Home > Crazy Town Podcast > Episode 37 – Discounting the Future and Climate Chaos, or… the Story of the Dueling Economists

April 14, 2021


An argument between economists is usually as exciting as reading the phone book (what’s that?), especially about something as boring-sounding as the discount rate. But it’s an argument that underlies how governments and businesses solve (or don’t solve) climate change. So, literally life and death stuff. Jason, Rob, and Asher explore why the discount rate, and discounting the future more broadly, is so deadly important, and why the number 0 is what our kids and grandkids deserve. In our Do-the-Opposite segment, catch up with Jane Davidson and her ideas for establishing better governance and a livable environment.

 

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Show Notes

Transcript

Asher Miller
Hi, I’m Asher Miller.

Jason Bradford
I’m Jason Bradford.

Rob Dietz
And I’m Rob Dietz. Welcome to Crazy Town where Elon Musk and Jeff Bezos are spending billions to prove which has the bigger penis. Today’s topic is our cultural tendency to discount the future. And please stay tuned for a guest interview with Jane Davidson.

Jason Bradford
Okay, guys, good movie, good book: “Charlie and the Chocolate Factory.” You remember that?

Rob Dietz
Oh, yeah, yeah. Although the movie is actually, “Willy Wonka and Chocolate Factory,” right?

Jason Bradford
Thank you. I can always count on you to like, get me properly –

Asher Miller
I didn’t really watch the movie, but the books I’ve read a couple times.

Rob Dietz
That movie was –

Jason Bradford
Was that the remake with –

Rob Dietz
No no no. The original with Gene Wilder that was part of my childhood. The Oompa loompas, and the . . .

Jason Bradford
All good stuff. There’s a lot of themes, you know, life lessons there. And so, I’m going to I’m going to kind of do something related –

Asher Miller
Just chocolate is magical.

Jason Bradford
Well, chocolate is pretty magical. So, here’s what I do. I’m gonna ask you some questions. You just answer me honestly. Okay? If you can. Be honest. Alright.

Rob Dietz
What kind of dig was that?

Jason Bradford
Alright, so I can either give you guys a chocolate bar now. I’ll wait till after we’re done with the podcast recording. But imagine getting a chocolate bar kind of right after the podcast. Okay?

Asher Miller
Is it Fairtrade Oganic?

Jason Bradford
Imagine your favorite chocolate bar.

Rob Dietz
I’m still stuck on the now part. Can I have mine now?

Jason Bradford
Maybe. . . .Or I’m going to give you two bars in six months. What do you choose?

Rob Dietz
Oh I’m pretty sure I’m taking that chocolate bar right now.

Rob Dietz
Six months?

Jason Bradford
Okay. Okay.

Asher Miller
We might not be here in six months.

Rob Dietz
The collapse is upon us. So I think we’re gonna be out of here in two to three.

Jason Bradford
Okay, what if I shorten that to two bars tomorrow?

Asher Miller
Hmmm…

Rob Dietz
This is tougher.

Asher Miller
Tempting.

Rob Dietz
How about this, Asher? You get one now? Give me half of it. And then I’ll do the tomorrow and give you one.

Asher Miller
Oh, this is nice. We’re scheming. Okay.

Jason Bradford
Okay, that’s good. You guys just showed me the thinking that went into this famous test called the marshmallow test. Where they did this sort of thing with little kids and marshmallows? And so . . .

Asher Miller
Marshmallows suck. I’d much rather have chocolate.

Jason Bradford
Right. That’s why I use chocolate because I really – marshmallows, eh!

Rob Dietz
Can we get some graham crackers in a campfire? And then we’ll just have s’mores.

Jason Bradford
Well, then now we’re talking, okay. But this shows that people prefer to have their rewards now and they’re not willing to necessarily delay them even if the reward is greater in the future. And this is actually true for other animals. You can kind of do these similar tests for dogs or whatever. They have a time preference. Okay? But there’s another side to this. There’s another side to us. And I want to do another set of questions.

Rob Dietz
I love quizzes.

Jason Bradford
You guys have you guys have kids, right?

