Wednesday, December 14, 2011

Al Gore's Manifesto for Sustainable Capitalism

Al Gore and David Blood wrote an editorial in the WSJ titled a "Manifesto for Sustainable Capitalism."

A fair amount of this is actually fine -- essentially an argument for including what are now externalities into the economic calculus of firms and consumers. That is sound economics and policy. Of course, what the level of the externality is, in dollar terms, for any specific environmental problem is always a key question. I like to ask what I view as a telling question: What do you think the carbon tax should be, on the basis of a barrel of oil or gallon of gas?

But of course I could not read an article by Al Gore without having some arguments. This quote:
Before the crisis and since, we and others have called for a more responsible form of capitalism, what we call sustainable capitalism: a framework that seeks to maximize long-term economic value by reforming markets to address real needs while integrating environmental, social and governance (ESG) metrics throughout the decision-making process.
does worry me. Two things: first, what exactly is a "real" need? Who determines that? Is my desire for a fast car a real need? How about my desire for imported Scottish salmon?

The other thing that is a bit odd is the focus on long term value (I do like the metric of economic value, though). Yes, I do agree that there is at times too much focus on the short term. Examples abound. But to have one of the major actions proposed being an end to quarterly earnings reporting? That seems a stretch. Have they really thought out the unintended consequences of letting managers report only once or twice a year? I suppose my students might want grades to be issued only at the end of each year, yet I continue to push for grading at the end of each course.

1 comment:

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