“Non-monetary incentives that encourage pro-environmental behaviour can contribute to combating climate change. Here, we investigated the effect of green energy defaults in the household and business sectors. In two large-scale field studies in Switzerland of over 200,000 households and 8,000 enterprises, we found that presenting renewable energy to existing customers as the standard option led to around 80% of the household and business sector customers staying with the green default, and the effects were largely stable over a time span of at least four years. Electricity consumption had only a weak effect on default acceptance. Our data do not indicate moral licensing: accepting the green default did not lead to a disproportionate increase in electricity consumption. Compared with men, women in both the household and business sectors were slightly more likely to accept the green default. Overall, non-monetary incentives can be highly effective in both the household and business sectors.” in nature human behvaiour.
NetZero framework, HSBC engagement
Progress in sustainable investing was quite notable this week. Pretend sustainability - greenwashing - comes about because bad faith actors realise there is a genuine force, demand / trend and want to benefit from it.
So in some ways it’s a good thing if you support sustainability ideas because it means there’s real substance somewhere. Let me note two items of substantive progress this week.
First, the IIGCC lead collaboration that has led to a net zero Paris Aligned investment framework. Many asset owners and investors support the framework and it’s a very significant step in harmonising efforts on what netzero for companies might mean. Still much work to do, but worth noting this step. You can view the framework here (my linkedin).
Second, a collaborative investor engagement has led to HSBC aligning its financing commitments to a low carbon world. You can view their letter here (my linkedin).
Why 1857 French patent law made Basel wealthy and birthed Swiss Pharmaceuticals
Why is Basel (Switzerland) one of the richest places in the world
Why the WWF would not exist without pharmaceuticals
The fallout from a national patent monopoly
Answer: the French patent monopoly of the fuschine dye lead to manufacturing moving to Basel and leading to modern pharmaceuticals which are a pivotal part of the economic history of Switzerland. Fritz Hoffman (1868 - 1920) was a founder of Hoffman-La Roche which today is Roche, a leading pharmaceutical company. Luc Hoffman (1923 - 2016) was Fritz’s grandson and co-founded the WWF.
In some corners of the internet (Twitter) Matt Yglesias caused a minor fuss by suggesting that copyright should be shorter on the grounds that in the US Life+70 years is a poor trade off for society benefits vs incentives for individual artists.*
This might seem very esoteric to many of us and maybe who cares that Mickey Mouse cartoons are still under copyright but the roots of the debate are actually, in my view, very important to how scientific progress might happen (or not) and have had major historical outcomes including why Basel (and Switzerland) are so rich today, why the World Wildlife Fund (WWF) exists and at what pace might we invent new pharmaceuticals or other medical inventions. Let me lead you through why this might be.
Switzerland is rich and I think there are strong arguments that it is one of the best if not the very best country in the world as it has so very high scores across wealth, health, happiness, peace and freedom. (Perhaps its only blemish would be after-tax gini coefficient is fairly average amongst the OECD)
-2nd (vs Norway) on the Human Development Index (HDI)
-5th on GDP / Capita (IMF, World Bank)
-10th on Peace Index
-4th on Life expectancy
-3rd on Happiness Index
-2nd on Human Freedom Index
Observers may point to its culture, its federated system of government, and how it fared in the World Wars. All of these are factors contribute, but one overlooked part of its economic history might be the strength of its pharmaceutical/chemical industry and that in turn rests upon innovation, patents and litigation.
In 1856, William Perkin discovered the dye “mauve” and he filed for a patent. He was actually trying to isolate quinine and thus working in the great tradition of accidentally discovering something else (cf. more recently Viagra). Perkin’s discovery paved the way for the new dye industries. One of the most important new dyes was aniline red or fuschine (important for French high clothing fashion at the time). The French firm, Renard Frere patented the fuschine invention in Britain and France in 1859 and so had a monopoly.
The ability to patent (although even in the 1850s firms were worried about the strength of patents and relied on trade secrets) was an important incentive to develop dyes but it was also a potential barrier to using the invention to develop more dyes or, of course, if you wanted to compete in manufacturing the same product.
