Category Archives: Environment

When Workers Own Their Companies, Everyone Wins

In 1921, the Olympia Veneer Company became the first worker-owned cooperative to produce plywood. By the early 1950s, nearly all of the plywood produced in the United States was manufactured by worker-owned cooperatives. Today, however, worker-owned cooperatives seem few and far between. Say “co-op” and most people think of Park Slope foodies or strictly guarded apartment buildings. Worker ownership may seem a relic of the past, but it could actually play a significant role in reviving the union movement, bolstering the green economy, and stemming the tide of deindustrialization.

Today, there are only about 30,000 cooperatives, strictly defined, employing 856,000 workers in the United States. Most of these cooperatives are consumer cooperatives, owned by consumers, rather than workers. (Technically, cooperatives are defined by incorporation, ownership, and tax-filing status.) But about 47 percent of American workers participate in profit-sharing arrangements of some sort. Employee stock ownership plans (ESOPs), for instance, involve around 10 million workers and range from plans that are essentially cooperatives (in which workers have decision-making power) to plans in which workers have stock, but no ownership or decision-making powerthese are essentially profit-sharing by a different name. Procter and Gamble, the twenty-seventh largest corporation in America is estimated to be10 to 20 percent employee-owned. Among the Fortune 100, many companieshave employee ownership plans, including Exxon Mobile, Chevron, ConocoPhillips, GM, Ford, Intel, UPS, Amazon, Coca-Cola, Cisco, and Morgan Stanley.

Against this backdrop, it’s not so surprising that some are making the case for co-ops. Union leaders, in particular, argue that there is significant opportunity to expand the coop model by associating it more closely with unions. This make sense: Unions are looking for new allies and methods for increasing worker control, while cooperatives can benefit from the organizational skill and scalability of unions. Associating with coops would also allow the unions to extend their reach. While the union movement is concentrated in manufacturing, a recent study by Hilary Abell finds that 58 percent of cooperatives are in the retail and service sectors. “If you go back to the beginning of the labor movement,” says activist Carl Davidson, “unions and cooperatives used to go together like bread and jelly.”

Leo Gerard, the President of United Steelworkers Union, has been vocal about the possibility of what he calls “union cooperatives.” He has even studied this: In the wake of the recession, his union allied with Mondragon, a large federation of cooperatives based in Spain, and spent three years developing ways to build a similar movement in the states. Gerard noted that even while the Spanish economy has fared poorly in recent years, Mondragon proved resilient, maintaining steady employment.

The idea is catching on in the U.S. as well. In Pittsburgh, a “union cooperative” industrial laundry called Clean and Green uses green technologies and employs 120 worker owners. The business replaces a traditionally-run laundry; if it succeeds it will be a potent proof-of-concept for the cooperative movement. Two thousand minority home health-care workers in New York City formed a cooperative that increased their wages and benefits while also giving them more control of their working conditions. They are coordinating with the Service Employees International Union (SEIU. The coop model might provide unions with just the fresh air that they need. The economist Richard Wolff tells me that, “Unions concentrated mostly on how to minimize what to give back. They very rarely think in terms of strategic alternatives.”

Coops are also already an important part of the emerging green economy. In Cincinnati, one cooperative is connected with local building trades, and it retrofits buildings with green energy technologies. The nascent nature of the industry makes it ideal for cooperatives, which cannot be formed in industries already dominated by large hierarchical corporations. Ohio Cooperative Solar,for instance, installs solar panels on rooftops in downtown Cleveland.

Cooperatives can also supplement economic development programs in cities suffering under the weight of deindustrialization. In Cleveland, historian and political economist Gar Alperovitz has developed a cooperative model based on the idea of “anchor institutions.” He aims to use institutions like hospitals, local government, and universities, which are constantly in demand, to serve as a bulwark against the vicissitudes of the business cycle. He tells me that he’s had interest in his anchor-institutions model from representatives from about a hundred cities across the country. Cincinnati has experimented with the anchor-institution model, as well as Atlanta, Washington, D.C., and Jacksonville. Most of these areas are either deindustrialized or were hit hard by the housing crisis.

And coops are not just good for unions, the environment, and struggling townsthey are good for workers, too. A meta-study by economist Chris Doucouliagos examines 43 published studies and find that profit-sharing, worker-ownership, and worker participation in decision-making are correlated with higher productivity. The effects are stronger among labor-managed firms than among those with merely worker-ownership schemes like ESOPs. This seems to be playing out in the Union Cab Cooperative in Madison, Wisconsin. The coop was formed when cab driverswho were fed up with long hours, poor benefits, and low payditched management and bought the cabs themselves. The cooperative is run by a nine-person board of directors elected by the workers who sit for terms of no more than three years. In total, about 60 workers are involved in management, with representation distributed throughout the cooperative. The highest-paid workers make a base salary that is only 2.2 times the lowest-paid workers, although drivers who spend more hours driving and those elected to management positions make more.

The Union Cab Cooperative isn’t going to overtake Uber any time soon, but there is no reason to believe that cooperatives have to remain small. The Spanish coop that aligned with United Steelworkers, after all, has 80,321 employees. Its revenues in 2012 were €14.081 billion. In the United States, Hy-Vee, a chain of 235 supermarkets with 62,000 employees and $8 billion in revenue is entirely employee-owned.

The appeal of worker-ownership in the United States could even cross partisan lines. The two biggest supporters of ESOPs are the conservative Dana Rohrabacher and socialist Bernie Sanders. In 1999, they co-sponsored “The Employee Ownership Act of 1999” which would grant companies with a threshold of worker ownership an exemption from the federal income tax. Sadly, more recent cooperative bills have been primarily supported by liberals. But conservative policy wonks talk about an “ownership society,” and cooperatives are an ideal way to promote ownership and responsibility.

According to Democracy Collaborative, the world’s largest 300 cooperatives together constitute the ninth largest national economy. America is a land of ownership and democracyand yet these values are generally ignored in the workforce. Cooperatives can change that.

Originally Published on The New Republic.

Why we should abolish the GDP

Co-Written with Lew Daly.

Imagine this: your state is thinking about building a new coal plant. Gross domestic product measures how much money that project would produce. But it can’t account for the children who get asthma or the people who die from that air pollution. And that’s a problem.

What was once a highly technical debate about the failures of conventional economic metrics is fast becoming a world movement to unseat GDP and replace it with something better.

In America, many states are finding new, more holistic measures of progress. Already, Maryland, Oregon and Vermont have begun using the genuine progress indicator (GPI).