Rob Dietz
Yes.

Asher Miller
Yes.

Jason Bradford
Do you love them?

Rob Dietz
Yes.

Asher Miller
Actually, I just found out my older son is listening to our podcast, which is troubling. I’m definitely gonna say yes.

Jason Bradford
Okay. Yes. All right. And you care about them and you care about their future?

Rob Dietz
Yes.

Asher Miller
Of course.

Jason Bradford
Very good. So in that frame of mind, I want to talk to you about chocolate bars again. What if I told you, you can have a chocolate bar now. But there isn’t much more chocolate left in the world. It’s a resource that has a problem. There’s disease problems with the trees that make chocolate, there’s climate change. And that if you want your kids to have chocolate in the future, you could choose to forego your chocolate bar today. And instead give it to your kids in two years. If you don’t, there’s a 50% probability your kids won’t be able to get any chocolate in the future.

Rob Dietz
Wow, this is getting complex. Here’s where I’m going with it. I’m giving it to the kid because the crap I’m going to take if I just scrounge up and knock down their chocolate. I’m never gonna hear the end of it.

Jason Bradford
Okay.

Asher Miller
They don’t have to know. But yeah, actually, I’m totally convinced I would leave it for my kids. No doubt.

Jason Bradford
Right. Okay, so this is the thing. It’s like, if you frame the question in first way you’re like, “Yeah, I’d gobble it up.” But if you put yourself in that frame of mind, thinking about the future, an the risk to that future, and what you want to leave as a legacy, suddenly, your answer changes. And I think that’s what’s important. I think that’s what we want to talk about in today’s show. It’s that we have both in humans, this ability to sort of discount the future: we’ll just take our reward today, even if the reward in the future could be better. But we also have this capacity to have tremendous caring for the long term and really plan for it. So that’s the hidden driver I want to talk about. It’s this discounting the future that we’re doing. But I also want to explore the fact that it doesn’t have to be this way because there’s other sides to it.

Asher Miller
Can we just think about some other examples? You’re talking about the marshmallow test or trinkets or whatever. But I’m just trying to think like, are there examples in our lives of either us or people we know that have sort of discounted the future?

Rob Dietz
I got an example that it’s taking the maturity level up a little bit from the child with a marshmallow, but not very far. Okay? So I had this friend. Let’s call him Biff, okay? And this friend of mine, me and Biff, we were in college at the time. And we’re walking down the main walkway –

Jason Bradford
With your friend Chas?

Rob Dietz
No, just Biff and me. Chas was at the country club.

Jason Bradford
Okay. Okay.

Rob Dietz
So me and Biff are walking down the main walkway. Beautiful campus, right? Lined by these old brick buildings and stuff. And I think it was a Friday or Saturday night. It just had that kind of party atmosphere.

Jason Bradford
This is the Tadmor college?

Rob Dietz
Tadmor? What are you talking about?

Jason Bradford
I don’t know. Anyways –

Rob Dietz
Okay, so me and Biff are walking down the walk. And there’s a fraternity house that’s right on the periphery of the walk. And we see these guys in the upper window, like two or three stories up. And they’re like making a big ruckus. And they have this hose thing hanging down from the window and they’ve got this giant funnel at the top. So basically, they’ve set up a multi-story beer funnel,

Jason Bradford
What’s that called, again? When you like –

Rob Dietz
Funneling

Asher Miller
They just took funneling to the next level. Like two or three levels.

Jason Bradford
Yeah, gravity assit to the extreme.

Rob Dietz
So, my friend Biff is like, “Hey, can I try?” and they’re like, “Sure.” And I just I stand back and I’m watching this. So he puts this

Rob Dietz
Out of the splashzone?

Rob Dietz
Yeah, he puts this this tube in his mouth. I see these guys at the top, like three of them, each with a beer. They just pour them all in at once.

Asher Miller
They’re like getting it to terminal velocity.

