The cost of the warm inner glow


Below the fold is today’s column for the Fin.

Cap on moralising needed

The world’s most pressing issues require moral courage, not self-righteousness, writes Nicholas Gruen.

Since the destruction of Sodom and Gomorrah, weve tended to moralise disasters to see them as the just deserts for our natural sinfulness. Even in todays secular age, debate on how to handle two crucial issues the financial crisis and climate change remains heavily (and unfortunately) moralised.

Its true that both crises will test our moral qualities. In particular both call for the intellectual courage thats necessary to see new problems afresh. And we need the moral courage, particularly amongst those aspiring to lead us, to forge new social consensuses around solutions which embody those insights.

Unfortunately the moralisers usually want us to take intellectual (and moral) shortcuts. They might give some of us a self righteous inner glow. But theyll only hold us back. In fact they could make things worse.

Activists make climate change politically compelling by moralising it and making it All About Us. They were scathing about the Governments commitment to reduce its claim on emissions entitlements to 95 percent of 2000 levels by 2020. That represents a per capita reduction of 25 percent which seems pretty challenging to me but theres no accounting for (moral) tastes.

But heres the thing. Arresting climate change isnt all about us. As Garnaut has insisted, what really matters is building a truly global and binding agreement. And for nearly twenty years the major developing countries have resisted binding commitments insisting you created the problem, you take the lead in fixing it. Twenty years!

That underlines a further problem with moralism. The moralisers in rich countries feel queasy about forcing poor countries into binding commitments. Their real enthusiasm is the way the looming crisis might make rich societies mend our profligate ways.

But with China soon to be the largest global emitter thats absurd. Imagine people being excused from water restrictions because they were poor. Thats effectively where moralism has got us in climate change negotiations. (None of this means we should be unprepared to offer compensation or to allow developing countries to temporarily increase their emissions taking a heavier load ourselves as we gradually decarbonise production).

But what really matters is not how heavily we beat our breast in self denial, but how we maximise the chances of engaging the major developing countries. Thats why Garnauts most important recommendation was that we commit ourselves to unilaterally reducing our entitlements to emit whilst undertaking to dramatically intensify our efforts if a truly global agreement were reached.

Though Australian policy now embodies this conditional generosity in a diluted fashion, if the idea catches on with other developed countries, we might have made the game-changing difference that enables a truly global system to evolve.

Moralism also threatens to befuddle our response to the financial crisis.

Right back to Adam Smith economists have preached the virtues of prudence and thrift which are the building blocks of investment for the future. That message has, if anything grown in relevance in the last generation as household savings have steadily declined and foreign debt has grown to fund consumption and mining investment.

And at a time like this it would be nice to have less foreign debt so we are less beholden to investor sentiment. But alas, thats for the medium to long term. Saint Augustines prayer Lord make me chaste, but not yet may be comical, but this is one situation in which its the right prayer. Now is no time to increase our savings.

And yet, appealing to moral notions of thrift, neither the Government nor the Opposition has had the moral backbone to come clean and unreservedly endorse deficit financing as an appropriate response to the crisis. We should be prepared to run substantial deficits and it may be appropriate to run them for some time. It all depends on how things develop in the international economy and our own.

But thats not all that should happen. Because we cant know when it should occur, we should begin now building institutions for instance independent advisory bodies like the Productivity Commission to impose disciplines on politicians to move from fiscal accelerator to brake and to increase savings as recovery takes hold.

Doing something like that would make all the difference between genuinely learning from the mistakes of the past, as opposed to engaging in a bit more empty moralising about them.

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melaleuca
melaleuca
12 years ago

Speaking of warm inner glows, Larvatus Prodeo chief economist Mark Bahnisch thinks the time is ripe for a big fat boost to the minimum wage:-

http://larvatusprodeo.net/2009/01/12/unemployment-and-social-responsibility/

But as to this-

“Because we cant know when it should occur, we should begin now building institutions for instance independent advisory bodies like the Productivity Commission to impose disciplines on politicians to move from fiscal accelerator to brake and to increase savings as recovery takes hold.”-

I can’t agree. This is a relatively straightforward question of economy theory and policy that shouldn’t require the establishment of a new institution.