GPI takes into account 26 social, economic and environmental indicators. These include financial factors such as inequality and the cost of underemployment. But GPI also considers the cost of pollution, climate change and non-renewable energy resources. And it explores the possible social impacts, such as the cost of commuting and crime.

States that calculate GPI often find that while they perform well economically, environmental and social indicators lag. The GDP/GPI comparison below reflects a large and growing “well-being gap” in our development since the 1970s: We are growing in our national output and consumption, but the growth is not improving our well-being as a society.

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The GPI well-being gap also tracks closely with life satisfaction, which has stalled in the United States since 1973. Data from the General Social Survey and the World Bank show that while GDP per capita has increased dramatically, happiness has flattened out.

The percentage of people who are “very happy” has remained stalled at around 30 percent (“pretty happy” moved up two percentage points) for three and a half decades, even while GDP per capita (in 2011 dollars) doubled.

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And at the same time GDP has grown, progress on child poverty has stalled. In fact, the child poverty rate is eight points higher today than it was in 1969.

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While alternative measures sound ephemeral, they are not. When commenting on Bhutan’s Gross National Happiness policy, Cylvia Hayes, the first lady of Oregon says: “What Bhutan is doing is not trivial at all. They are running policy and infrastructure decisions through a more comprehensive set of metrics that gives a much fuller account of what the effects of those decisions will be.”

Oregon’s governor, John Kitzhaber (D), wants to tie GPI to a 10-year budget plan that encourages longer-range policy development for a more sustainable state economy.

And Oregon isn’t the only state looking for new ways to measure growth. In Maryland, GPI is influencing the development of new goals such as reducing infant mortality, cutting greenhouse gas emissions 25 percent by 2020 and planting more crops that improve soil fertility. Researchers in Utah and Colorado are also developing GPI estimates in collaboration with the other states.

Some countries are also making the shift. In France in 2009, then-President Nicolas Sarkozy asked Joseph E. Stiglitz, Amartya Sen and Jean-Paul Fitoussi to investigate the limits of GDP. As a result of these efforts, INSEE, the French statistics agency, has moved to use happiness as an economic indicator and released numerous reports on its inequalityquality of life and sustainability. One significant departure between GDP and other measures is the environmental impacts of growth, which are staggering. GDP growth has coincided with a massive and costly increase in carbon dioxide concentrations.

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As a group of social scientists argued in the journal Nature, “if a business used GDP-style accounting, it would aim to maximize gross revenue — even at the expense of profitability, efficiency, sustainability or flexibility.”

Originally published on The Washington Post.

How to tap latent conservative support for global warming policy

Both last month’s Senate Climate Talkathon and Tom Steyer’s $100 million dollarpledge to back environment-friendly candidates indicate the same thing: Democrats are getting serious about global warming again. But even when Democrats have managed to close ranks behind previous legislative efforts like Waxman-Markey, Republicans have stymied them. Can the left forge a coalition to tackle the problem?

The environment was once a bipartisan issue. The 1970 Clean Air Act, the 1972 Clean Water Act, and the 1973 Endangered Species Act were all passed with bipartisan support, as was legislation strengthening those acts in the 1980s and 1990s. Since then, the environment has become increasingly divisive. Data from the Pew Research Center show that the decrease in support for environmental protection is not only very recent but also one-sided:

Despite that decline, Republican support for environmental causes is stronger than it might appear. Two Ph.D. students at the University of California Santa Barbara, Phillip Ehret and Aaron Sparks, found that a quarter of individuals self-identifying as “very conservative” or “conservative” support environmental regulations, even if they risk harming the economy. A Yale Study finds that 85 percent of Democrats and 55 percent of Republicans favor “regulating CO2 as a pollutant” and majorities from both parties favor investing in renewable energy. If Republican voters are concerned about the environment, haven’t we seen an action?

One explanation is that the framing of environmental issues is often anathema to conservatives. Matthew Feinberg and Robb Willer’s important paper on the subject, “The Moral Roots of Environmental Attitudes,” finds that liberals view environmental issues as moral concerns informed by a harm principle, while conservatives view environmental issues through the lens of purity, and particularly for religious people, stewardship.

In 1971’s Octogesima Adveniens, Pope Paul VI laid out a religious case for protecting the environment, using the language of responsibility, duty to future generations, and purity—in other words, the conservative framing under Feinberg and Willer’s standards:

Man is suddenly becoming aware that by an ill-considered exploitation of nature he risks destroying it and becoming in his turn the victim of this degradation … thus creating an environment for tomorrow which may well be intolerable …. The Christian must turn to these new perceptions in order to take on responsibility, together with the rest of men, for a destiny which from now on is shared by all.

In his 2006 “Letter to a Southern Baptist Pastor,” E.O. Wilson showed how to use the religious framing in defense of the environment:

You have the power to help solve a great problem about which I care deeply. I hope you have the same concern. I suggest that we set aside our differences in order to save the Creation. The defense of living nature is a universal value. It doesn’t rise from, nor does it promote, any religious or ideological dogma. Rather, it serves without discrimination the interests of all humanity. Pastor, we need your help. The Creation—living nature—is in deep trouble.

The environmental movement has stumbled because it has not framed the issue as Wilson and Paul VI did. A 2012 study by Matthew C. Nisbet, Ezra M. Markowitz, and John E. Kotcher found that climate campaigns overwhelming frame the issue in terms of harm and care, fairness, and oppression of marginalized groups. These frames fall into what Feinberg and Willer would consider left-wing frames, alienating conservatives.

Adopting a more conservative framing wouldn’t lead to liberals winning more elections. More likely, moderate Republican and centrist thought leaders could make green policy a bipartisan initiative of the sort that was common during the Eisenhower, Nixon, and Bush Sr. days. There are already right-leaning pro-environment groups, like Atlanta’s Green Tea Coalition and Ducks Unlimited. That’s unlikely to be enough to bridge the divide. Because people are more likely to respond to arguments made by someone within their community than outside of it, progress depends on more Republican voices.

But Republican thought leaders and policymakers have abandoned the environment in droves. ThinkProgress calculates that 56 percent of Republicans in the current congress deny anthropogenic global warming. Among the general public, 26 percent of adults don’t believe global warming is real (although only 11 percent of Democrats do, versus 46 percent of Republicans and an astonishing 70 percent of Tea Partiers). Deborah Guber, a professor at University of Vermont,argues that there has been a concerted effort among right-leaning elites to downplay the environmental issue. “Partisan conflicts are not inherent in the subject of climate change,” she writes. “Party sorting seems to occur only as citizens acquire information and become familiar with elite cues.” This helps explain the lack of political movement, despite evidence that conservative voters are concerned about the degradation of the environment.

