Degrowth vs. Decarbon

In reply to my last post, Katharina linked to a think tank arguing for “degrowth” as a strategy of preventing further global warming. My mini model seems to support exactly that strategy: reduce consumption and production to reduce greenhouse gas emissions. But there is another way to deal with the problem, which is usually referred to as “decarbonization”. This strategy calls for reducing the use of greenhouse gas emitting modes of production, like switching from coal to nuclear power. In my experience both strategies tend to be supported by the same set of people. But think about them in terms of my model and you realize that they cut in opposite directions – the more we “decarbonize”, the less we need to “degrow”, and vice versa.

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Climate Policy, GDP and Welfare

The 5th assessment report of the IPCC is drawing a lot of attention for its claim that reducing greenhouse gas emissions would only have small costs in terms of gross social product, that “saving the planet” is cheaper than we might think. I have not read the report in detail and I am in no position to say whether the IPCC got it right or wrong.

However, it occurred to me that the IPCC is asking the wrong question. They ask how much mitigation policies would cost in terms of (world) GDP. But climate policy is a classic case where GDP is a very bad indicator of economic welfare. Greenhouse gas emissions are a byproduct of producing goods and services and they cause global warming, which is arguably a bad thing, i.e. a negative externality. Individual consumers and producers do not take account of the negative effects of their consumption/production decisions on society and therefore consume and produce too much.

Here is how that works in a simple model. (For the visual types, here is how it works graphically: climate policy graph.)

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Thoughts on an Unconditional Minimum Income

The concept of an unconditional minimum income is one that has fascinated me for quite some time. Particularly, I have been finding myself stumbling across different shades of the idea on a fairly regular basis lately. Hayek, back in 1944, had already argued in favor of a weak form of such an arrangement. Milton Friedman’s Earned Income Tax Credit, though in its current form tied to actual employment and thus hardly unconditional (appart from phasing out as income rises), points in a somewhat similar direction. When even reading about what seem to be related concepts on Mankiw’s (post of Nov. 18th) and Sumner’s blogs I knew it was time to write down some of my thoughts on it.

But first I decided to get through a creatively named book by an author named Karl Reitter I picked up at this year’s Elevate Festival. And while it proved to be considerably less informative than I had hoped (I’d like to assume this speaks to my vast knowledge of the issue and unmatched level of intelligence, but am rather inclined to think this would be megaloamanic and nothing else), the author pleasently surprised me by only occasionally going off on the typical rants against the “neoliberal economic system” I have come to expect from similar publications. In its purest form, an unconditional minimum income is exactly what it says it is: a concept that ensures a certain level of income to any and all persons living in a country, without any strings attached. Anyone under 18 could receive a reduced level of the transfer, but that’s pretty much it. Ideally, one would scrap all forms of often distorting social programs and replace them with such a system in a way that turns out to be neutral in terms of direct budgetary impact. Let’s get down to the details.

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