John Quiggin
John Quiggin
12 years ago

I can’t follow (or at least agree with) the argument here. Are you making a retrospective criticism of the Kyoto deal by which developed countries moved first (this seems to me a necessary first step). Or are you, as it seems, claiming that climate activists/moralisers/critics of the government are opposed to a deal involving binding targets for China and India? If so, who?

As I recall, the main criticism of the government’s package was that it presumed the failure of a global agreement, and then used that presumption as the basis for an unambitious target, with a bid conditional on agreement that should have been the unconditional starting point.

Here’s my take in slightly mangled form on the AFR site

melaleuca
melaleuca
12 years ago

Alright Nick, I see your point. I also see PrQ’s- not sure it was a good idea to bring AGW into this :)

melaleuca
melaleuca
12 years ago

I don’t buy your argument, Nick. Green groups have to think strategically about what they do and must consequently take into account the following:

– a lobbying dollar spent in an attempt to change policies in liberal democracies like Australia and the US will provide a far better return than a dollar spent trying to change the policy of a dictatorship like China. This is because dictatorships are less responsive to public opinion.

– Green groups got very badly burnt when they pushed hard for a global phase out of DDT use, including a phase out in in developing countries. This gave forces on the Right a chance to paint a portrait of Greens as heartless baby killers- “Greens care more about saving animals than they care about black babies dying from malaria”. If Green groups strongly attack developing countries for not doing enough to curtail AGW, they will effectively hand the Right another nail studded club with which to whack them.

You need to look at the big picture, Nick.

melaleuca
melaleuca
12 years ago

The amount of influence Green groups based in the West can be expected to have on the Chinese dictatorship is somewhere between naught and zilch. You aren’t being realistic.

John Quiggin
John Quiggin
12 years ago

Until now, most of the talk about the intransigence of China and others has come from those in developed countries opposed to doing anything. The same people (notably Bush and Howard) were also privately lobbying in China and India to encourage their intransigence. Green groups were entirely right not to play this game, and are still right not to give the remaining advocates of this line any oxygen (as I think your column does).

On the conditional offer, there was nothing novel in Garnaut proposing this, and therefore no reason for anyone to make a big deal about it. The Europeans had already taken exactly the same position, with the general support of Green groups. It’s an obvious negotiating stance if you want to get a global agreement while overcome the general unwillingness to make the first move. It’s illegitimate to make a turn the fact that people didn’t make a big deal out of this into a big deal of its own, with the implication that silence on this point indicates opposition, or at least “queasiness”, let alone psychodrama.

What matters in making this negotiating stance work is that the unconditional target should be large enough to encourage others, while the conditional target should be consistent with climate stabilisation. Garnaut’s proposed cuts were pretty much the minimum necessary for this – the government’s fall way short, which is why Green groups condemned it.

As regards your point that you’ll be surprised if we reach the target, presumably you include the implied clause “given that neither party is willing to impose non-trivial economic costs on households and business”. Once this is spelt out, the inconsistency in trying to marry this line to threats of sanctions against poor countries is obvious.

John Greenfield
John Greenfield
12 years ago

On moralising, economics, warm inner glows – both climatic and Luvvie – and such, well may we look forward to the Luvvies demanding abandonment of the minimum wage or a wage freeze so that Australia can meet its international obligations! Last month, Shazza Burrow stunned us all once more with her sagacity, thundering

Article 23 in the Universal Declaration of Human Rights. Everyone has the right to work, to free choice of employment, to just and favourable conditions of work, and to protection against unemployment.

Someone should warn La Shazz to be careful what she wishes for. Me thinks Article 23 could also be applied to climate change initiatives.

http://www.abc.net.au/news/stories/2008/12/11/2443411.htm

John Greenfield
John Greenfield
12 years ago

Nicholas it was not an ambit claim at the Left, but a very real and serious identification of a problem that will only increase as the language of human rights – and planned legislating of those human rights – clash with potentially catastrophic crises currently looming, such as unemployment and conflicts over global warming.