Guber notes the infamous 2003 Frank Luntz memo arguing that the environment was the issue on which Republicans were most vulnerable. “The scientific debate is closing [against us] but not yet closed. There is still a window of opportunity to challenge the science,” Luntz wrote. “A compelling story, even if factually inaccurate, can be more emotionally compelling than a dry recitation of the truth.” Funders took Luntz’s idea and ran with it—with impressive success. A Drexel University study released in December bolsters the idea of a concerted denial campaign led by elites. The survey found that the climate-denial movement consists of 91 organizations supported by 140 primarily conservative foundations.

“The Republicans and (at least a large part of) the business community are against doing anything about climate change, because doing something about it would mean government intervention in the economy, which is ideologically bad but also having tangible and real economic costs on certain segments of the business world,” Benjamin Radcliff, a professor of politics at Notre Dame, told me.

Regulating greenhouse gases would hurt some big businesses. If IPCC estimates are correct, some 80 percent of existing fossil fuel reserves must remain unused. That presents a risk for companies like Koch Industries and Exxon Mobil—companies whose donations give them an outsize influence on the political process. Recently, Exxon said it is “highly unlikely” that governments would implement policies to significantly reduce emissions. (Just to be sure, the company has donated millions to climate denial groups.)

Tom Steyer’s example aside, Martin Gilens and Benjamin Page find “that economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence.” And elites are less likely to be concerned about climate change than other citizens. Benjamin I. Page, Larry M. Bartels, and Jason Seawright have found that the issue ranks below “the loss of traditional values,” budget deficits, and inflation among policy priorities for the wealthy. While the wealthy in their study generally favored reducing spending on the environment (the difference between “expanded” and “cut back” was -8) the public strongly favored increasing spending (+29).

Internationally, the environment isn’t so polarized. Right-leaning politicians like David Cameron and Nicolas Sarkozy have embraced the environment, and Angela Merkel won reelection in part by promising to phase out nuclear energy in favor of renewables. And within the U.S., some Democratic governors in red states have had success pursuing environmental issues. In Wyoming, the most conservative state in the country, Dave Freudenthal’s administration focused on a long-term strategy for resource extraction that included, among other things, preserving the state’s forests and regulating hydraulic fracking. The result: a reelection margin of 20 percent and a reputation as one of the most popular governors in the country, including 66 percent approval among Republicans.

But at the national level in the United States, environmental progress has been stymied by elites with a vested interest in fostering denial and the economic means to do so. This is not an easily surmountable challenge, but the polling reveals that underlying support offers hope for moving climate-change policy forward; and unlike hot-button issues like abortion or gay rights, the policy solutions are well agreed-upon. Yet the environmental movement has not helped itself by framing the issue in terms that appeal mostly to the converted. Activists will find more success if they focus on promoting sanctity and responsibility, showing how protecting the environment is economically beneficial and leaving a legacy for future generations.

Originally published on The Atlantic.

What if economic growth is no longer possible in the 21st century?

Co-Written with Lew Daly.

For decades, rapid economic growth has been the norm for developed countries. An educated workforce, a large population boom, major technological advances, and abundant fossil fuels were the key components of growth, generating substantial and broadly distributed increases in standards of living in many countries. We have grown so used to such growth that we inevitably view it as a panacea for a host of economic ills, whether it’s a deep recession or income inequality.

We now understand, however, that the postwar growth paradigm is not environmentally sustainable. We also know that the shared prosperity it once delivered is itself unraveling. With these combined trends, something has to give in order to maintain living standards.

One possible scenario, with surprisingly good news for average Americans, is that constraints on growth will force political leaders to accept redistribution as a policy tool. Indeed, if we cannot grow our way to broadly shared prosperity again, redistribution is the only way to save the middle class.

Many economists have warned that the old model is dying out. In a much-cited paper, Robert Gordon argues that the rapid growth we take for granted is not only historically anomalous but likely to slow significantly in the 21st century, pointing in particular to diminishing returns from technology as one major drag. Developed countries have already picked the “low-hanging fruit” of technological advance (in Tyler Cowen’s phrase), and future innovations will produce far less growth, he argues.

Steven King, chief economist at HSBC, similarly argues, “The underlying reason for the stagnation is that a half-century of remarkable one-off developments in the industrialized world will not be repeated.” Gordon also points to rising inequality, which has led to stagnating middle-class wages, as a drag on future growth. As a result of these trends and others, average annual growth will fall below 1 percent in the 21st century, he predicts.

Then there is the impact on the global economy that will result from combating global warming. Working from a conservative carbon budget of 450 parts per million (PPM), Humberto Llavador, John Roemer, and Joaquim Silvestre predict that achieving this target will require a substantial slowing of growth, mainly borne by the United States and China. The U.S. and China must keep growth within the threshold of 1 percent and 2.8 percent of GDP per year, respectively, for the next 75 years, they say.

In an interview, Roemer tells us that these results are optimistic; after all, some economists have argued that growth may not occur at all. In the paper, the three argue that “there is no politically feasible solution to the climate change problem unless” both the U.S. and China “honestly recognize the connection between restricting emissions and curbing growth.” In contrast, the Congressional Budget Office’s long-range analyses use a growth projection of 2.2 percent on average over the next 75 years.

Other economists have come to similar conclusions about the connections between growth and sustainability. Early in 2012, Kenneth Rogoff argued that maximizing growth must be weighed against the negative possibilities of growth, like global warming. Indeed as James Gustave Spethnotes, environmental impacts are the most significant challenges to growth: “Economic activity and its growth are the principal drivers of massive environmental decline.”

Growth constraints will push the issue of distribution to the forefront of political discussions. In his forthcoming book Capital, Thomas Piketty predicts that growth will slow to between 1 and 2 percent — 19th-century levels — by the end of the 21st century. This trend, he further argues, will be accompanied by higher returns to capital and lower returns to labor, thereby exacerbating inequality.

The conclusions that flow from these observations are stark. The old economic paradigm relied on unsustainable growth, so we must change the paradigm. For decades, our rising standard of living came at a deep cost to our environment and our children’s future. There is simply not enough planetary bio-capacity to grow our way out of the messy moral discussions of distribution. The idea that inequality is merely an inefficiency to be corrected with a technocratic fix or perpetual growth is no longer tenable.

Fortunately, we have plenty of GDP that could help the middle class, with approximately $200,000 a year potentially available for each family of four. Given that the median family of four only gets about $67,000 a year at this point, it should be clear that it is possible to grow and strengthen our middle class, significantly, while adjusting to the lower GDP growth we are likely to experience in the future.

The question is, will political leaders accept the need for distributional remedies, or will they continue to side with the wealthy against the struggling middle class?

