Posts Tagged ‘carbon’

no exit

Special mention


A former student (and a friend of Nick Krafft) suggested I look at Larry Lohman’s work, especially a recent briefing paper, “When Markets Are Poison: Learning about Climate Policy from the Financial Crisis.”

Lohman argues that studying the financial crisis and the climate crisis together can provide useful tools for understanding how to tackle both. His view is that

Overconfident commodification of uncertainty (in the form of a trade in new and complex derivatives) helped precipitate a global economic crash. Overconfident commodification of climate benefits (in the form of a trade in carbon) threatens to hasten an even worse catastrophe.

What I like about this paper is that Lohman challenges the view that commodification—whether of uncertainty (e..g, in the trading of credit default swaps) or of climate benefits (e.g., in the form of carbon offsets)—is a natural phenomena. Instead, he uses the work of Karl Polanyi (as well as some Marx and the social studies of finance) to analyze the ideas and institutions behind the creation of uncertainty and climate markets. And, of course, what the lessons might be for climate markets of the crash in the uncertainty markets.

Here are the parallels Lohman finds between the two sets of markets:

  • Both markets have seen the construction of similar abstract
    commodities, largely by centralised corps of “quants” and traders.
  • Embedded in neoclassical economics and its over-ambitious institutions
    of calculation, both markets heighten systemic dangers, necessitating
    movements of societal self-protection.
  • Both markets involve regressive redistribution and the destruction of
    crucial knowledge.
  • Both are vulnerable to bubbles and crashes.
  • Both erode notions of transparency and conflict of interest.
  • Both call into question the assumption that all imaginable markets can
    be successfully regulated.

In my view, he successfully challenges the economistic logic—the logic of calculability and abstraction—presumed by mainstream economists and policymakers alike. And therefore, of course, the idea that price incentives will lead to effective actions on climate change.

The only thing missing is to connect this critique of the political economy of “cap and trade” to a critique of the class dimensions of capitalism. So, more work remains to be done.