[Part 4 of Values-based vs. Market-based Approaches to the Economy]
If you’ve ever heard someone preach the joys of a market-based solution, odds are at some point they’ve said, government regulations/bureaucrats can’t be smarter than the market — the economy’s just too complicated. But as we saw last week, creating a market-based solution runs smack into the same problem. In case you need a reminder, here’s one last example:
On India’s Bhilangana river, local farmers run a finely-tuned terraced irrigation system that provides them with rice, wheat, mustard, fruits and vegetables. This ingenious, extremely low-carbon system of agriculture is threatened by a new hydroelectric project designed to help power India’s heavy industry. Villagers may have to leave the valley, losing not only their livelihoods but also their knowledge of a uniquely sustainable modern technology.Is carbon trading stepping in to support the villagers’ piece of the solution to global warming? On the contrary. It’s supporting the hydropower company, which has hired consultants to argue that their dam will result in fewer carbon emissions than would have been the case if it had not been built. The firm plans to sell the resulting carbon emission rights to polluting companies in Europe. The example is typical of the way carbon markets are undermining positive approaches to climate change everywhere.
I’m guessing that’s not what the designers of carbon emission trading markets had in mind.
So what do we do? There’s a simple solution, used every day in software development (my little corner of the economy), industrial design, and many others: you deal with it head on. You start from the assumption that you can’t possibly figure it all out in advance and you go from there.
If I’m trying to build a complicated database, for example, I start by assuming that I won’t really understand what users want, users may not understand what they want, and what they need tomorrow will be different than today. So, I build software iteratively, so my users and I get to find out for real if we are on the right track. I start with mockups rather than actual code; knowing you probably won’t get it exactly right the first time is a lot less scary when you’re throwing away a paper prototype instead of lots of labor-intensive programming. And I use risk management. I come up with a list of things that might go wrong and what we’ll do to mitigate the risk. Then I watch like a hawk for signs of trouble and move aggressively when I see them.
A lot of the same lessons apply when trying to shove the economy closer towards our values. We start from assuming we won’t get it right and then build tools and systems to help us stay out and get out of trouble.
Take the idea of priming the pump from Auden Schendler’s Getting Green Done. Schendler writes:
government needs examples of how to be environmentally progressive and case studies from which to build policy. Every individual and business matters because we need labs for determining what’s worth pursuing and how best to do it.
So before we know enough to write smart regulations, we can “prime the pump” by funding experiments. That’s how Schendler’s first success at the Aspen Skiing Company happened — he got a grant to fund his pilot project. Later, once we’ve gained enough experience, we can do things like write the first versions of green building codes. But even this will take trial and error to find the right balance.
There are two keys to this approach: holding folks accountable and feedback loops. Instead of assuming that markets will automatically lower emissions, we watch carefully to see if it is actually lowering emissions and then tweak the rules and incentives as we go. Instead of assuming that if Wall Street has plenty of capital and shareholders are happy corporations will automatically create lots of good jobs, we keep a close eye out on what capital is getting used for and whether it’s actually creating good jobs.
It’s not a simple answer. Then again, life isn’t simple. If we start from the principle that we aren’t as smart as we think we are, we are a lot more likely to get to where we want to go.
Up next: placing our bets