Originally published on The Week.

Can We Make Environmentalism a Centrist Issue?

For decades, thinkers on the left have wondered why the working class regularly votes against its own interests, upending what Marx believed would be an inevitable march from democracy to socialism. In his book,What’s the Matter with Kansas?Thomas Frank argued that social issues obscure economic motives, and indeed the most salient non-economic one has always been race, at least in this country. In America, conservative politicians have exploited racism to their own benefit, first to disempower blacks with Jim Crow, then to undermine the union movement, and more recently to undercut support for welfare programs, as Ian Haney Lopez recently documented in Dog-Whistle Politics. Nixon’s “law and order campaign” played on racial fears, as did Reagan’s denunciation of “welfare queens.” Republicans played at race to win solid majorities for decades while actively working against the interests of the majority of Americans. The left has much to learn about this strategy. It needs to fundamentally re-align Americans around an issue with a deep and latent importance: the environment.

When asked about the most important global issue, 25 percent of Americans cite environmental degradation, while only 10 percent cite the economy. “Everyone studying American politics has been waiting for a new realignment because the last few decades have been marked by political apathy and the rise of a new voting bloc that is not strongly tied to either party,” says Dr. Benjamin Radcliff, professor of politics at Notre Dame and author of The Political Economy of Human Happiness: How Voters’ Choices Determine the Quality of Life. “What is needed is some spark, either an event, like the Great Depression—or just a party capable of mobilizing this latent potential.”

Hedge-fund manager and environmentalist Tom Steyer’s recent pledge to pour $100 million into 2014 races could certainly create the political infrastructure to allow the left to capitalize politically on the next oil spill. A potent path forward is for the left to appeal to independent voters concerned about the environment. By adopting a moderate framing and language that appeals to both centrist thought leaders and disenchanted Republican moderates and independents, the environment could become to the left what race has been to the right.

Dr. John Roemer, a professor of political science and economics at Yale, wrote in a 2005 paper with Woojin Lee and Karine van der Straeten that “the Left might attempt to exploit global warming the way the Right has exploited racism.” He says that the issue is even more salient today, although the right is currently in a state of “cognitive dissonance” because of their anti-government ideology. His own upcoming book, Sustainability for a Warming Planet, uses terms like “intergenerational equity” and “sustainability” that are commonly used by centrists like David Brooks and Joe Scarboroughwho worry that the federal debt is unfair to future generations and on an unsustainable course. Such leaders thrive on issues like the federal debt and sustainability, a leftist concept that is intellectually harmonious with stewardship, a right-wing one. By using the language of responsibility and intergenerational equity, as well as homespun wisdom about “living within our means,” the left could create a broad umbrella coalition encompassing concerned centrists. Internationally, moderate right-wing parties have successfully co-opted the environment from the left; Angela Merkel famously won re-election in part by promising to phase out nuclear energy. In Britain and France, conservative politicians have been at the forefront of initiatives to adopt alternative measures of sustainable progress. France’s conservative Nicholas Sarkozy created the Commission on the Measurement of Economic Performance to identify ways to move beyond GDP as the measure of economic progress. In Britain, conservative Prime Minster David Cameron also pursued a measure of happiness and well-being.

Both Roemer and Radcliff note that a key detriment to progress is the right’s fixation on eliminating government. “There’s simply no way to reduce emissions without some bureaucracy,” Roemer says. “You can’t fight global warming without government intervention.”

In America, some left-wing candidates have won in heavily right-wing parts of the country by using conservationist rhetoric. Bernie Sanders won his Senate seat in Vermont—a rural, white state that holds the record for longest-consecutive streak voting Republican in presidential elections—by, according to David Sirota, “visiting hunting lodges to talk about protecting natural resources for hunting and fishing and establishing a connection with [hunters].” In Montana, a state that has voted Republican in all but one of the last ten presidential elections, Governor Brian Schweitzer won twice (the second time in a landslide) partially by wooing hunters and fisherman with land and stream access. In Wyoming, the most conservative state in the country, Governor David Freudenthal’s administration focused on a long-term strategy for resource extraction that included, among other things, preserving the state’s forests and regulating hydraulic fracking. The result: a re-election margin of 20 percent and a reputation as one of the most popular governors in the country with 66 percent approval among Republicans.

In hindsight, the potency of the environmentalist message should not be surprising. Religious traditions have always stressed the importance of living in harmony with the environment, and the very idea behind conservatism is not radically re-inventing the world in which one lives, lest unintended consequences ensue. Data from the Pew Research Center show that the environment used to be a non-partisan issue, and only recently became politicized. In her 2013 paper “A Cooling Climate for Change? Party Polarization and the Politics of Global Warming,” Deborah Guber, a professor at University of Vermont, finds, “partisan conflicts are not inherent in the subject of climate change” but rather, that “party polarization among elites has now trickled down to the masses.” She cites thefamous memo by Republican political distorter extraordinaire Frank Lutz, in which Republican politicians were encouraged to “continue to make the lack of scientific certainty a primary issue in the debate.”

The Pew data cited above show that swing voters lean toward Democrats on environmental issues. Rasmussen polling finds that voters overwhelming favor the Democratic position on the environment (51 percent to 34 percent). That leaves a lot of voters open for a sustainability-minded lefty, particularly in states where big businesses threaten land that was once preserved for hunters or fracking threatens water supplies.

According to Dr. Robert Bartlett, chair of the Department of Political Science at the University of Vermont, the problem has been framing. “Environmentalists tend to frame the issue in terms of harm and justice, while conservatives respond to in-group loyalty, sanctity, respect and stewardship.” Aaron Sparks, a Ph.D. student at the University of California, Santa Barbara who is studying the issue with Phillip Ehret, finds that about 20 to 30 percent of strong conservatives hold pro-environment attitudes (meaning they are willing to sacrifice economic growth to protect the environment). But Democrats must be “smart about how they frame their appeal,” Sparks says. “Conservatives can be persuaded to accept the environmental argument if is pitched in a way that is consistent with their morality, which tends to emphasize the sacredness of nature and a focus on local, community-building issues.”

But a 2012 study finds that climate campaigns overwhelming continue to frame the issue as harm and care, fairness and oppression of marginalized groups. These liberal values don’t resonate with conservatives. Environmentalists might take a page from E.F. Schumacher’s book, Small is Beautiful:

Modern man does not experience himself as a part of nature but as an outside force destined to dominate and conquer it. He even talks of a battle with nature, forgetting that, if he won the battle, he would find himself on the losing side. Until quite recently, the battle seemed to go well enough to give him the illusion of unlimited powers, but not so well as to bring the possibility of total victory into view. This has now come into view, and many people, albeit only a minority, are beginning to realize what this means for the continued existence of humanity.

