class

Republican tax cuts have significantly increased the gap

None of this is new, but it’s still pretty entertaining to see a business magazine laying it out in stark, nicely designed graphs. Maybe something to e-mail to your cranky Republican uncle?

Green Signs of Hope

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If you’re feeling blue about our side’s chances of getting its act together, WE ACT for Environmental Justice, and several other environmental justice organizations from around the country just released a report you should check out: Environmental Justice and the Green Economy. The report lays out three principles for building a just, sustainable economy:

1. Strives for full democratic participation.

2. Builds capacity for a truly sustainable infrastructure and green economy.

3. Creates and share “green” wealth.

The rest of the report shows how groups around the country are fighting for this vision.

Take Harlan County, Kentucky. You probably know about the environmental devastation caused by strip top mining. At the same time, most folks in Harlan County are in a no-win situation.

There are few employment alternatives to coal-related jobs, even as coal employment in Kentucky is a third of what it was 30 years ago, largely due to the increased mechanization of the industry. Large absentee landlords and local land-owners are unaccountable to new forms of economic development. The local elite maintain tight control over politics, commerce, and public life in this region.

But folks are fighting back, in part through a statewide organization called Kentuckians for the Commonwealth (KFTC). Continue reading →

Winning the Next Health Care Fight One Pothole at a Time

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When I first took a look at the list of projects in Chicago’s 49th Ward’s Participatory Budgeting experiment, I was a little disappointed. Participatory Budgeting sounds so lofty: We the People choosing directly. And yes, some of the items folks get to vote for are pretty cool, like art projects or community gardens. But most of the voting choices are for mundane items like potholes and speed humps.

But then I thought about the nasty pothole I try to avoid while getting on the freeway ramp to work (unfortunately, public transit to my latest job is dismal). Almost every freakin’ day it gets on my nerves. So do the drivers who, in an effort to spare their axles, make incredibly stupid, last-minute maneuvers. If I had the chance to rid myself of that jarring irritation at the start of every day, I’d vote that sucker off the asphalt island in a second.

And knowing that I and my neighbors had the power to make that call? I’m ashamed to admit, it would mean more to me than getting to vote for my city council rep. Except when my Councilperson does something really awful, I don’t pay that much attention. I know, bad, bad me. But I’ve only got so many minutes and brain cells to spend every day, and DC’s city government feels like the weather — there’s not much you can do about it but complain. It feels too far away, too removed from my daily life. And the amount of work it would take to have a real impact feels overwhelming.

But voting on that pothole? It feels real — a victory in the daily battle against life’s small irritations.

Similarly, I’m sure my city council rep has voted to create a community garden or two in our district. But if I were the one doing the voting — and therefore meeting my neighbors who were pitching it — I’d feel a real sense of ownership. If my neighbors’ and my votes gave the green light to that community garden, I’d check it out once in a while to see the results of our small exercise of power. Even if I never put seeds into the earth, I could look at it and say, I did that.

In turn, that small exercise the power might change the way I think about DC’s government. The $1.3 million budget I’d vote for is a drop in the city’s bucket. But if I had a real say over it, I might start paying more attention to where the rest of my city tax dollars were going. And now that my neighbors and I had taken smaller actions together, taking action together on a slightly bigger stage might not feel so overwhelming.

What does this have to do with healthcare reform? Polls have consistently shown that one of the biggest long-term obstacles to reform is that most folks don’t trust the federal government. They may vote for their senator and for Obama or McCain, but they don’t believe they’ll have a real say or that their needs will get met. We can probably get out of this mess by delivering more victories like the half-asked-but-way-better-than-status-quo healthcare bill. But taking small steps that hand back direct power, even if it’s just over potholes, could also make a real difference.

For example, one of the most important players in the fight for high quality health care for all that doesn’t bankrupt us is Medicare. Medicare solicits lots of “community input” through public hearings, etc. Right now, Big Pharma and other big players still win hands down because the rest of us are checked out. But if more folks had a real say over their community’s potholes, progresses might convince them it’s worth fighting to give everybody a real say over their community’s medical procedures. Even in small doses, hope can do amazing things to the body politic.

Maybe potholes and speed comps aren’t so mundane after all.

Potholes and People Power in Chicago's 49th Ward

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This week, while millions of Americans vote whether Siobhan or Tim should be saved on American Idol, residents of Chicago’s 49th Ward will be voting whether the potholes on 1600-1750 W. Lunt Ave or 1000-1350 W. Morse Ave. will be given the ax . That’s right, ladies and gentlemen, Participatory Budgeting has come to the US! Alderman Joe Moore explains:

Residents in my ward have met for the past year — developing a rule book for the process, gathering project ideas from their neighbors and researching and budgeting project ideas. These range from public art to street resurfacing and police cameras to bike paths. The residents then pitched their proposals to their neighbors at a series of neighborhood “assemblies” held throughout the ward.

The process will culminate in an election on April 10, in which all 49th Ward residents 16 and older, regardless of citizenship or voter registration status, are invited to gather at a local high school to vote for up to eight projects, one vote per project. This process is binding. The projects that win the most votes will be funded up to $1.3 million.

Participatory Budgeting was developed in Porto Alegre, Brazil back in 1989, where as many as 50,000 residents spend up to 20% of the city’s budget. The idea spread throughout Brazil and other parts of Latin America, and in the past 10 years cities in Europe, Africa, Asia, and Canada have been experimenting with it. But Alderman Moore’s experiment is the first attempt to bring it to the U.S.

What kind of projects will 49th Ward residents choose from? Items on the ballot include new residential streetlights on 1500-1600 W. Greenleaf Ave. ($65,000), Speed Humps on 1100-1200 W. Greenleaf Ave. ($3500), 2 Community Gardens ($33,000), adding showers to Loyola Beach Park ($50,000), creating the first part of a new bike network in Rogers Park ($10,000), a one block free WiFi test site ($24,600), or 12 murals created by Chicago artists on CTA and Metra underpasses ($84,000).

Although the votes encompass only $1.3 million, Moore argues a lot more’s at stake:

It shouldn’t come as any surprise, then, that only 1 out of 5 Americans trusts government to do what is right most of the time. Citizens don’t believe their government listens to them and they don’t believe they have any power to affect public policy….

Rather than being passive observers of government [the hundreds of residents who've been involved have] become active participants in governing. More important, they know they have the power to make decisions, and that their government is not just hearing them but actually following their mandate.
Empowering people to make real decisions openly and transparently is the first step toward restoring public trust in government.

To find out about the winners, check out Participatory Budgeting in the 49th Ward after Saturday. And for more info about Participatory Budgeting, check out the Participatory Budgeting Project.