Rob Dietz
Yeah. So this comes down and he drinks some, and some of it to sprays his face and his whole body and he’s soaked with beer. But anyway, I guess in the context of what we’re talking about here and hidden drivers discounting the future, Biff was living in the moment of getting deeply intoxicated,

Asher Miller
Without thinking about what it would be like in an hour.

Rob Dietz
Yeah, not thinking about the future of hugging that toilet for the rest of the evening.

Jason Bradford
Alcohol poisoning.

Asher Miller
Which I assume he did?

Rob Dietz
Yeah, I didn’t follow him when he you know –

Jason Bradford
Are we any more advanced than my dog, Dylan, then? Who if you make a mistake, and he gets into a giant supply of something edible that he finds somewhere –

Rob Dietz
Of course, what he defines is edible might be utterly disgusting.

Jason Bradford
Right. But I mean, if there’s a bag of potato chips that somehow is left, you know, on the floor, and – it’s gone.

Rob Dietz
Yeah, he’ll eat the bag too. The actual bag.

Jason Bradford
Oh, yeah. I mean, you’re looking like little little foil pieces in his poop for a few days. Oh, yeah. He’ll be vomiting. He’ll be like shitting, like a storm out, and it is just horrible, but –

Rob Dietz
And we’re back to our Crazy Town happy topic of shit everywhere.

Jason Bradford
Right. Yeah, Dylan doesn’t have a great ability to control himself.

Asher Miller
Right. So animals have the short termism? Humans have the short termism.

Jason Bradford
Biff has got a problem with Chas.

Asher Miller
You know, these are funny. These are funny examples. Maybe not so funny when you have to clean up after Dylan. But there’s some serious implications of this short termism, right? I mean, if you think about it, we have it in virtually kind of all these systems that we inhabit, right? If you think about economics, the short termism in economics and finance, right?

Rob Dietz
That’s really weird, because when has economics ever gotten anything wrong before?

Asher Miller
Oh, never. I didn’t say it was wrong. I’m just saying, you know, it’s all short term. You know, but you think about it. It’s like, immediate rewards. People are looking for immediate rewards. It’s all focused on quarterly earnings. People are looking to do these trades now with computer assisted technologies like a total immediate . . . Then you think about our political system. And, you know, part of the challenge we have for getting anything done – certainly done for the long term – is the fact that maybe there’s a penalty to be paid for doing that, in the short term, right? Because you got to run for re-election. And if you’re in the House of Representatives, every two years, or every four years if you’re the president, or six years in the Senate. Our structures, our systems are kind of built to sort of reward or have people oriented in terms of the short term.

Rob Dietz
Yeah, that’s right. I don’t remember the last time I saw a 200-year plan from McDonald’s or Walmart, you know? That doesn’t that doesn’t exist.

Jason Bradford
No, no. Yeah. So I think there’s tons of examples, and they can be crushing. I was thinking about the rain forest and why it’s cut down often. Or you know, palm plantations. So it ties off into money.

Rob Dietz
Yeah, there’s a really good example of that that happened in the United States back in the late 80s, early 90s timeframe. And then actually one of the main characters was just in the news again. You remember good old Michael Milken?

Asher Miller
Oh, yeah.

Rob Dietz
He got in the news not too long ago because he got pardoned by the outgoing President Trump. Well, Milken was involved in his deal, where, you know, he was famous for kind of coming up with the junk bonds idea. I don’t know if he came up with it, but he certainly made it big when he was working at Drexel Burnham Lambert. That was his his now defunct company. But so Milken is supplying bonds that have, he’s basically making it so that a company that’s at high risk can issue corporate bonds. And those bonds have a really, really big interest rate, because they’re risky. This company might go under and not be able to pay the people who are buying these bonds. Well, okay, so there was this company that wanted to buy some tract of Redwood forest land in California from another company. And the company that owned it was actually a pretty good timber company. They were privately owned. And they were kind of managing this thing so that they could maintain the forest over the long term.

Jason Bradford
Yeah, they employed all these people. So there’s like, it’s like this company town, almost. And so there was a sense of: We need to have stability here, because we need to maintain the schools, and we need to entertain the housing stock. . .