Originally published on The American Prospect. 

Natural Gas Will Not Save the U.S. Economy

Co-Written with Lew Daly

Economist Kenneth Boulding famously said, “Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist.” But it’s not just economists who believe that anymore. Such ideas are still widely accepted by thought leaders, journalists, and politicians who, together, form a strong consensus that the U.S. recovery should be bolstered by natural gas exploration and production. The McKinsey Global Institute claims in a recent report that a natural gas boom is one of the most important “game changer” ideas for U.S. economic growth, while The Economist writes, “Become a champion of a global fracking revolution, Mr. Obama, and the world could look on America very differently.” And in his recent State of the Union address, President Barack Obama said “I’ll cut red tape” for factories that use natural gas, and that “Congress can help by putting people to work building fueling stations that shift more cars and trucks from foreign oil to American natural gas.”

But the belief that natural gas can be a “bridge fuel,” allowing us to grow rapidly in the age of global warming, is fit for a madman.

The current consensus is that if global temperatures rise more than 2 degrees Celsius above preindustrial levels, the consequences would be catastrophic (the Arctic melt would raise sea levels by tens of meters). So scientists have proposed a “carbon budget”: the total amount of carbon dioxide that can be released into the atmosphere without raising temperatures by 2 degrees. Using a conservative carbon budget of 450 parts per million—which has been endorsed by the International Energy Agency and Britain’s Stern Review—economists Humberto Llavador, John Roemer, and Joaquim Silvestre have thrown cold water on the idea that natural gas is our nation’s economic savior. In a forthcoming paper, they argue that given that budget, the world’s two largest CO2 emitters, the U.S. and China, must keep GDP growth within the threshold of 1 percent and 2.8 percent of GDP per year, respectively, for the next 75 years.

These results may sound surprising, but they are in line with a growing body of research on stranded carbon assets, which are assets such as fossil fuels (oil, coal and natural gas) that will lose their value well before they’re expected to. This can happen as a result of, say, market disruption (rapid advances in green technology like wind and solar polar or divestment) or government regulation (a carbon tax or stricter fuel economy standards). That latter is more likely because, even now, we have found way more fossil fuels than we could possibly burn without inviting long-term environmental disaster.

The Intergovernmental Panel on Climate Change’s carbon-budget model, widely considered the most reliable, puts the budget for 2012-2100 at between 886 and 1119 gigatons of CO2. Total known fossil fuel reserves in the world, if burned, would add 2860 gigatons of CO2 to the atmosphere. Thus, simple math indicates that almost two-thirds of all known fossil fuel reserves must remain unburned if global temperatures are to remain habitable. And these are optimistic estimates. James Hansen of the Columbia Earth Institute and other leading scientists and economists argue that all extraction of coal and other unconventional fossil fuels, like the Canadian Tar Sands, must cease immediately and the extraction of conventional fossil fuels, like oil and natural gas, must be significantly pared down.

Projects like the Keystone XL pipeline and other attempts to revive the U.S. economy based on fossil-fuel extraction are the equivalent of running up billions in debt and then running off to borrow more. The international community is already blowing through its carbon budget; the IPCC predicts that given “business as usual,” we’ll burn 1,000 gigatons of CO2 between 2012 and 2033, depleting the more conservative budget entirely and nearing the upper bound. We’ve already seen the consequences of temperatures growing by less than one degree Celsius, yet we’re on track to see themrise by more than six degrees by 2100. Our current trajectory tempts ecological and economic collapse, and yet, many are arguing that we accelerate the process.

Part of the problem is that our measure of growth, GDP, does not take into account the costs or sustainability of growth. One billion dollars of growth in the production of solar energy is not the same as $1 billion produced by coal in terms of ecological harm and sustainability, but GDP counts them equally. Instead we should measure progress using more extensive metrics like the Genuine Progress Indicator, which factors the impact of greenhouse gas emissions into its calculations. Further, we should institute a carbon tax, preferably an international one. Some companies currently price carbon internally—meaning that they put a price on the carbon produced by their projects, and subtract that from any expected returns—but do so at widely varying rates. A Carbon Disclosure Project study finds that nine of the largest energy companies in the United States internally price carbon dioxide emissions, at a cost ranging from $15 per ton (Devon) to $60 per ton (ExxonMobil). Governments should consider the social and environmental cost of carbon dioxide when they are making infrastructure and research investments, regulating extractive industries like fracking and offering tax incentives. Against the EPA’s recommendation, the State Department decided not to consider the social cost of carbon in its analysis of the Keystone pipeline.

The State Department also didn’t consider the very likely possibility that the pipeline will become a stranded asset. We can only hope it will—because that would mean we’ve finally learned that if we don’t live within our carbon budget, the long-term ecological and economic harm caused by our relentless extraction and burning of fossil fuels will obviate any short-term benefits to the economy. If we build our recovery on natural resources that need to remain underground to keep global temperatures stable, then we’ll be like the foolish builder in the Gospel of Matthew “who built his house on sand. The rain came down, the streams rose, and the winds blew and beat against that house, and it fell with a great crash.”

Originally published on The New Republic.

Interviews with the governors and economists working on the GPI

Lew Daly and I have a new piece on The New Republic examining states implementing the Genuine Progress Indicator. Because the piece is meant for a broad audience, some of the finer points had to be brushed over. This piece explains some of the more wonky questions about GPI.

1. Why not GDP?

A lot of people argue that “GDP is a bad indicator.” It’s not; it’s a very incomplete indicator. Think of baseball statistics. A player’s batting average tells you an important fact about a player—what percentage of the time at bat he gets a hit. That’s important to know. But it’s not the only thing to know. A power hitter may have a low batting average, but he may drive in a lot of runs, so it’s important to consider RBI (Runs Batted In). If a player gets a lot of walks, his batting average won’t reflect that, you need to look at her OBP (On Base Percentage). A player may get a lot of doubles and triples, but her batting average won’t consider those any differently than a single. For that we would need the player’s slugging percentage.

Any coach who judged his players purely on their batting average would be at a competitive disadvantage to a coach who judged players on a wider collection of metrics. GDP is like a batting average, it tells you something very specific and very important, but it fails to capture the full performance of an economy.

2. Okay, so what is the Genuine Progress Indicator?

The Genuine Progress Indicator (GPI) includes 26 indicators to give a broader picture of the sustainability of growth.

