In his interview with the Wonk Room, [American Petroleum Institute Chief Economist] Felmy recognized that the [Center for American Progress] report concluded that you would get four times as many clean energy jobs as oil jobs from the same investment, because “green technology is more labor-intensive and less capital-intensive.” He admitted that if you invest money in clean energy instead of oil and gas:

“I have no doubts you can get a lot more jobs.”

In other words, tax hikes improve the economy.

the example of a New York State farmer named Morse Pitts. He sells the bounty of his 15-acre Windfall Farm in the Hudson Valley at Manhattan’s famed Union Square market, where his eggs command a steep $14 per dozen and “some of his greens go for more than $40 per pound.” Yet even though his weekly market stand teems with consumers eager to “vote with their forks” (to speak nothing of their checking accounts), he nets just $7 per hour for his labor and plans to shut down his operation soon.

The problem, Rogers makes clear, is a widespread lack of infrastructure for supporting small-scale, ecologically minded farmers. The public resources that might do just that are siphoned off by the industrial food system, in the form of commodity subsidies and largesse to the corn ethanol industry. Farmers like Pitts have to pass on the costs of their ecological stewardship directly to their customers in the form of eye-popping prices, which still don’t add up to a decent salary, while industrial-scale farms can generally trash the environment with impunity, letting society as a whole, or distant communities, pick up the bill….

At this point, farmers like Pitts — whose experience aligns with my own efforts to farm in North Carolina — have plenty of conscientious consumers willing to pay the full cost of their food. What they need now are conscientious policymakers willing to take on the agribusiness and food-processing interests that profit most from the current situation….

Voting with your fork, it turns out, is not enough. We can’t just “be the change we want to see” in the food system; we also have to get out there and organize for policy reform: to become, in short, a countervailing force that challenges the power of the food lobby.

In DC, I have friends here who bike to work every day. They tell me that so long as you’re aggressive enough with car drivers, you’re usually okay. That and watch out for folks in cars who open up the door right in front of you so you can avoid the delightful experience known as getting “doored .” Anybody surprised more of us don’t follow their path?

If we want more folks to “pony up” like Mykleby says they should, we’ve got to make it easier so those of us without a Mad Max approach to biking will do it. One interesting example of how is a pilot project San Francisco is trying out in Golden Gate Park.

The $250,000 project will move parking spots away from the curb so bicyclists and cars no longer have to mingle on the roadway. The lanes are expected to protect bicyclists and encourage more cycling in The City.

“A painted buffer area between the parked cars and bikeway will provide space for passengers to enter and exit vehicles,” the SFMTA said. “In areas without parking, the bikeway will be separated from the travel lane by a painted buffer area only.”…

The lanes have been a success in Amsterdam, Copenhagen and New York City, said Andy Thornley, the Bicycle Coalition’s program manager.

But even less complicated or expensive changes can make a real difference. Cities have discovered that creating what are known as Bike Boulevards, or a network of streets where signs and lines painted on the road make it clear that on these roads, bikes have priority, can significantly increase bicyclist safety without making car drivers crazy. No matter what cities do, individuals still have to make the decision to bike. But we can make that decision a much more appealing — and sane — one.

This isn’t BP’s or Transocean’s fault. It’s not the government’s fault. It’s my fault. I’m the one to blame and I’m sorry.

It’s my fault because I haven’t digested the world’s in-your-face hints that maybe I ought to think about the future and change the unsustainable way I live my life. If the geopolitical, economic, and technological shifts of the 1990s didn’t do it; if the terrorist attacks of Sept. 11 didn’t do it; if the current economic crisis didn’t do it; perhaps this oil spill will be the catalyst for me, as a citizen, to wean myself off of my petroleum-based lifestyle.

‘Citizen’ is the key word. It’s what we do as individuals that count.

For those on the left, government regulation will not solve this problem. Government’s role should be to create an environment of opportunity that taps into the innovation and entrepreneurialism that define us as Americans….

Here’s the bottom line: If we want to end our oil addiction, we, as citizens, need to pony up: bike to work, plant a garden, do something. So again, the oil spill is my fault. I’m sorry. I haven’t done my part. Now I have to convince my wife to give up her S.U.V.

I’ve got a question for Mykleby. Does he think folks who live in New York City are more patriotic or better citizens than the folks in South Carolina?

After all, almost nobody who lives in New York City owns a car let alone an SUV. They don’t live in oil-guzzling McMansions. And they have a much smaller carbon footprint.