Rob Dietz
Yeah, and guess what? A forest is a renewable thing. Like you can grow trees. We could have this for the long term. Well, that’s not so great in the money world. So this other company comes in called Maxim. And they issue the junk bonds. And it turns out that in order to pay those off after . . . So they get their money, and they buy the tracts of land from from the timber company. And in order to pay back the money on the bonds, they just liquidate the forest. They just cut the whole damn thing down. It was a huge fight. That’s where all those forest activists –

Jason Bradford
Julia Butterfly kind of events? I was living in California at the time and it was huge news. Because we’re talking trees that are like 1000 years old, 2000 years old. 300 foot tall redwood trees diameter of 20-feet. Just unbelievable old growth redwood forests. It’s called The Headwaters. And each of these trees was worth like, 100,000 bucks or something crazy. There was just, “Oh, there’s $100,000 tree, $200,000.” They just count them up.

Rob Dietz
Yeah, oh and it’s so stupid. A dumb financial convention that we make up, junk bonds, then drives the decision to – yeah, exactly. Say, “Oh, there’s however many millions of dollars, let me just cut them all down.” And of course, Michael Milken takes his piece off of it. This company, Maxim, gets their profit off of it. And I think you were mentioning Jason, like all the people who were employed in certainly a more sustainable forestry situation, they probably get nothing.

Jason Bradford
Yeah, it led to huge trauma for that communityI know. You think we would have learned by that. But it’s really it’s the discount rate is a sort of financial mechanism. Or they say, and we talked about discounting in the future when we said “Chocolate bar now or later.” And you valued the chocolate bar more today more than you valued two chocolate bars in six months. And so you can turn this into sort of a financial metric, where you say, “I’d rather have this amount of money today, than more money in the future, because the future money isn’t worth as much as this amount of money is today.”

Rob Dietz
Yeah, I don’t want to get all all technical, but maybe we should just explain it, a little bit, of what’s going on here. Like anybody that takes an Econ or Finance class will sort of get this present value, future value equations that they look at. And it all comes from interest. A bank will give you interest if you you give them money to loan out. So the way this works is you do a future value calculation by saying money in the future is going to be worth what it is today plus the interest, and then that compounds each additional year. So you have this exponentially growing future value of that money. And the way the discount rate works, it’s kind of like doing that backwards. You’re discounting a future amount back to the present. And that has all these implications for making policy decisions. It’s totally dependent on what you set that discount rate to be.

Jason Bradford
Yeah, and this comes up actually in the debates over what should be done about climate change, and what sort of investments should be made today to help mitigate climate change and its problems. And so, the infamous story is related to sort of the debate between say, Nordhaus, our favorite Yale economist, who we’ve kind of dissed in previous episodes.

Rob Dietz
Let it be known, Jason defines favorite differently from Asher and me.

Jason Bradford
Yeah. Our favorite to kind of smack down. And Nicholas Stern. So there was this debate going on the climate change community about, should we use the discount rate in the so called Stern Report, which had what was considered a low discount rate of like 1%. Which meant that they sort of considered the future to be worth something, a little bit, you know? It’s worth something. We’re only discounting it by 1% a year. Whereas Nordhaus was using a more traditional 3%. But the difference between a 1% and a 3%, when you’re talking about what’s the value of a life, in so many years time or whatever, it’s huge. But the thing that got me about this, though, is a sort of nutty debate. Because all these economists assume that we got to be careful about how much we curtail present day consumption. How much we say, “No, don’t eat that chocolate bar.” Because in the future, our descendants gonna be richer anyway. They’re gonna be wealthier than us. So we should let these wealthier people in the future really take care of these problems that we’re creating today.

Asher Miller
Right, I mean, it’s basically saying, “Look, we shouldn’t take the hit now. Because it’ll be cheaper for us to fix it later.”

Rob Dietz
Yeah, we’ll have more margin because we’re so rich. And that’s because of the way that the discount rate changes the amount of money exponentially.

Asher Miller
I remember reading this piece by Dave Roberts, back when he was writing at Risk. He’s now at Vox. And he wrote, I think, a pretty detailed piece about this.