In fact, innovation was spurred to look at other process and second (and then third and fourth) generation dyes were based on other chemicals (azo then alizarin - in fact alizarin substitutes for a “natural” product which raised the question still debated today as to what extent a patent can be granted onto an “invention” based on nature eg. DNA).
This is important as the modern pharmaceutical industry occurs at this time as an offshoot of the dye industry which it eventually overtakes.
The patents surrounding this started off the litigation and patent wars between countries and companies which still echo today (and have cousin debates eg copyright) because so much profit was at stake for companies and for countries both innovation and tax and industry.
This also coincides with the emergence of the “corporate lab” and the notion of incremental innovation being patentable if there is something “new in the art”.
In house teams of scientists collaborated to overcome technical challenges and large number of large pharmaceutical companies today (arguably a majority of the top 20) can trace roots to a company formed in this period or shortly after (Bayer, Pfizer,Eli Lilly, Roche, Novartis, AstraZeneca, Glaxo SmithKline, Sanofi).
So why the rise of German companies in the 1860s and 1870s? Government supported education, training and industrial policy… yes… lots of competent chemists…. Yes and then there was essentially no enforcement of British and French patents (for fuschine dye) which German companies could copy and mass produce.
During this period, French chemists who could not manufacture dye due to French patents moved over to Basel where there was no such patent enforcement. Thus the Swiss dye industry was given a major boost yet in fact Basel could not compete with the scale coming from Germany in the base chemical supply of fushcine and alazarin, so the Basel companies pivoted (not a new silicon valley idea) to high end dyes and, importantly, pharmaceuticals.
Basel during this time is thus also an example of an industrial cluster. The competition but the innovation spillover between Ciba, Geigy, Sandoz, Hoffman La Roche and the ability to copy French and British inventions gave a huge boost to this industry.
In France, by 1875 La Fuschine (which had patented fuschine) was bankrupt and passed out of existence.
But, Germany did introduce strong patent protections and at about the right time from the German corporate point of view. These protections came in 1877 enough time for German companies to innovate from the first inventions of 1856/1857.
This is one important complex trade off to consider. The ability for Germany to outcompete France and British dye stuff industry here is due to this delay in patent protection. Arguably this allowed much faster innovation.
This would be the heart of case for lowering patent (or by analogy copyright) protection. This enabled a great amount of innovation (and positive wealth for Germany / society). Japan copied this tactic for semiconductors in the 1950s/1960s.
But, if there was no protection indefinitely - there would be no further incentive to create more innovation or derive new inventions built on current innovations.
So there are claims - although perhaps one should not overstate them as of course many other factors as well - that the Swiss chemicals and pharma industry is the unexpected child of French patent law and in particular this gave Basel a significant boost.
This boost we can still see in the economy of Basel today (top 10 city by GDP/ capita)as it is one of the richest regions in the world, in one of the richest countries in the world.
Interestingly, Britain fell behind in the dye industry in this period partly due to having a patent system that could not cope with the consequences of chemical invention and then the German lead enabling German companies to file patents before British companies. This lead to the proposals of compulsory licensing / revocations (still apparent in national laws today, and for instance used in threat by the US against Bayer on Cipro in 2001).
Back to Switzerland and fastforward, so Hoffman La-Roche along with Ciba, Geigy, Sandoz (now all Novartis) became 4 (now 2) of the most successful companies in world in the 1900s. Luc Hoffman (former chair of Roche, and large shareholder) essentially used his profits derived from his wealth to co-found the WWF.
And so, my argument is that French patent law in 1857 was a pivotal casual factor in being able to have the WWF founded!
Codas:
I will have a nod here to an aspect that Milton Friedman would approve. Hoffman used his profits from Roche to found WWF. He didn’t use Roche itself as a vehicle to protect wildlife.
Arguably, Roche maximises its long term value by inventing new medicines the side effects of this are profits.
