Monday , August 3 2020
Home / Business / We won’t achieve economic reform until we go back to co-operating

We won’t achieve economic reform until we go back to co-operating

Often, norms of socially acceptable behaviour – entrenched views about what behaviour is ethical and what isn’t – are used to encourage people to put the interests of the group ahead of their own immediate interests. Markets work much better, for instance, if it’s realistic to assume that almost all the people you deal with can be trusted to act honestly.

All this applies in spades to our failure to make progress in the area of reform that’s more important to our economic future even than conquering the coronavirus: stopping emissions of greenhouse gases from wrecking the climate.

Here, the owners and miners of our huge remaining deposits of coal and gas are fighting tooth and nail to delay the day when those deposits become worthless, while the rest of us are encouraged to put the frightening thought of having to pay a bit more for electricity and petrol ahead of the future environmental and economic wellbeing of our children and grandchildren.

It’s okay for the oldies – who, until this year’s bushfire conflagration, fondly imagined they wouldn’t live long enough to suffer the consequences of their selfish short-sightedness. And those who will suffer the consequences have either yet to be born or are only just realising what a mess their loving parents are leaving for them.

But the deterrent to action isn’t just that the (modest) adjustment costs are upfront, whereas the (much greater) costs of inaction are off in the uncertain future. It’s also that the greenhouse effect is global, not local.

Loading

As the climate-change deniers love reminding us, no amount of effort to reduce emissions on our part will make much difference until people in other parts of the world are doing the same. In which case, why don’t you and I do nothing and leave it to all the others? (Economists call this the “free-rider” problem.)

All this may explain why a recent discussion paper from the Academy of the Social Sciences in Australia, Efficient, Effective and Fair, included a chapter on the moral case for action on climate change, written by Professor Garrett Cullity, a philosopher from the University of Adelaide.

Cullity argues there are five reasons why climate change is a moral issue, each of which is independent of the others. The first is that it involves many causes of harm including extreme weather events, tropical diseases, and malnutrition.

“These harms are primarily borne by the most vulnerable members of the global community,” he says. “We should be morally concerned to reduce the amount of harm we do to them.”

The second argument holds if we believe there’s a risk of serious harm in the future but can’t be sure it will come to pass. “Action that imposes serious risks on others can be morally wrong because it is negligent and reckless, independent of the harm that actually eventuates,” Cullity says.

These first two arguments give us moral duties of both “mitigation” (reducing the further damage our emissions are doing) and “adaptation” (helping vulnerable people to adapt to the damage already done).

Conventional economics doesn’t take much interest in morality. But economies where everyone sticks out for Number One stop working very well.

“They apply not just to national governments, but to any agent whose actions contribute to increasing atmospheric greenhouse gas concentrations – including state and local governments, cities, corporations, non-government associations and individuals.

“And they apply to each of these agents unilaterally. The moral duty not to engage in actions that harm or endanger others is not a duty that we are exempted from when someone else is not complying with it.

One of the deterrents for action on climate change is that the greenhouse effect is global not local.

One of the deterrents for action on climate change is that the greenhouse effect is global not local.Credit:The Age

“The strength of the duty is proportional to the harm or risk imposed if the duty is not followed, and it may be related also to the capacity to influence others to comply with their duty.”

The third argument concerns “contributional fairness”. When a group needs to achieve something important by acting together and is doing so by sharing the overall burden among its members, failure to contribute an equitable share of that burden amounts to free-riding. Duties of fair contribution apply to groups of any size.

In the case of a wealthy country such as Australia, the size of our contribution to the solution should reflect the size of our contribution to causing the problem, the benefit we have derived from past emissions-producing economic activity, and our relatively great “ability to pay”, as tax economists put it.

The remaining two moral arguments concern the responsibility of national governments. If you accept that they have a duty to protect future citizens, not just present ones, it follows that they must contribute to global mitigation, not just local adaptation. And, since the economic costs of responding to the problem get higher the longer you delay, they have a moral duty to begin now.

Conventional economics doesn’t take much interest in morality. But economies where everyone sticks out for Number One stop working very well. And self-interest isn’t enough to solve a “wicked” problem like climate change.

Ross Gittins is the Herald’s economics editor.

Most Viewed in Business

Loading

About admin

Check Also

Recycling plant set to boost waste industry after China blow

Australia’s waste industry was plunged into crisis almost three years ago when China announced it …