John Quiggin
John Quiggin
12 years ago

Nicholas, let me turn #11 around the right way and observe that, if the Chinese government made protests about Australia’s human rights record we (you, I and everybody else) would laugh at them. Everyone knows that, whatever our faults on this issue, China is far worse and in no position to lecture anybody. Chinese complaints would be correctly perceived as obfuscation designed to take off the heat.

In the current case, our per capita emissions greatly exceed China’s. A negotiating stance in which we make a manifestly inadequate offer while making a big noise about China’s obligations would be laughable. It makes sense only on the assumption that you want the negotiation to fail (Bush, Howard) or expect it to fail (the current government).

Patrick
Patrick(@patrick)
12 years ago

Alternatively, John, imagine if ‘per capita’ emissions were completely besides the point.

I think the problem is this:

Everyone knows that, whatever our faults on this issue, China is far worse and in no position to lecture anybody.

Of course ‘everyone’ knows. Have you ever asked someone Chinese? By everyone you mean your friends.

Chinese complaints would be correctly perceived as obfuscation designed to take off the heat.

As they are in this context as well. In fact the environment and emissions are much more urgent issues for poor countries who a) can less afford management of them and b) are more susceptible to civil unrest from displacement etc.

vanaalst.robert
vanaalst.robert(@vanaalst-robert)
12 years ago

“John seems to think that there is some absolute standard which can be appealed to, but people will see things differently”
.
I’m sure some people do see it differently, but I doubt the Chinese government does (nor, for that matter, the average Chinese citizen). Until you convince them that the average Australian citizen should be able to create multiple times more emissions than the average Chinese citizen, I really doubt they are going to care too much (and it isn’t hard to see why). I’m sure there are some arguments for slight differences (e.g., China should have more because they do a lot of the heavy manufacturing which gets to Australia via imported goods, or Australia should have more for some other reason), but it’s hard to see how that would justify one group creating five times as much pollution as another. As far as I’m concerned, the only people that think massive differences between countries is ok believe in country boundaries far too much.

melaleuca
melaleuca
12 years ago

“But we need action from all major players now. I for one am against making anything but relatively desultory action if were not clearly heading in that direction.”

That’s real mature, Nick.

vanaalst.robert
vanaalst.robert(@vanaalst-robert)
12 years ago

“People wont sign up to collective action if they see free riders everywhere”
.
Surely there is no general case here, since there are innumerate examples where this is not true, some of which are illegal and some of which are accepted social norms (e.g., driving like an idiot, not making noise that annoys your neighbors, littering, standing in queues, etc.)

melaleuca
melaleuca
12 years ago

“Its proposed as a mature action, not a peevish one.”

I suggest you look at the work done by Prof Eban Goodstein on the costs of early action verses the cost of later remedial action- http://www.lclark.edu/faculty/eban/

I blogged on his work here: http://allocasuarina.blogspot.com/2007/01/what-do-astrologers-old-hags-who-read.html

melaleuca
melaleuca
12 years ago

Nick,

Eban Goodstein and others point to the vast range of measures that could be enacted today using current know-how to achieve large GHG cuts with negligible cost and in some cases actual gains.

The US based Rocky Mountains Institute also says the same and gives literally hundreds of examples in its book Natural Capitalism and on its website:- http://www.rmi.org/. Before you dismiss RMI as a bunch of fuzzy headed hippies, please note they have a long history of contract work with US Government agencies, including the Defence Department. It also does work with the Brookings Institution, which I note has recently been number the world’s number one think tank.

A 25% cut in GHG emissions by 2020 with no or negligible cost should be as easy as rolling out of bed.