Circling back on copyright and patents. My non-expert view is that US copyright on balance is too long because there is too much benefit to individual deceased estates at life + 70 years and the cost to society from orphaned works, lack of derivatives etc. is high. Life + 20 would seem more reasonable. Or even 50 years total from publication, with 20 year extension possible
Patents for fast cycle inventions seem about right at 20 years, this covers a lot of software and a lot of devices. (Although I do think software family patents are anti-innovation)
Patents for long cycle inventions - and drugs take 8 to 12 years on average to invent - might not provide enough protection. For instance, there’s argument that the prices are not high enough for new antibiotics. The industry engages in lots of (fairly unproductive from a society view) patent extension legal tricks to extend the effective patent life beyond 10 years (10 years development time). Much better would be to stop legal tricks (including paying off generic makers) and to agree 20 years from launch (maybe keeping the paediatric extension work at 6 months), but that also stop very minor technical improvements (eg use of enantiomers or extension release innovations) from granting patent extensions in the years. In reality, this would not happen for political reasons and for the difficulty in judging what is incremental or not innovation but it would be better system. There’s quite a lot of complexity around pharmaceutical innovation which would qualify it from being a totally different class of invention in my view both because of its life extension qualities, the difficulties in legal form keeping up with advancing science (patent on modified DNA…), the effects of drug class protections on innovation, and the big differences between transformational invention (new class of drug) and incremental innovation (identifying a new crystal form of an established drug).
Links:
Freedom Index: https://www.cato.org/human-freedom-index/2020
Happiness INdex: https://en.wikipedia.org/wiki/World_Happiness_Report
Matt Yglesias: https://www.slowboring.com/p/dr-seuss-ip
Peace Index: https://www.visionofhumanity.org/wp-content/uploads/2020/10/GPI_2020_web.pdf
Life expectancy: https://www.worldometers.info/demographics/life-expectancy/
Swiss Chemical industry: https://link.springer.com/chapter/10.1007/978-94-017-3253-6_2
History of Dyes: https://www.britannica.com/technology/dye/Reactive-dyes
Luc Hoffman: https://en.wikipedia.org/wiki/Luc_Hoffmann
Basel GDP: https://en.wikipedia.org/wiki/List_of_Swiss_cantons_by_GRP
Finnish worker culture, no impact from board representation
Finnish worker culture. This paper (VATT/MIT/NBER/Berkley) looked at the impact of worker representation had in Finland. Contrary to exit-voice Hirschmann there was no real impact on voluntary staff job losses. BUu there was also no real impact on margins or productivity either.
It’s maybe specific to Finland - but this could suggest that companies don’t have to be worried about workers on Board but neither do they gain very much by way of profits or anything else.
Voice at Work - economics.mit.edu/files/21196 (Harju et al 2021, How does boosting worker voice affect worker separations, job quality, wages, and firm performance? We study the 1991 introduction of a right to worker voice in Finland. Thelaw granted workers in firms with at least 150 employees the right to elect representativesto company boards. The size-dependent introduction permits a difference-in-differencesdesign. In contrast to exit-voice theory, we find no effects on voluntary job separations as arevealed-preference measure of job quality. We can also rule out small increases in the laborshare or rent sharing, with some evidence for small pay premia increases, in particular atthe bottom of the wage distribution. We detect a small reduction in involuntary separations,zero effects on worker health, and a moderate increase in survey-based subjective jobquality. Regarding firm performance, we find, if anything, small positive effects onsurvival, productivity, and capital intensity. An additional 2008 introduction of shop-floorrepresentation in smaller firms had similar, limited effects. Interviews and surveys indicatethat worker representation facilitates information sharing and cooperation rather thanshifting power or rents to labor
Theory of change, depression drugs, fossil fuel divestment
In much of science practice, scientists form ideas and models and then test these models in the world. The more credible the model to other thinkers and the more the model can explain empirical results and - even better - predict new results that be tested then the more useful the model and the more weight we can give it in our thinking.
Many models can not fully explain what we observe in the world.
Many observations have no good models for them.
How should we think about decision making faced with forward looking uncertainties? I argue we should put more weight on when we have plausible models. This is harder in social sciences than physical sciences but still should be considered. That said empirical data can guide where models seem inadequate.