When the GDP is compared with the GPI, we discover that much of the “progress” over the past several decades is illusory:

3. Why?

It varies by state. So far, the states that have implemented GPI have discovered that much of their economic growth came at the expense of the other components of GPI. Their workers have longer commutes, they have depleted natural resources, volunteerism and free time have declined and income gains have been unequal. It’s like discovering that a star player has a high batting average, but rarely advances runners and frequently strikes out in key situations. Maryland, for instance, has seen its economic component increase dramatically, while social and environmental indicators have remained flat or declined.

4. What should we do about it?

I spoke with policymakers and economists to get their thoughts on implementing GPI.

Anthony Pollina, who crafted the legislation to develop Vermont’s GPI in 2012 discussed why legislatures need to take interest:

“We make policies the same way every year and we make the same mistakes every year. We cut programs and deny the fact that we are hurting people and undermining their well-being. The GPI can put a halt to that… The GPI is a brand new concept for most people and it’s a brand new way of making policy and looking at policy. We tend to make policy the same way every year and we make the same mistakes, cutting programs and undermining well-being… What the GPI is going to do, for instance looking at the environmental impacts, it’s going to force policymakers to recognize problems with the way they’ve been doing things. A lot of policymakers choose not to recognize problems because when you recognize a problem you have to start to fix things.”

Cylvia Hayes, First Lady of Oregon told me why she decided to push for GPI:

“You can’t effectively govern a state in a two-year biennial budget cycle… As a person in the sustainable development field you have two problems. One is, we’re measuring the wrong thing, and two, you’re measuring things on such a short time horizon that you can’t actually see the full costs and benefits of policy decisions. So we’re integrating the GPI with a ten-year budget plan outcomes metric and then begin to make explicit what our policy and state budget decisions will mean to all three capital accounts (our physical capital, human capital and environmental capital)…. The intent in Oregon is to use the GPI to craft the state budget. Oregon has a long history of working up alternative metrics we had the Oregon Progress Board… but one of the reasons it didn’t move the dial is because it wasn’t attached to state policy decisions and state budget decisions… We worked with a group of graduate students and an ecological economist at Portland State University. We have a rudimentary GPI, now we are hiring a person to oversee the implementation of GPI. The first part of that will be updating the GPI, making it more rigorous.”

Bernie Sanders, Senator (VT) told me why he thinks the federal government needs to look at GPI:

“I think it is enormously important. GDP tells us about the economic growth we see as a nation, but it doesn’t tell us anything about who benefits from that growth… What we have got to do is come up with an approach that tell us how we are doing as a nation in terms of well-being for our people… Who is benefiting from economic growth, that’s the first thing that GPI tells us. Secondly, and more importantly, if someone builds a coal-burning plant and that creates economic growth, GDP measures that, but if that creates global warming, GDP doesn’t measure that… You can create jobs having one guy dig a ditch and another guy fill in that ditch… but what the GPI does is it gives us some guidelines as to what our priorities are as a nation…”

Eric Zencey, author most recently of The Other Road to Serfdom and the Path to Sustainable Democracy and a key architect in Vermont’s GPI program, told me how he convinced Vermont legislators to look into GPI:

“It just makes such good common sense… some of us hung around the capital and talked it up a little bit… We got attention because if you can get out there and say, ‘we oughta measure what matters,’ it’s hard for someone to say we should measure what doesn’t matter… Sound business practices include subtracting costs from benefits… this is just double-entry bookkeeping to the economy as a whole… Another factor in the acceptance of GPI was that the legislature had committed to doing outcome-based budgeting… if you are going to argue that programs have to be evaluated against the outcomes they produce than you have to some larger strategic sense of what you want those outcomes to be. GPI is outcomes at the macro level.”

5. Right, right, but let’s get wonky. How do we take this from an idea and actually implement it?

John Kitzhaber, Governor of Oregon, gave me the nitty-gritty about how to implement the GPI with budget decisions:

“If you invest in at-risk kids you can’t show the ROI [Return on Investment] in two years, but you can sure show it in five or six years. So we became intrigued about how we could not just adopt the GPI but make it an effective driver for policy and budget decisions….The holy grail of GPI advocates is making it more than an academic tool but to integrate it with policy. So first we’re creating a website to inform people of what this is… and we also want to see what elements of GPI we could integrate into our 2015 – 17 budget as pilots. One area where we could get good outcomes is at-risk kids. We need to start small, but what elements could we integrate in 15-17 and then what can add into the 17-19 budget. When I leave office and hand over the 19-21 budget hopefully by that time we’ve institutionalized the trajectory of using these metrics to guide budgetary policy…Most of the interest I’ve seen has not been legislative leadership, but governors and budget-makers, people on ways and means committees. It also has to be an educational initiative, that’s the importance of the website… It’s very important to get governors behind this…

Doug Hoffer, Vermont State Auditor, talked to me about how his office will use GPI for performance audits:

“My office only conducts performance audits (having contracted out for the mandated financial audits) so there may be opportunities to use the GPI as we go forward. The process of performance auditing is defined by GAGAS standards but the choice of audit topics and the definition of objectives allows for some discretion. To the extent we measure program performance against legislative intent, it may be possible (this being Vermont) that GPI values are explicit or inferred. Our only constraint would be the quality and reliability of the data used in our analysis. We are not allowed (nor is it prudent) to make findings and recommendations without sufficient supporting evidence. In any case, I look forward to using GPI metrics as circumstances permit.”

Eric Zencey tells me about standardization,

“GPI 2.0 includes some additional tweaks that cover things that are front and center for other states, some researchers in Hawaii said, ‘this is very East-coast centric’ and Utah said, ‘what about water security and range-land?’ So GPI 2.0 will include some of those things. There is a high level of cooperation among states. I see this GPI summit group like the American Society for Mechanical Engineers which sets standards… There are some elements of GPI that are science-based, other parts, it’s arbitrary, it just matters that we all do it the same.”

6. Okay, but can this get bipartisan support?

John Kitzhaber tells me that Republicans are interested in his state,

“The GPI can get public bipartisan support when it moves from the academic to the practical. We have to show the practical applicability…I’ve very committed to make it happen, we can’t have any false starts…For example the business community and a lot of Republicans in the business community are very interested in early-childhood education. They understand there is a big ROI there. If you can show that by more exclusively connecting the consequences of our budgetary and policy decisions to downstream costs, whether those are depletion of natural capital or driving up the cost of the social safety net becomes more resonant.”

Eric Zencey tells me how GPI can make the government more efficient,

“We had a Republican governor before Peter Shumlin and he brought to a Democratically controlled legislature a proposal [Challenge for Change] that would improve the efficiency of the provision of government services. When I started talking about GPI, at first they pushed it aside; I wrote back and said, ‘everything you hope to accomplish is easier under a GPI.’ An aide wrote back to me and said, ‘you just moved up on the list.’ The aide noted that this could make sure that Challenge for Change did not become a just an axe.”