Actually, it’s worse than that. If Mykleby thinks the “terrorist attacks of September 11″ is one of “the world’s in-your-face hints” to “change the unsustainable way I live my life,” then isn’t he coming scarily close to saying that New Yorkers sacrificed blood because of South Carolinians oil addiction? And what does it say about South Carolinians that nine years after New Yorkers’ terrible sacrifice, South Carolinians are still guzzling oil?

If you asked Mykleby these questions, he’d probably say, give me a break (or something more colorful). New Yorkers didn’t pony up, it’s just really easy in New York City to get around without a car.

And that’s the point that a lot of very sincere, patriotic folks like Mykleby — and many touchy-feely environmentalists — aren’t willing to face. If most folks live in communities where it’s hard to get around without a car, telling them it’s their fault and they need to pony up is pretty much guaranteed to get us nowhere. That’s the reason nine years after 9/11 we are still hopelessly dependent on oil.

What we do as individuals does count. But it’s as citizens deciding to fight together for a common future — e.g., creating 20-minute neighborhoods — not as individuals deciding whether or not to bike to work, that will determine whether we continue to be addicted to oil.

We’re also working to make every section of Portland a complete 20-minute neighborhood to strengthen our local economy. Two-thirds of all trips in Portland and in most American cities are not about getting to and from work. So if I can offer quality, affordable goods and services, eliminate food deserts, have neighborhoods with schools and parks and amenities–if I can create these 20-minute complete neighborhoods all over Portland–it strengthens our local economy. We drive 20% less than cities of comparable size, and because we don’t manufacture cars, produce oil, or have car insurance companies, every dollar that we don’t spend elsewhere, will stay in Portland’s economy. There’s about $850 million that stays in Portlanders’s pockets because we drive less. With a 20-minute neighborhood, also reduce congestion and meet our climate action plan goals.

In response, Grist’s Jonathan Hiskes writes ,

Rather than yet another attempt to rebrand climate change/global warming/global weirding, etc, etc., may I suggest that it might be more fruitful to add phrases like “20-minute neighborhood” that flesh out what a response to climate-change looks like? Concepts such as that and location efficiency help illustrate a sustainable vision, they’re not politically charged (for now), and they appeal to notions of health, community, and quality of life along with the environmental benefits.

I think he’s wrong about these concepts not being politically charged, but focusing on a positive vision instead of doom and gloom — or, if you need to get your masochistic fix on, doing both — seems like a no-brainer. Why the entire Enviro movement doesn’t get this is beyond me.

1. Create more sustainable and resilient communities
2. Green the local economy
3. Engage the community in the climate change planning process
4. Approach climate change planning on a regional level
5. Address transportation through transit-oriented development and complete streets
6. Promote density through infill development and brownfield redevelopment
7. Adopt green building policies
8. Preserve and create green space
9. Plan for climate adaptation

One of the more interesting case studies was of Sarasota County, Florida, which has adopted the Architecture 2030 Challenge,

which is built around the goal of achieving carbon neutrality for county operations by 2030…

As staff members began examining what it would take to succeed on that challenge, they quickly realized that land use and community design were every bit as critical to carbon neutrality as energy use in public buildings. In just one example of how that realization translated into a different way of thinking about policy, county staff members looked at the amount of driving that residents were doing and saw that it was largely predetermined by the pattern of development. The task of reducing VMT became not just an issue of housing demand but also a matter of housing need: where does the county need to locate housing and what form does the housing need to take?

That insight, and the fact that folks in Sarasota care about “protecting the area’s natural systems, the county developed a 2050 plan that

proposes the development of “2050 Villages”–compact developments designed to preserve open space and reduce driving–as well as an initiative emphasizing strong transit connections and TOD.

to get a sense of what kind of carbon emission savings Smart Growth can offer, a few steps from the report:

Transportation accounts for one-third of all greenhouse gas (GHG) emissions, more than any other single end-use sector. Between 1990 and 2006, GHG emissions from the transportation sector accounted for 47 percent of the increase in overall U.S. GHG emissions…

SMARTRAQ [Strategies for the Metro Atlanta Region’s Transportation and Air Quality] found that people living in neighborhoods that were rated as the least walkable drove about 30 percent more—and produced about 20 percent more GHG emissions—than those living in the areas rated most walkable….

The greater location efficiency offered by redeveloped brownfields can reduce VMT by 33 to 58 percent over greenfield developments….