I’m going to think about these cases and what they might say:
-Anti-depression drugs and their effectiveness or lack
-Germ and virus theory and mask wearing
-Fossil Fuel divestment , social political change strategies
-Quantitative Easing by central banks
-ThenDoBetter grants - catalyzing change
Anti-depression drugs and their effectiveness or lack of.
Prozac, known as fluoxetine, is a serotonin re-uptake inhibitor or SSRI and it was designed as an anti-depression drug based on a model for depression that scientists developed.
The basic model is called the monoamine hypothesis of depression and this theory s proposes that patients with depression have depleted concentrations of serotonin, norepinephrine (noradrelanline), and dopamine.
It was conceived due to at least one line of evidence on the effects of reserpine on serotonin and catecholamines. Reserpine, an alkaloid extracted from the Rauwolfia serpentina, was utilized as a treatment for hypertensive vascular disease in the 1950s; however, reserpine was found to precipitate depression in some patients. The depression produced by reserpine was reversed after the treatment was terminated and following either rest or electric shock therapy (Additionally, reserpine was found to produce depressive-like effects in animals Reserpine was found to inhibit vesicular monoamine transporter, and as a result, depletes brain monoamines (i.e. serotonin and catecholamines), which provided evidence for the role of serotonin, norepinephrine, and dopamine in depression.
Since its original formulation, scientists can see that this hypothesis can not explain many other observations (for instance that healthy patients who deplete monoamines do not become depressed).
Still, SSRIs were invented as the NHS website suggests:
“ It's thought that SSRIs work by increasing serotonin levels in the brain.
Serotonin is a neurotransmitter (a messenger chemical that carries signals between nerve cells in the brain). It's thought to have a good influence on mood, emotion and sleep.After carrying a message, serotonin is usually reabsorbed by the nerve cells (known as "reuptake"). SSRIs work by blocking ("inhibiting") reuptake, meaning more serotonin is available to pass further messages between nearby nerve cells.”
Without going into too much more detail, we know empirically that SSRIs relieve depression in a good number of people and can help prevent relapse. But we also know that they don’t work in a good number of people and that they stop working for a good number of people. And we are not exactly certain why.
There is much we simply do not understand about depression and brain function.
So how does relate to masks?
We have a pretty good theory about how viruses are transmitted. They travel in aerosol droplets from the nose and mouth - from sneezing and coughing and breathing - and they are then breathed in by others. They can also go from nose to hand to someone else’s hand to nose, or from hand to object back to someone else’s hand. Although there is debate as to how long viruses can survive on objects and how easily this transmission occurs.
Scientists have a consensus on this. And so when thinking about mask use to prevent transmission it’s surprising with hindsight that this did not feature more prominently.
Of course now we can look back and also note how many Asian countries had mask wearing and how European and America seemed initially reluctant. Still, I think it would have been much better if those in policy making or decision making roles could have case back to whether there was an underlying model for whether mask wearing should work and then assess risk/benefit.
Here the model was and is very useful, but didn’t seemed to make an impact.
Central Banks have engaged in what economists call quantitative easing or QE. These are large scale purchases of asserts by central banks. Economists are debating as to how QE actually works in the real economy and they are unsure. At least I can say scientists are much more sure on how germ theory works than on how quantitative easing works.
It’s perhaps in the same area of dispute as depression drugs. There’s some empirical evidence but the totality of it can not be explained by one model we have. And the three models posed by QE are not universally agreed upon. (Segmented Market, Preferred Habitat and Signalling theory).
There’s - to my sense - maybe more agreement amongst depression scientists about what can or can not be explained then there is amongst economists. I note this as important as the Bank of England publishes an in-depth report into QE - https://www.bankofengland.co.uk/independent-evaluation-office/ieo-report-january-2021/ieo-evaluation-of-the-bank-of-englands-approach-to-quantitative-easing
This brings me to fossil fuel divestment strategies and thoughts on activism.
In biology, scientists call the SSRI mechanism as a mechanism of action. It’s how we best think the SSRIs are working biologically.
In social science, scientists often talk about a “theory of change”.
“A theory of change is a description of why a particular way of working will be effective, showing how change happens in the short, medium and long term to achieve the intended impact.”