Another point- if Oz develops policy programmes and technologies as a result of being early first out of the blocks, it will reap a financial benefit if it sells these to the johnny-come-lately types.

vanaalst.robert
vanaalst.robert(@vanaalst-robert)
12 years ago

“Name any successful piece of international negotiation where countries vital national interests are at stake that has been constructed along those lines.”
.
The EU. The Euro. Look at Belgium. Joining pretty much ended Belgium, which now exists basically as a dotted line on a map (and parts of Northern Italy seem to have reverted to being pretty much German as far as I can tell), and they surely knew that would happen before signing up. Letting in lots of the poor countries is also a huge risk to the big countries. Remember the scare stories of tens of millions of Eastern Europeans all moving to Germany/France/England that didn’t eventuate and how that would drag down wages and cause lots of crime and destruction? Similarly, many countries took a huge risk with the euro. But as far as I can tell, both the EU and the Euro are successes.
.
Also, it’s not clear to me that greenhouse stuff falls into this international category (it’s really an empirical question). I don’t think most people think of this as an entirely “international” issue. My belief is that it’s more like these water restrictions we have now in Melbourne. The government said “please do something about your water”, stuck on a few unenforcable bans, and presto, the rate of personal usage is down at no apparent cost. There are also water tanks all over the place, despite their expense, when people could have just turned on the hose. To me if the price is not noticeable for most people (and that is pretty much the price of reducing emissions substantially for most people if I’m to believe many of the economists), it will happen.

vanaalst.robert
vanaalst.robert(@vanaalst-robert)
12 years ago

“I would have thought those countries joined to advantage themselves”

I wasn’t thinking of the countries joining, I was thinking of the countries letting them in. I can’t see what the advantage of letting, say, Turkey in is to Germany (it’ll be chaos if you believe the propaganda), but that didn’t stop all EU countries excluding Ireland offering, including ones with even more to lose (the other poor countries Turkey will compete with for subsidies).

“But theyll see it as an international issue sure enough when they see their own sacrifice and compare it with the intransigence of the Chinese”

I think you’re far too optimistic about how international the average Australian’s outlook is. Governments constantly get blamed or praised for things that really have nothing to do with them (budget deficits on the bottom of economic cycles, surpluses at the top etc.), and that’s true in many places (as the other article you posted on Obama basically shows — forget about the world economy, it’s not in people’s imaginations). Also, anyone that has been to China will realize the difference between China (lots of poor people, small amounts matter) and Australia (people so rich they buy water in plastic bottles) doing something. If China loses 1% of GDP for a few years, millions of people go into poverty. If Australia loses 1% of GDP for a few years, people won’t be able to speculate on houses quite as much.

“So theres a pretty large educational issue, and its slow going”

I don’t see that as a problem. It took 20 years for Australians to stop littering, but they did eventually. I don’t think this has to be solved completely by tommorow.

melaleuca
melaleuca
12 years ago

Nick,

may I be so impertinent as to humbly suggest that you write a post that explains to economically illiterate lefties why it is a silly idea to up the minimum wage in current circumstances.

Your humble and obedient admirer- Mel.

Thanks.

Tel_
Tel_
12 years ago

But with China soon to be the largest global emitter thats absurd. Imagine people being excused from water restrictions because they were poor. Thats effectively where moralism has got us in climate change negotiations. (None of this means we should be unprepared to offer compensation or to allow developing countries to temporarily increase their emissions taking a heavier load ourselves as we gradually decarbonise production).

From a moral perspective it is totally unfair to claim that China is the largest global emitter. I mean, why measure China as one entity when you could count Tibet separately? Maybe just count Hong Kong separately? This “largest emitter” status is a product of nothing more than arbitrary political boundaries.

The only consistent and non-arbitrary measurement (from a moral dimension) is per-capita.

I do agree that if we try to get global support for an unrealistic target, we are likely to end up achieving no target at all. From the point of view of getting any working treaty, Rudd’s 5% does make some practical sense. Morality continues to exist even in situations where practicality limits our options, but then again we don’t really know what our options are until we try. Possibly it is not so much the moralisers who are the problem but purists who think that morality is the only consideration.

So am I to presume that in a drought you would argue that the poor should not face higher opportunity costs of water use until the rich have lowered their water consumption? If so how far should their consumption be lowered. To the level of the poor?

Generally known as a “rationing system”, tends to be popular in wartime and other periods of mutual hardship.

