Earlier this week, the EU published a series of proposals aimed at reducing its carbon emissions by 55 percent by 2030. The legislation has revived debates on the economic models best suited to facilitating investment and decarbonization.
A Financial Times article by MAX KRAHÉ was circulated widely this week, in which he argued for the importance of central planning in the green energy transition. In an April report for the Royal Belgian Academy, Krahé examines the structural justifications for his position.
From the text:
"As of today, we lack an agreed-upon, reliable methodology for distinguishing between sustainable and non-sustainable investments. Unfortunately, this is not a problem of insufficient data or the imperfect implementation of a theoretically sound methodology. Instead, the problem lies with the basic methodology of the dominant approach that has been used to draw this distinction so far: a bottom-up approach that tries to rate the sustainability performance of individual companies by looking at firm-level performance indicators—such as emissions, the use of land, water, or energy, average and minimum wages, corporate governance structures, and so on—without taking into consideration the wider context into which these firms are embedded. As the report shows, there are deep, conceptual reasons that stand in the way of determining the contribution that individual investments make to sustainable development. In particular, where we cannot identify counterfactuals, the question of sustainability can only be asked of systems as a whole, and not of their individual components. While there is a combination of methods that allows downwards translation, from system-level sustainability to identifying individual sustainable investments, there is no reliable method to translate upwards, from individual investments to their impact on a system’s overall sustainability, and hence to the unsustainability of that individual investment. Concerning this link, the report’s central finding is that upwards translation is impossible in dynamic systems. The link between individual investments and system-level sustainable development is a one-way street."
Link to the full report.
- "The ECB is admitting climate as a concern because it may affect price stability and financial stability. It is not addressing the fact that the financial system itself funds the fossil-fuel economy and thus drives the climate crisis." In Social Europe, Adam Tooze comments on the Bank's Strategy Review. Link.
- "Academics have been warning for years that solar power faces a fundamental challenge that could halt the industry’s breakneck growth: the more solar you add to the grid, the less valuable it becomes." James Temple on solar's market failures. Link.
- "While both the Soviet Union and the United States were interested in regional weather control, the Soviets listed 'the development of climate-control methods among the most urgent problems of Soviet science.'" Noah B. Bonnheim examines the ideological history of climate engineering. Link.
Low-income Housing Policy
Assistant Professor of Sociology at Princeton JOHN ROBINSON studies the politics of low-income housing policy in the United States. In a 2020 article, he analyzes the rise of state housing finance agencies (HFAs) in the 1960s, which remain the leading suppliers of credit for low-income renters today.
From the introduction:
"Both HFAs and federal insuring offices (FIOs) played a key role in expanding credit access to marginalized groups: the former as direct lenders, and the latter by subsidizing and insuring debt provided by private lenders. While FIOs became the focal point of public blame over the credit expansion, HFAs proliferated in a majority of states between 1968 and 1975. What explains these divergent outcomes? My core findings show that FIOs merely redistributed credit toward marginalized groups by openly defying exclusionary market expectations without redefining valuation practices around the allocation of debt for marginalized renters. By contrast, HFAs reconstituted credit’s baseline racial assumptions by introducing new market values and rationalities that—often inadvertently—subverted established market rules and the racially reactionary campaigns waged to enforce them. Specifically, by relying on speculative bond finance—in particular a novel instrument called “moral obligations bonds”—HFAs mobilized a subversive vision that pioneered new markers of debt soundness, new notions of suburban prosperity, and a new blueprint for managing racial tensions."
Each week we highlight research from a graduate student, postdoc, or early-career professor. Send us recommendations: firstname.lastname@example.org.
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- Why did social democratic parties liberalize their economies in the 1980s and 1990s, and was there an alternative? Join us on July 27 at 10am ET for a conversation around our book, Market Economy, Market Society. Featuring Stephanie Mudge, Adam Przeworski, and Wolfgang Streeck, and moderated by Waltraud Schelkle. Register here.
- "While the power & resources of local government remained enormous in the early 2000s, they were deployed to facilitate the role of the private sector in urban life." On the site, Kim Phillips-Fein interviews Benjamin Holtzman about his new book charting the political transformations that followed New York City's 1975 fiscal crisis. Link.
- "They Worked." A new research brief by JFI Senior Fellow Claudia Sahm on the effects of the $1,400 relief payments. Link.
- "Any of these proposals would mark a radical break in American public finance, but something similar will be necessary to catch up to the rest of the world." In the Times, writes on the Fed, municipal bonds, and climate policy. Link. (The piece features comments from Claudia Sahm, and discussion of research by many scholars who participated in our recent panel on investment and decarbonization. Link to the transcript of the event.)
- "From the deployment of AI in service management, to the ‘opening up’ of administrative datasets, digitalisation initiatives have uprooted established modes of public sector organisation and administration. They have also fundamentally transformed the political economy of the welfare state." Rosie Collington explores the link between AI and privatization in Denmark. Link.
- "This article demonstrates how gender equality policies which aim to reduce the burden of women’s unpaid care and domestic work through the state-supported marketization create a vulnerable group of under-paid care and domestic workers." Sumika Yamane on care work policy in Sweden, Singapore, Taiwan, Hong Kong, and Japan. Link.
- Lars Fredrik Andersson, Liselotte Eriksson, Paul Nystedt examine the history of health insurance cooperatives in early twentieth century Sweden. Link.
- "We contribute to the understanding of the internal differentiation among China's business elites by documenting the emergence of a particular kind of large, non-state business group that we argue is more akin to a mafia system than any standard definition of a firm." A new paper by Meg Rithmire and Hao Chen. Link.
- In an article from May, Matthew F. Nichter analyzes the interracial unionism of the UPWA. Link.
- "We construct a database linking European royal kinship networks, monarchies, and wars to study the effect of family ties on conflict." Seth G. Benzell and Kevin Cooke assess the causal impact of relative mortality on war duration from 1495-1918. Link.
- Mario Small, Armin Akhavan, Mo Torres and Qi Wang draw on more than 6 million queries to "compute the difference in the time required to walk, drive or take public transport to the nearest bank versus alternative financial institution from the middle of every block in each of 19 of the largest cities in the United States." Link.
- "We construct a database linking European royal kinship networks, monarchies, and wars to study the effect of family ties on conflict. To establish causality, we exploit decreases in connection caused by apolitical deaths of rulers' mutual relatives. These deaths are associated with substantial increases in the frequency and duration of war. We provide evidence that these deaths affect conflict only through changing the kinship network. Over our period of interest, the percentage of European monarchs with kinship ties increased threefold. Together, these findings help explain the well-documented decrease in European war frequency." A network of thrones, by Seth G. Benzell and Kevin Cooke. Link.