Supposedly a good theory of change needs to be testable. THis is in common with good theories of biological mechanisms of action - but are often much harder to assess in social science.
To my mind - a purported biological mechanism of action - such as the SSRI one - has much in common with a theory of change mechanism.
I come across some activists who have not really thought about their theory of change. And if the conversation allows, I will suggest they do think about it. I will often stress I do not know myself what theory of change is correct because many of the social science ones can not be supported either way by the evidence.
Still - when you think about the theory of change around divesting as opposed to the theory of change around engagement and persuasion of a company - you end up with very different theories.
This was summarised in Ellen Quigley et al’s report for Cambridge University (H/T Dominic Burke).
The divestment social-political theory of change:
“The political case for divestment rests on expectations that it will accelerate the pace of legislation in favour of an energy transition away from fossil fuels. It does so both through creating a political
environment more favourable to legislation and by weakening the political power of the fossil fuel industry.”
This to use a policy term “moves the Overton window” - this changes the range of policies acceptable to the general public to be enacted by governments.
It’s quite far away from anything involved with investing (Although there are separate arguments for financial risks and theories such as influencing cost of capital).
One can argue this makes the movement more of a moral movement - one that you can align with women rights, minority rights, and slavery abolition and mperhaps more recently apartheid campaigns.
Using aparthied in South Africa is a complex and interesting parallel. Many factors (some with parallels to engagement and diplomacy and some with parallels to embargoes and divestments) are impossible to disentangle with cause and effect in the outcomes.
As strict financial theorists would argue most fossil fuel financing is not made by trading shares but by primary financial capital raising from bank or government loans or share issuance, and such that trading in secondary equities.
Thus the theory of change for engagement or within system workers is to persuade companies to change models and change strategies and this is more effectively done via share votes and engagement. And it is to invest in primary innovation and primary capital formation for companies making the most positive impact.
Neither theory can easily be proven with the empirical evidence we have. There are some companies that have changed course. Some climate policies have come into place and some evidence that the overton window has moved - although more easily for innovation policy than for carbon taxes, it seems.
But, it does bring me back to which theory of change is more meaningful or more reasonable to you.
I am asked where do I stand. If there’s time I typically outline a number of these arguments for both sides and because it is complex and unproven, I hold the theories of change lightly.
But, my theory of change is that it falls - by a complex dance and a good deal of luck and happenstance - that a number of individuals spark the change that leads to systems altering. These individuals lead others.
And so, this is one of the reasons behind my idea on ThenDoBetter grants. The focus is on individual grant giving with a huge dose of luck and happenstance to people who will make that positive change.
As a coda thought. There are no universal theories of autism. The three main ones (central coherence, theory of mind, executive function) can explain certain aspects of autism but fail in many other aspects. We have (in my view) poor models of autism (although not zero models, thus we can reject “refrigeration” and other catastrophically bad theories) and so we should hold lightly too much strong form advice here.
Quigley report:
https://www.cam.ac.uk/sites/www.cam.ac.uk/files/sm6_divestment_report.pdf
How effective are anti-depressants:
Brief history of anti-depressants: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4428540/
Theories on QE
https://www.stlouisfed.org/on-the-economy/2017/november/economic-theory-quantitative-easing
Quick links: climate, circular economy, grief, china, spaced repetition
Quick Links:
➳Where we are on climate. Wallace-Wells (a former?) climate alarmist (now just not as extreme) looks at the evidence that the central case is for 3 deg warming by 2100 (down from 4c but not 2c).
➳Circular economy: this business recycles chopsticks into furniture. How many more circular economy businesses are out there waiting?
➳Interstitial times, on the difficulties of endings
➳Mark Carney on the purpose of markets, financial crisis, COVID and climate.
➳Ethical Progress, better today than before
➳Ray Dalio on grief
➳Jeremy Grantham on late stage bubbles
➳Dan Wang on China
➳Using spaced repetition prompts for recall
➳FiveThirtyEight on US responses to protests.
Was 2020 a turning point year?
Why do I think 2020 may be a rare turning point year?