Trying to make the world work so that the poor make no contribution until rich consumption levels have fallen (how far?) – trying to fit it up to the debating points of the greens will end in tears.

The concept of leaders leading by example does seem a little strange. A teacher wanting his students to refrain from swearing might get better results if he doesn’t emulate a sailor himself… but there’s that useless moral dimension again.

This is all presuming that there’s a solid scientific case to demonstrate that our efforts are going to make any significant difference, but that’s another argument.

Tel_
Tel_
12 years ago

Green groups got very badly burnt when they pushed hard for a global phase out of DDT use,

Green groups got rightfully burnt by claiming that DDT was killing Bald Eagles by thinning egg shells despite excellent scientific evidence pointing out that Bald Eagles were mostly killed by good old fashioned hunting and habitat destruction. Of course DDT is easy to detect (even in microscopic quantities) and it hangs around for a long time so if you can detect it, must be a problem, right?

http://www.junkscience.com/ddtfaq.htm

Laboroutsider
Laboroutsider
12 years ago

I will answer that one for you Mel, and no need for a long post.

The demand for labour is downward sloping. The demand for the labour of the young and low skilled is more price elastic (wages have a bigger effect on employment) than that for skilled workers. Raising the minimum wage at a time when the demand for labour is already contracting, will hit the young and skilled with a double whammy. If you care about the welfare of the young and low-skilled, lobby for compensation for the lower real wages through the tax-transfer system a negative income tax or earned income tax credits. Even the ACTU realised during the 1980s that such tradeoffs were a good idea.

There is of course an economic debate about just how elastic labour demand is…but it certainly isn’t zero….and certainly is higher for lower skilled individuals…Appealing to the findings of the Card/Kreuger US study of the minimum wage won’t get you very far as the minimum wage is much higher in Australia and consequently more binding on employers.

Baltic breeze
Baltic breeze
12 years ago

Hey Nic.

You know the CFC worldwide agreements to stop production is an example of how reducing carbon emmissions will follow. To avoid everyone doing nothing then appealing to the moral values that voters understand is the best way forward. Peasants they may be but they have morals and a vote.

Australia establishing anti carbon systems that work will eventually be followed worldwide. Obama and Gordon Brown have followed Australia on economic policy to deal with this economic crisis. China will follow as they want the job creation that goes with the global superstition. Better to have a superstition to create jobs and keep the populace busy than religeous stupifying superstition like God and stories like sodom. Politics and Religion should not be put together.

Being self righteous is a characteristic of religion and self righteous we would be to expect developing countries to make the same sacrifice. We all know China is motivated by economics and this means that the Australian leadership is very smart and schrewd. Once Australia has obtained the Competitve Advantage and is selling carbon solutions to the world you will see China wanting to get in on the business.

As for the savings you suggest. Why? Australia has one of the worlds largest savings rates contained with super contributions. $10 spent creats $100 of value to a bunch of people. The banks would invest the savings in what – subprime and then be bailed out by govt because they dug such a massive hole with all the large savings. Then who pays? The people again through increased taxes. I would rather spend my money than have it taxed away from me.

Patrick
Patrick(@patrick)
12 years ago

Conrad, think harder. You happen to name two countries whose ‘national self-interest’ (in, presumably, their own continued territorial integrity) was reduced by the Euro.

My understanding is that Italy would be bankrupt, the Lira trading at around one million to the dollar and interest rates well into double figures but for the Euro. Belgium meanwhile might simply have fragmented had it not come to be so relatively meaningless as a political whole.

National interest seems alive and well. To the extent that your observations are valid (and there is some point to them in other aspects of the EU) then what is happening is the substitution of political class interest for national interest – to wit, recent EU treaties.

Tel_
Tel_
12 years ago

Rationing systems exempt the poor? Like water restrictions perhaps?

The poor constantly ration their consumption because they cannot afford to do otherwise. Someone spending seven days a week not watering the garden they don’t have (because their land is so small, plants and fertilizer are expensive and they work long hours, coming home exhausted) probably will not be too upset finding they are restricted to a mere two days a week.