7. What about the federal government?

Eric Zencey talks about the institutional memory in the federal government:

“There was interest from the BEA and there is institutional memory; they know GDP is a flawed measure… Absent federal action, GPI is going forward like other important initiatives are, a state-by-state level. I don’t think we’ll need all 50 before we get action… when somewhere between 30 and 35 states are compiling and using it.”

Cylvia Hayes tells me about trickle-up leadership:

“I think that, unfortunately we are at a point in this country that the federal governance structure is so flawed that we aren’t going to significant breakthrough leadership on any of the big issues in front of us. One of the reason’s John decided to run again was because of the notion I call trickle-up leadership. We believe that states are the innovation labs right now and that if we can have state and multistate regional collaboration on bold and innovative policies on a whole host of issues from energy and climate to poverty eradication, that will provide an opportunity for trickle-up and trickle-out leadership.”

John Kitzhaber talks about critical mass:

“We have a working relationship between Oregon, Washington, California and British Columbia… If we can work with Washington, which is interested in this and bring California on board, we can get a critical mass…I see it coming out of D.C. but I see D.C. responding to states…”

Bernie Sanders talks about his goal:

“I’m very proud that Vermont and Maryland are moving forward… all of which is terribly important in helping us to gain information about what it takes to make us a happier, healthier society…What Vermont and other states are doing is exactly the right thing… I’ll be introducing legislation soon to bring the GPI to the federal government.”

8. Okay, but we can’t measure happiness! Isn’t this just a pie-in-the-sky idea?

Cylvia Hayes explains why Bhutan has been unfairly characterized:

“When John and I went to Bhutan the newspaper here was critical of it, but what was interesting was the positive response defending the concept… there is a hunger for it, but the happiness frame was unfortunate because it tends to get trivialized. But when you look more deeply at what Bhutan is doing, it’s not trivial at all. They are attempting to run policy and infrastructure decisions through a triple-bottom line, much more comprehensive set of metrics that gives a much fuller account of the what the effects of the policy will be. That, a tool like that, should be attractive regardless of your party affiliation if you are interested in making wise public decisions with your public dollars.”

Eric Zencey talks about why GPI is serious,

“They try to associate GPI with something it isn’t then attack the thing it isn’t. GPI isn’t that flakey happiness… we’re not measuring happiness. They are both alternative indicators and they both have arguments for them, but this is not the gross happiness indicator. There have been attempts to throw smoke and throw sand.”

States are ditching GDP

Co-Authored with Lew Daly

In Douglas Adams’s The Hitchhiker’s Guide to the Galaxy, Deep Thought informs Loonquawl that the meaning of life is 42. Loonquawl exclaims, “Is that all you’ve got to show for seven and a half million years’ work?” Deep Thought replies, “I think the problem, to be quite honest with you, is that you’ve never actually known what the question is.” In much the same way, Americans talk about GDP growth without ever wondering what GDP actually measures. We all know the answer, but most of us don’t know the question.

GDP, or Gross Domestic Product, measures the market value of all goods produced within a country. It was first developed in the heart of the Great Depression, a context of dramatic declines in economic activity and scarce information about what was happening. When the architect of GDP, Simon Kuznets (who later won the Nobel Prize for this work), presented his first report to Congress, he warned against expecting GDP to answer the most important questions for a country: “The welfare of a nation can scarcely be inferred from a measurement of national income as defined by the GDP.” Later, he wrote in The New Republic, “goals for ‘more’ growth should specify of what and for what.” To quote Yogi Berra, “If you don’t know where you’re going, you might not get there.” Kuznets’s concerns were not heeded, and GDP growth increasingly became the primary standard for measuring a society’s economic progress and standard of living.

In the wake of the Great Recession, Americans have become cognizant of the fact that GDP bears little connection to their well-being, and many states are working together to implementalternative measures that more accurately reflect the progress of human well-being. One such measure is theGenuine Progress Indicator (GPI), which assesses 26 variables related to economic, social, and environmental progress. Economic indicators include inequality and the cost of unemployment. Environmental indicators include the cost of water pollution, air pollution, climate change, wetlands depletion, forest cover change, and non-renewable energy resources. Social indicators include the value of housework, higher education and volunteer work as well as the cost of commuting and crime.

Two states, Maryland and Vermont, have officially adopted GPI (Maryland through administrative action by Governor Martin O’Malley; Vermont through a bill passed by its legislature). Oregon and Washington are also moving toward adoption of the GPI in some form. At a recent national summit for “GPI in the States,” organized by the policy think tank Demos, delegations from 20 states, including researchers, advocates, and public officials, met in Baltimore todiscuss implementing GPI in their states. O’Malley went to the heart of the issue in a powerfulkeynote address:

 

To make genuine progress, we must be willing to adopt a more holistic definition of progress itself.  To seek an honest assessment of whether our graphs are moving in the right direction – or in the wrong one. A system without feedback eventually fails. And our country, our states, our cities – they are all systems.  Life creates the conditions that are conducive to life. Period. Full stop. Perhaps, there is no better description of the intent of GPI. Its purpose is to further the conditions that are conducive to life.

 

In a recent interview, reflecting on Maryland’s leadership with the GPI, O’Malley noted that, “In drafting a Constitution to form ‘a more perfect union,’ our founding fathers identified justice, tranquility, security, general welfare, and the blessings of liberty as necessary components for achieving that goal.” O’Malley noted the irony that, “more than 200 years later we do not formally take stock of any of these in evaluating our nation’s prosperity.” Already, GPI is influencing the development of new green growth and clean energy programs in Maryland. The state has established new goals that affect GPI but not Gross State Product (GSP, a measure of state economic output), such as reducing infant mortality, cutting greenhouse gas emissions by 25 percent by 2020 and planting more cover crops (crops that improve soil fertility).

Policy development using GPI is in its relative infancy. As with any new measurement framework, there are implementation challenges. The Gund Institute of the University of Vermont recently released an initial set of estimates under the state’s new GPI law, and many legislators from both political parties are interested in applying the new metrics to policy. Anthony Pollina, who crafted the legislation to develop Vermont’s GPI in 2012, told us, “We make policies the same way every year and we make the same mistakes every year. We cut programs and deny the fact that we are hurting people and undermining their well-being. The GPI can put a halt to that.”