I still think there’s a decent chance that COVID will fade from memory and we will have learnt little (this would make it like Swine flu). But, I think that chance sits around 30% and moving lower. This is partly due to the length of time COVID will be affecting us and partly due to our response both innovation-wise and public health wise.
On the positive front we have had many science innovations not least on the vaccine and biomedical front: mRNA technology looks set to prove long-term robust to make many kinds of vaccine. We have a malaria vaccine in late stage testing, Deepmind/AI has made advances in protein folding modelling, and new molecular entity drug approvals (excluding vaccines) was c. 51 this year in the US, which is in line with the last few years in terms of therapeutic innovations. With gene-editing technology and our increasing knowledge and comptuting power, biomedical advances for the next 10-20 years look promising to me.
Environment-wise: We’ve had China, Japan, South Korea commited to carbon net zero. Battery technology has continued to improve. Solar power is the cheapest form of energy in many places. Even Nuclear (mini) and fusion technology has continued to improve. Apple has joined the electric vehicle / driverless car race.
Governance-wise: We had fiercely contested US elections that have essentially been peaceful and robustly managed given that over 161 million Americans voted. UK and EU managed to agree a Brexit trade deal.
My guess is that certain people will be inspired by science and innovation as having some answers to our challenges that will make them place more bets here and invent more valuable things that will improve human welfare and the environment. That COVID has triggered an enhanced ability to work out of the office should help bring more productivity and people to work and develop and, hopefully, this should also bring about better welfare.
Many of these improvements are slow-moving - like our overall improvements in human life expectancy and welfare. Many of us both misjudge how far we have come, and perhaps if we understand our progress we misjudge the challenges which are still great.
But we will need both parts. To understand where we have made progress, where we still have challenges and to use the opportunities COVID has given us to do better while trying to defeat its catastrophic impact.
That's not to downplay the awfulness of COVID. That's with us. But how we react is still up to us.
I remain more worried about creative arts practitioners.While over the long-term creative industries have typically bounced back from hard times, I think 2021 will continue to be hard and I see many brilliant creatives having to leave the arts and related work. It’s hard to measure the value of arts and the financial rewards are low for the majority. There is little joy in a future generation of creative work when this generation is so hit.
Mark Carney: Markets, COVID, Climate, Reith lectures
Former central banker (UK/Canada), Mark Carney gives the 2020 Reith lectures. He tackles the purpose of markets, financial system resilience and climate. He has collated much of the current stakeholder, shareholder, free market, “late” capitalism debate and puts it through the lens of the pandemic, bubbles, and climate and from an active and influential player.
I think he’s putting much of the debate in the mainstream and there are critiques both of unregulated markets (not grounded in values) and the need for a just transistion, but also that market forces are very neccessary for wealth generation and to solve the challenges (a critique of those who don’t favour markets at all). In one interpretation that would be arguing for state capacity.
4 hours of lectures (plus some very brief questions from Nobel Lauerates (the likes of Paul Krugman), politicians etc. I don’t have a super simple summary but I would highlight:
He views markets as a necessary mechanism for wealth creation. But markets are amoral and so needed to be grounded in values, such as social values, and that’s his reading of the full works of, eg, Adam Smith.
“...Smith’s writings warn of the mistakes of equating money with capital and divorcing economic capital from its social partner….”
His arguments look at unpriced externalities (climate, COVID), human errors (“irrational decisions”) and then…
”…the drift from moral to market sentiments. They include the undercutting of the social foundations of the market, the corrosion of values arising from pricing of goods, services and civic virtues, that have been traditionally outside the market, and the flattening of values by forcing decisions to be made according to utilitarian calculations. Let’s take the first of these drifts, the changing nature of markets. Now of course markets don’t exist in a vacuum, the market is a social construct whose effectiveness is determined partly by the rules of the state and partly by the values of society. It requires the right institutions, a supportive culture and the maintenance of social licence. Values of trust, integrity and fairness are critical to effective market functioning, and these values have increasingly been taken for granted. Milton Friedman’s classic pion to shareholder value includes the following caveat: A corporate executive’s responsibility is to make as much money as possible, while conforming to the basic rules of society, both those embedded in law and in ethical custom.