Residential buildings account for 21 percent of all CO2 emissions. A detached single-family home uses 54 percent more energy for heating and 26 percent more for cooling than a multifamily home. Homes in compact developments use, on average, 20 percent less energy than homes in sprawling development.

Will all of this stop the climate crisis? No, because right now the efforts are too scattered and diffuse. But what if the environment movement and folks like Obama were doing everything they could to encourage and provide resources for these local experiments? We could make a hell of a lot more progress much more quickly than we can with all the energy being spent on a probably doomed effort to pass cap and trade.

Come to think of it, if Obama, the enviros, and Obama’s amazing social network of folks who organize to get him elected were focused on these kinds of climate crisis fights at the local level, it might create serious increase the odds of getting something serious done at the national level — corporations might decide he was worth cutting a serious national deal if only to slow down local efforts. These are the kinds of options we lose when we follow Krugman and other economists’ market-based framework.

The case I’ve laid out over the last six posts is not an argument against using markets as a tool. As I’ve said, for example, despite all the problems with cap and trade it’s certainly possible that this usage of markets could be an important piece of a larger solution. What I’ve been arguing against is the idea of using a market-based framework.

I think it’s also important to be clear that I’m not arguing that many of our solutions won’t be embedded in or operate alongside of a market. They will be — and so would an approach that relied primarily on regulations.

I’m still struggling with defining what exactly a values-based framework is. But after playing with values-based vs. market-based frameworks for a few weeks, I think it has some real potential. And making the comparison sets some useful boundaries on the scope of what I’m trying to do — which is a really good thing when tackling something this complex.

Finally, I think my first draft of a values-based framework gets around one of the issues I have with some of the other attempts to put values at the center of talking about the economy. These approaches often get off to a strong start, but they run out of gas/bio diesel pretty quickly; they don’t do a good job of handling the inherent challenges of acting on our values in something as complex as the economy.

All in all, not a bad “stumbling towards.”

One of the fundamental principles underlying a market-based framework is that through consumer choice, everyone gets a say. Some bureaucrat doesn’t decide what shoes you get to wear, you do. If you decide hot pink ballerina slippers or combat boots — or hot pink combat boots — best express who you are, you get to make that call. If you have the cash, that is, and if it’s profitable for someone to make hot pink combat boots. For this kind of freedom, the argument goes, the market is pretty effective.

But as Krugman said in Building A Green Economy, there are limits to how much real freedom markets can provide for all.

Now, efficiency isn’t everything. In particular, there is no reason to assume that free markets will deliver an outcome that we consider fair or just. So the case for market efficiency says nothing about whether we should have, say, some form of guaranteed health insurance, aid to the poor and so forth. But the logic of basic economics says that we should try to achieve social goals through “aftermarket” interventions. That is, we should let markets do their job, making efficient use of the nation’s resources, then utilize taxes and transfers to help those whom the market passes by.

The “aftermarket” approach runs into two problems. The first is what almost happened in Chula Vista. In Chula Vista, the fuel plant’s owner planned on spewing toxins close to folks’ homes and their kids’ schools. Doing something about it afterwards would be too late. And although there was a city plan that should have protected these folks, the owner of the fossil fuel plant simply ignored it He knew that unlike my or Krugman’s neighborhood, politicians wouldn’t crush him. He figured these folks didn’t have enough political power to protect themselves.

We can see the same market calculus at play with BP. BP figured it didn’t have to worry that not paying enough attention to safety would wipe out the company, because in 1990 Big Oil got Congress to cap their liability at $75 million (although there’s a chance there may be a way around the cap).

The same is true for the finance industry, which back under Clinton managed to gut the rules stopping them from taking insane risks without getting rid of their bailout safety net.

In short, a market-based framework gets into trouble because it doesn’t take power seriously enough. It pretends that power isn’t at the heart of markets, that it isn’t central to the shaping of markets. It doesn’t deal with the critical question, who gets to define what counts as “efficient”? One person’s market “failure” may be another person’s market success.

That’s also why many folks who are fans of the market-based framework end up proposing fairytale solutions. Take people like Tom Friedman, who says the best way to stop the climate crisis is create a carbon tax and then let the market do its magic. Even if the word “tax” wasn’t political suicide for Republicans now, there is no way a carbon tax large enough to do any good will happen in the US. Suburban folks who live far from their jobs and rural folks will stomp any politician who votes for it because it would devastate their lives.