Under Governor John Kitzhaber, honored by Governing Magazine as a “public official of the year” for his bipartisan achievements, Oregon is developing a ten-year state budget plan which will be integrated with GPI. He told us that many of the Republican concerns in his state aren’t adequately measured by GSP, citing growing support for early childhood education as an example. “GPI can get public bipartisan support when it moves from the academic to the practical,” he told us. “We have to show the practical applicability.” With GPI and related approaches, some public costs can be better understood as smart investments. “By more exclusively connecting the consequences of our budgetary and policy decisions to downstream costs, it becomes more resonant,” Kitzhaber argued.

Alternative measures of progress are getting significant traction internationally. The Human Development Index (HDI), which measures life expectancy, literacy and Gross National Income (GNI) per person, is now widely used and increasingly influential in policy debates, particularly in developing countries. More recently, the United Nations introduced the Inclusive Wealth Index (IWI) in 2012, which measures human capital and environmental capital as well as physical capital to determine the sustainability of growth.

But the U.S. government has lagged behind states and the international community. Eric Zencey, who was influential in bringing GPI to Vermont, argues that if states begin to use GPI it will put pressure on the federal government to do the same. “GPI is proceeding the way other important movements have, on a state-by-state level,” he said. “We don’t need all 50 states to adopt it before it becomes clear this needs to be done at the federal level.” Senator Bernie Sanders believes that federal action along these lines is critical for our future and said that state-level initiatives are “enormously important,” in prodding the federal government into action.

There are signs that the government is moving in that direction, notably the HHS-funded panel investigating measures of well-being and a recent report by the Bureau of Economic Analysis that examined the limits of GDP and suggested a review of the national accounting system. The National Research Council has investigated methods for including environmental values in the national accounting system.

In 1968, Robert Kennedy said that GNP “measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything, in short, except that which makes life worthwhile. And it can tell us everything about America except why we are proud that we are Americans.” We ignored those words then, and instead rushed headlong toward an unsustainable future. Only now, nearly half a century later, are we beginning to heed them.

Originally published on The New Republic.

 

How the SEC can stop climate change

Several corporations sit on the boards of powerful business and trade organizations that take positions contrary to  the companies’ purported stance on climate change, finds a new Union of Concerned Scientists report. They are able to do this without public accountability because, currently, trade associations aren’t required to disclose their funders and corporations are not required to disclose their political spending. The report’s author makes clear that in the crucial arena of climate change policy, “the public is still in the dark when it comes to how companies and their trade associations influence government decisions.”

There is a simple way to start to fix this lack of transparency and accountability. The U.S. Securities and Exchanges Commission (SEC) should proceed with its rule making that would require companies to disclose their political activities. While 650,000 Americans of all stripes, including leading investors, have filed a record breaking number of comments supporting this common sense rule, 29 trade groups, including the U.S. Chamber and National Association of Manufactureres, wrote to the agency opposing the proposed rule. Last month, the SEC removed consideration of the rule from its 2014 agenda.

The UCS study recommends that the SEC take action on the rule, and demonstrates why such a rule is so necessary to combat climate change. The study examines major corporations’ responses to an annual survey about their political activities and compares them to the stances of trade associations they support. The study finds that these organizations often hold extreme positions on climate change that are not consistent with the expressed preferences of the companies that fund them. It also finds that many companies did not disclose their positions on a trade association, even when publicly available information shows they are on the association’s board. Ninety-five companies reported that one or more of the trade groups they supported had a climate policy that was not consistent with their own.

As SEC Commissioner Aguilar has explained, “shareholders require uniform disclosures regarding corporate political expenditures for many reasons, including that it is impossible to have any corporate accountability or oversight without it.” A Drexel University studyreleased last December finds that the climate denial movement consists of 91 organizations supported by 140 primarily conservative foundations but that 75% of the funds for the climate denial movement is completely untraceable. These two studies both point to the importance of a U.S. Securities and Exchanges Commission (SEC) rule to require that companies disclose their political activities.

Of the 9,136 peer-reviewed authors who published a paper about climate change between Nov. 12, 2012 through December 31, 2013 only one rejected anthropogenic global warming. The one dissenting author, Russian scientist  S. V. Avakyan, appears to be motivated by a desire to maintain Russia’s dominance as an oil and gas exporter. At this point, denying climate change is like denying the harmful effects of smoking – only someone with a commercial interest would even question the data.

Given the drastic costs to companies that could occur if the carbon bubble is popped through government action, it’s unsurprising that trade associations are lobbying heavily against regulation. It’s important to bring these trade associations out of the dark so that the public can know what companies are funding spurious climate research and policy. Without transparency there can be no accountability, and the SEC should move forward with the rulemaking to require disclosure of corporate political activities.

Why more GDP might not make us happy

Eugenio Proto and Aldo Rustichini have written a new column for VOX in which they argue that once GDP per capita reaches a certain level, it actually begins to correlate with lower life satisfaction.

Of course, this result shouldn’t be too surprising; GDP is a measure of economic production, and an excellent measure at that. But as Robert Kennedy noted in his 1968 speech,

Our Gross National Product [a measure of economic production that considers ownership rather than geographic location], now, is over $800 billion dollars a year, but that Gross National Product – if we judge the United States of America by that – that Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman’s rifle and Speck’s knife, and the television programs which glorify violence in order to sell toys to our children.

Simon Kuznets, the Nobel-prize winning economist who developed GDP, wrote in The New Republic, “Economic growth involves a variety of costs that must be recognized. Because of this, “goals for ‘more’ growth should specify more growth of what and for what.”

When people talk about GDP, they rarely understand the limitations of GDP as a measure of progress. GDP does not account for the social or environmental consequences of growth, nor the economic sustainability of growth. It doesn’t consider whether we’re producing bombs or butter. It doesn’t consider whether our economic growth may be coming at the expense of consumer safety, a worrying problem in the wake of thecontaminated water in West Virginia.

For poor and developing countries, positive GDP growth serves as a proxy for eliminating immiseration. For a developed country, immiseration is not as great a threat, and environmental and social sacrifices that may have been tolerated for growth are no longer countenanced. Already countries like Brazil, China and India are worrying about the environmental consequences of untrammeled growth. In American, people want more time with their families and shorter commutes.

A better measure of what matters is the Genuine Progress Indicator (GPI), which takes into account 26 economic, social and environmental indicators. States across the U.S. are beginning to implement GPI, and they’ve discovered that much of their recent GDP growth hasn’t budget the GPI. Here’s what it looks like in Vermont:

Eric Zencey, a key architect of Vermont’s move to GPI and one of the economists who is developing it with the Gund Institute, told me, “sound business practices requires deducting costs from benefits. We can change the conversation to what matters.” Here’swhat GPI looks like for the U.S. as a whole:

This helps explain why GDP is divorced from life satisfaction for developed nations.