And where do these basic rules come from? Economic and political philosophers from Adam Smith to Friedrich Hayek have long recognised that beliefs are part of the inherited social capital which provides the social framework for the free market. That social capital is the product of both formal institutions and culture, including what the Nobel laureate, Douglass North, referred to as incentives embodied in belief systems. The question is whether the expansion of the market, an expansion that Friedman helped unleash, is changing the underlying social contract on which it has been based. Could the emphasis on the individual over the community or on our selfish traits over our altruistic ones imperil both the market’s effectiveness in determining value and ultimately society’s values? In short, in moving from a market economy to a market society, are we consuming the social capital necessary to create economic and human capital? The ethical customs that Friedman assumes can change. Indeed, many of those necessary to support market functioning are corroded when financial returns become disembodied from their impact on other stakeholders. Friedman himself revealingly acknowledged the importance of such moral sentiments when he observed that a company might devote resources to provide amenities to its community, but only in the expectation of attracting employees, and that it could engage in such hypocritical window dressing by calling this social responsibility lest it, and I quote,
“Harm the foundations of the free market to a dmit that this fraud was all in the pursuit of profit alone.” This is how corrosion happens, and did happen in the ensuing decades…”
And in my reading of his lectures, his current views are very formed from his own experience as a central banker as seen here:
“....The starting point is the right balance between the market and the state, and this has shifted in recent decades with markets gaining in stature and influence. The market is becoming the organising framework, not only for economies, but also increasingly for broader human relations with its reach extending well into civic and family life. In parallel, the social constraints on unbridled capitalism, religion and the tacit social contract have been steadily eased. The Thatcher/Reagan revolution fundamentally shifted the dividing line between markets and governments. This change in direction was long overdue and their reforms unleashed a new dynamism. With the fall of communism at the end of the 1980s, the spread of the market grew unchecked. And so by the time I joined the G7 as the Deputy Central Bank Governor in the early 2000s, the conventional wisdom of market efficiency reigned supreme. Policymakers like myself had nothing to tell the market, they only had to listen and learn. Put it another way, the market was always right. But as my central bank colleague, and later Italian Minister of Finance, Tommaso Padoa-Schioppa once observed, when we grant an entity infinite wisdom, we enter the realm of faith. Faith can guide life, but blind policy, and such cognitive capture led to the self-cancellation of the policymakers’ judgement as only the market knows. And such trust dictated that the only solutions proposed to market failures were to add more markets or to reduce regulation further…”
There is much more in the lectures especially the 4th one on Climate. Long time readers won’t find anything that new in the climate lecture but he suggests:
“...The solutions to the climate crisis are intimately tied to our fiscal economic and social wellbeing. We need to leverage these social coalitions that have formed for climate action, but those coalitions won’t and shouldn’t hold if we don’t have a just transition. We can’t achieve environmental sustainability if we sacrifice our economy and with it, peoples’ livelihoods. Similarly, we won’t devise all the necessary solutions or implement them with sufficient speed without market forces.
And let me suggest here’s how you can reinforce these efforts.
First, if you work for a company, find out whether it has a plan to transition to net zero. If so, great, how can it be made better? And if it doesn’t have a plan, why not? Does management think governments and people are bluffing with their net zero targets? Or do they consider the company separate from society?
Secondly, wherever you put your hard-earned savings, in a bank, a pension pot, or in stock market, find out whether it’s been managed towards net zero. And if not, why not? Are the people investing your money missing out on major opportunities or are they taking unnecessary climate risks, or do they think that you just don’t care? If you care about the climate, make your money matter.
And third, ask not what the climate is doing to your country, but what your country can do for the climate. Does your country have a credible net zero plan? Does your government require large companies to disclose the impact of climate on their operations and must those companies have net zero plans? Do shareholders, ultimately you have an automatic vote on these plans? In other words a say on transition. Are banks planning for climate failure and do they know how they can contribute to climate success? “
Worth reading for an insight into what he will likely be arguing for in the coming climate talks in Glasgow.