Thank you for this crucial analysis! I hope in the future posts you will consider and address the fact that each of the enumerated calculations for the “cost” of battling climate change struggles with the same myopic MISUNDERSTANDING of modern fiat money. Specifically, each calculation assumes:
1. The money to pay for climate change initiatives must come from an existing money-stock that otherwise would pay for something else—and that “something else” must therefore be forsaken.
2. Climate change initiatives must compete with profit-making initiatives for some portion of that existing money-stock—a competition which is virtually impossible to win when climate change initiatives do not generate profits or, even worse, generate financial losses.
3. Money spent on climate change initiatives is “lost” from the existing money-stock that is available to pay for the goods and services that people need.
4. Government spending for climate change initiatives must use money that is “captured” from the existing money-stock by means of TAXES—or by borrowing that must be repaid with future taxes.
This is a zero-sum game that assumes the constraining factor in battling climate change is how much money exists, and how much of that existing money can be diverted to the climate change effort.
These are completely erroneous assumptions in the world of modern fiat money operations that we have now been living in for well over half a century. Modern Monetary Theory “discovered” this over two decades ago:
1. The constraining factor in battling climate change is not how much fiat money is available to pay for climate change initiatives, but the real resources—labor, technology, expertise, and materiel—that are available for that fiat money to buy. If the real resources are available, sovereign governments can issue the money—by fiat—to marshal those resources to undertake the initiative. There is, literally, no limit to the amount of fiat money that can be issued if the real resources are available to be put to work.
2. Even more crucial, fiat money issued and spent to undertake climate change initiatives is not “lost”: Yes, on one side of the ledger it is a “cost”—but on the other side of the ledger it is money that people and businesses EARN. It is, therefore, not a percentage of GDP that is subtracted—displacing other goods and services—but a percentage of GDP that is added, creating new goods and services, creating new employments and new opportunities for people to participate in “saving the planet” as a means of supporting their families.
Battling climate change, in other words, is NOT the biggest “financial” challenge the world has ever faced—and it is misleading and counterproductive to frame it as such. Instead, it is the biggest socio-economic OPPORTUNITY to come along in the history of human civilization.
Here is a recent post from my Substack “Paying For It” that directly visualizes what I’ve just described:
Yes, the real issue isn't the financial challenge. We can always print the money (though there might be an issue with inflation). But we can't "print" the underlying resources, which are the real problem.
I like the framing "we can't 'print' the underlying resources"!
I don't like the framing "we can always 'print' the money" because that statement is prejudicial: it assumes the "money is scarce" narrative that leads us to believe that "printing money" is irresponsible if not illegal. And it is precisely that narrative that underlies the confusion about how to PAY for mitigating climate change. No matter how it's calculated from that perspective, market society can't afford it.
It would be one thing if that were indeed true--that what we confront is the prospect of arguing about how to capture and allocate a fixed quantity of dollars. The frustrating thing is it is NOT true--and until the scientific/policy community takes the time to understand how modern fiat money actually operates, real climate change mitigation is not going to happen.
Thank you for this crucial analysis! I hope in the future posts you will consider and address the fact that each of the enumerated calculations for the “cost” of battling climate change struggles with the same myopic MISUNDERSTANDING of modern fiat money. Specifically, each calculation assumes:
1. The money to pay for climate change initiatives must come from an existing money-stock that otherwise would pay for something else—and that “something else” must therefore be forsaken.
2. Climate change initiatives must compete with profit-making initiatives for some portion of that existing money-stock—a competition which is virtually impossible to win when climate change initiatives do not generate profits or, even worse, generate financial losses.
3. Money spent on climate change initiatives is “lost” from the existing money-stock that is available to pay for the goods and services that people need.
4. Government spending for climate change initiatives must use money that is “captured” from the existing money-stock by means of TAXES—or by borrowing that must be repaid with future taxes.
This is a zero-sum game that assumes the constraining factor in battling climate change is how much money exists, and how much of that existing money can be diverted to the climate change effort.
These are completely erroneous assumptions in the world of modern fiat money operations that we have now been living in for well over half a century. Modern Monetary Theory “discovered” this over two decades ago:
1. The constraining factor in battling climate change is not how much fiat money is available to pay for climate change initiatives, but the real resources—labor, technology, expertise, and materiel—that are available for that fiat money to buy. If the real resources are available, sovereign governments can issue the money—by fiat—to marshal those resources to undertake the initiative. There is, literally, no limit to the amount of fiat money that can be issued if the real resources are available to be put to work.
2. Even more crucial, fiat money issued and spent to undertake climate change initiatives is not “lost”: Yes, on one side of the ledger it is a “cost”—but on the other side of the ledger it is money that people and businesses EARN. It is, therefore, not a percentage of GDP that is subtracted—displacing other goods and services—but a percentage of GDP that is added, creating new goods and services, creating new employments and new opportunities for people to participate in “saving the planet” as a means of supporting their families.
Battling climate change, in other words, is NOT the biggest “financial” challenge the world has ever faced—and it is misleading and counterproductive to frame it as such. Instead, it is the biggest socio-economic OPPORTUNITY to come along in the history of human civilization.
Here is a recent post from my Substack “Paying For It” that directly visualizes what I’ve just described:
https://johnalt.substack.com/p/the-monkey-trap
Yes, the real issue isn't the financial challenge. We can always print the money (though there might be an issue with inflation). But we can't "print" the underlying resources, which are the real problem.
I like the framing "we can't 'print' the underlying resources"!
I don't like the framing "we can always 'print' the money" because that statement is prejudicial: it assumes the "money is scarce" narrative that leads us to believe that "printing money" is irresponsible if not illegal. And it is precisely that narrative that underlies the confusion about how to PAY for mitigating climate change. No matter how it's calculated from that perspective, market society can't afford it.
It would be one thing if that were indeed true--that what we confront is the prospect of arguing about how to capture and allocate a fixed quantity of dollars. The frustrating thing is it is NOT true--and until the scientific/policy community takes the time to understand how modern fiat money actually operates, real climate change mitigation is not going to happen.