Even when rationing does bite the poor, it bites the rich much harder.

And you think we should be leaders of the Chinese in the way that a teacher teaches
pupils (not to swear)?

Possibly I didn’t pick the best example.

Let us presume (merely for argument sake) that Australians as a whole have a genuine interest in causing the Chinese to change behaviour. What methods exert influence on another?

[1] Bribery… “the carrot”
[2] Brute force… “the stick”
[3] Rational argument… “the lecture”
[4] Trickery… “the scam”
[5] Set a good example… “the role model”

You might know more (please share, I’ll find a use for them). A teacher has all options open (but [5] is still a good choice where it works), Australia has basically [5] and not much else. I guess we could cut off some of their fossil fuel supply (at great cost to ourselves), but basically the Chinese don’t bother to negotiate because they don’t really care.

Amnesty International gets housewives to write to overseas dictators saying, “Please don’t torture your political prisoners. because it’s immoral”, against all logic, it quite often succeeds. That’s essentially the position of Australia negotiating with China (except that the immorality of torture is more intuitive than the immorality of a coal fire).

Since your contribution seems to be at the level of cheap shots …

I feel more comfortable calling them rationed shots.

vanaalst.robert
vanaalst.robert(@vanaalst-robert)
12 years ago

Tel,

you should just use CO2 as the example — since for CO2 (and other forms of pollutants to an even great extent, many of which come with things that create CO2), China has a huge vested interest in cleaning up its act, so your point [5] is very important. Basically if you can show the cost is small, it is far more likely China (and everyone else for that matter) will do something — especially now when they also need to think of ways to spend money to keep people employed for the next year or two. Since China has options like cheap solar and nuclear power which Australia doesn’t have due to NIMBYism and the like, if Australia can do it cheaply, then China can do it even more cheaply.

observa
observa
12 years ago

It seems to me Nicholas is just pointing out the obvious good war/bad war analagous situation here. ie there’s little to rationally choose between a morally bad but practical war and a morally good but impractical one and I’ll leave you to go figure.

The problem for the AGW moralists now is obvious to one the godfathers of their theory now in James Hansen. Just as they reach moral and political ascendancy now, their practical methodology of C&T going forward, lies sullied by the experience of financial derivatives and the GFC looking back. In global emissions trading and all its associated spinoff derivatives they now trust and come hell or high water they’ll set the new moral standard for China. A noble crusade doomed to achieve what it has to date, but even if minimally successful would not reduce global emissions from emerging countries and thereby be swamped. Already the free emissions permit giveaways foretell the future and what politician would ever agree to power station brownouts due to exceeding emission caps? The broad answer as Hansen recognises is to have straight carbon taxing with income tax ‘dividends’ and ditto for all countries for a level playing field. In advocating that Hansen is really separating true green wheat from much of the leftist chaff with very different agendas.

observa
observa
12 years ago

Exxon joins Hansen in the practical Pigou Club
http://newsweek.washingtonpost.com/postglobal/energywire/2009/01/exxon_chief_embraces_carbon_ta.html
but an all important foundation board member of the Chicago Climate Exchange and his erstwhile keen to join energy adviser have ruled out joining them
http://newsweek.washingtonpost.com/postglobal/energywire/2009/01/obamas_gas_taxing_problem.html
Derivatives trading it is then which will give the Obama administration the popular stick of protectionism to beat China with, while blaming business for putting up gas prices. My take is Obamessiah is just another politician pandering to his base.

Tel_
Tel_
12 years ago

Another example of the “role model” principle in action:

http://www.theaustralian.news.com.au/story/0,25197,24939897-12377,00.html

The Coalition also accused him of being a climate-change “hypocrite” after it was revealed that several of these senior advisers drive fuel-guzzling motor vehicles.

“This is another case of Kevin Rudd preaching one thing but practising the exact opposite,” Shadow Special Minister of State Michael Ronaldson said.

Senator Ronaldson accused Mr Rudd of double standards just a day after the PM called on workers to defer wage claims to save their jobs.