A values-based framework puts power at the center. If you’re going to talk about what values should shape our economy, you’ve got to talk about who gets to decide which values. And if you believe in fairness and justice and freedom, that leads you to say, everybody should have a real say.

There are some great side benefits to this approach. If you empower many voices, more likely to explore a broader range of solutions. It also acts as a check on policy mistakes — if everyone has a real say, it’s harder to hose people.

Mind you, figuring out what “everybody should have a real say” means isn’t always straightforward. You could probably get most Americans to agree, big corporations shouldn’t be the ones who get to make all the big decisions — few people would argue the fuel plant’s owner should have been able to run over the folks in Chula Vista. On the other hand, I don’t want to live in a world where every decision is ground through a never-ending series of neighborhood community meetings. It’s hard to see how you end up with a world filled with interesting startups if you did. Ditto for NIMBYists, who essentially argue that people who live in a place today have veto power over the people who might live there tomorrow.

But pretending the complexities of power in the economy don’t exist doesn’t make them go away. All that gets you is the crazy, dysfunctional mess we have today. Better we own up to the difficulties and stumble towards a better answer.

Up next: conclusion

It’s easy to understand why economists love market-based frameworks: they’re elegantly simple. Set the right prices and everything follows. Or as Krugman wrote about solving the climate crisis:

Econ 101 tells us — probably correctly — that the only way to get people to change their behavior appropriately is to put a price on emissions so this cost in turn gets incorporated into everything else in a way that reflects ultimate environmental impacts…. [For example,] When businesses decide how much to spend on insulation, they will take into account the costs of heating and air-conditioning that include the price of emissions licenses or taxes for electricity generation.

But as we saw in Getting Green Done, price incentives often aren’t enough. Even when Schendler could show that switching to compact fluorescent light bulbs would save his company a lot of money, he lost that battle. Part of the reason: “Hotel managers don’t believe they make money by saving — they make money by selling” even though a huge amount of profit gets eaten up by overhead. In other words, people and organizations aren’t calculators.

That’s why, as we saw last year, behavioral economics may be doing well in the press but still isn’t making much headway with most economists — it makes building elegantly simple models close to impossible. Better to pretend it doesn’t exist:

“Behavioral economics has identified a dizzying array of human foibles. We clearly can’t incorporate all of them, and because of that, people feel that incorporating one error into your model may be just as unrealistic as incorporating none,” says Ed Glaeser, a professor of economics at Harvard University.

If we can’t afford to just throw our hands up and say the economy’s too complicated, what do we do? I say, place our bets. Markets can be a great tool, but there are plenty others — many of which also encourage flexibility and creativity:

• Prime the Pump by funding experiments
• Work together like the folks in Chula Vista’s Environmental Health Coalition, New York City’s WE ACT, Kentuckians for the Commonwealth, and the Miami Workers Center did to create a collaborative vision of where we want to take our community
• Use the power of non-market based competition and friendly rivalries like CityFlight 2010
• Run global corporate accountability campaigns
• Focus on a particular sector of the economy, such as Architecture 2030 — a campaign by architects whose goal is to ensure that by 2030 all new buildings and major renovations are carbon neutral

And these are just tools for taking on the climate crisis. There are plenty of examples from efforts to solve other problems. Take the case of open source software. If you surf the net, odds are many of the sites you visit it use open source software — an incredibly flexible, creative ecosystem where folks create and give away software and the means for modifying it. It’s one of our economy’s great success stories, and it’s not a market-based solution.

Markets are a good tool, but they are only one of many. If we focus just on markets, we’ll miss out on a lot of opportunities for tackling the major problems we’re facing.

If you’re concerned these other approaches won’t value flexibility and creativity the way markets can, I think you’re missing the point of a values-based framework. If we value flexibility and creativity not just because it’s effective in solving problems but because we intrinsically value it, then there’s no reason why we can’t decide it’s one of our critical values. I don’t know about you, but I want to live in a world where when we take on complicated problems like the climate crisis, we look for solutions that are effective, just, and that allow for flexibility and creativity.

In coming months, I’ll flesh out ways of structuring/chunking these tools and what’s involved in placing our bets. But for now, perhaps a simple way of thinking about the difference between a market-based framework and values-based framework is the difference between a model and heuristics. Economists love simple, clean, elegant models — and I don’t blame them. But if you live in the messy real world, they aren’t enough of a guide. That’s why in my sector of the economy, we tend to use heuristics instead. They aren’t as satisfying, but they get the job done.

Up Next: making sure everyone gets a real say.

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