Jason Bradford
Yes. With otters.

Asher Miller
With otters, right. We’ll link to it in in the in the show notes. But basically trying to explain this whole discount rate thing and the debate between them. It’s very technical. And, I remember reading that and just getting more and more enraged. Because here we are debating 1% or 3%. And, of course, Dave, I think is landing on that, kind of the 1% thing. Although he says, you know, the fact that we’re even thinking about this is kind of nuts. It’s absolutely insane, that we’re having this debate at all. Cuz, sorry –

Jason Bradford
What the fuck are we debating?

Asher Miller
We’re debating whether or not we should try to mitigate completely unsurvivable climate change, and the loss of millions of species?

Jason Bradford
Right. Well, in that article, which I thought was good, was he brings up, there’s this woman who, I can’t remember her name, we should put in the notes and it’ll be in the article. But she kind of brings up the point, and actually, I think Dave kind of agrees with her in the end. And it’s that, like, why are we assuming that we’re going to have a growing economy and be richer in the future? And also, we talked about this in a previous episode last year. It’s like, wait a second, if you’re at 3-4 degrees C, why would you think that you can even have a dinner that night?

Rob Dietz
Right. I love the idea to that just because there might be more money, that we can buy our way out of any problem.

Asher Miller
Well, it comes back to this belief in progress in technology. The Nordhaus assumption is not only will we be richer in the future, but we’ll have better technology. We’ll be in a position where we can actually maybe address these issues better.

Jason Bradford
It’s a myth of progress.

Rob Dietz
Can we can we talk for a second, though, even about these discount rates that get used in all these studies and policies. Like when we started thinking about this, my mind immediately went to three. The number three. Because we always use 3%. Kinda because that’s like an inflation amount that society is used to. Personally, I’d like to do some more digging on this because I think I found the main reason why it’s always 3%

Asher Miller
Oh, it’s the Holy Trinity.

Rob Dietz
Almost. You ever listened to Schoolhouse Rock?

Jason Bradford
Yeah, it’s on my playlist.

Rob Dietz
Yeah, well, you might remember the “Three is a magic number.”

Asher Miller
You know, I’ve seen Jack Johnson do a cover.

Rob Dietz
Yeah, maybe we can play a little clip here

Video
Three is a magic number. Yes, it is. It’s a magic number. Somewhere in the ancient mystic Trinity, you get three as a magic number. The past and the present and the future. Faith and hope and charity. The heart and the brain in the body, give you three as a magic number.

Rob Dietz
So I’m pretty sure that’s that’s the reason right there. That’s why the discount rate is three

Jason Bradford
So we have to blame School House Rock –

Rob Dietz
That’s real hidden driver, right?

Jason Bradford
Okay, let’s stop the episode. Let’s start over. Schoolhouse Rock is the reason we’re in Crazy Town.

Rob Dietz
Those bastards.

Asher Miller
Okay, this stuff drives me crazy. Absolutely drives me mad because it seems like – talk about crazy town. So crazy that we’re having this debate. And I want to get back to what you brought up before, Jason, which is at the very beginning is that, yes, this is in us. This tendency to think in the near term, to discount the future in favor of the present, other animals do too. But as you pointed out with the whole thing about the future for our kids, we have the capacity be thinking about the future and making long term plans. You know, most of us as parents, if we’re fortunate to be in a situation to do that, are trying to save our kids future, you know? Other kinds of things. We’re willing to make sacrifices for the future when we feel like we have a connection to that thing. And there are other cultures, you know, and, even in our past, where we did those things. I think about indigenous cultures and the focus on the seventh generation,

Jason Bradford
Oh, yeah, Cathedral building, for God’s sakes. There’s cathedrals that would take hundreds of years to build. And I’m not saying that we should be building cathedrals. But we were capable of organizing around something bigger than ourselves, that was beyond our own lifetime. And that we would, we would forego current day consumption for something that we thought would carry forward our culture and be a place that was, you know, make it better for our descendants. So, I would say there’s a really good phrase that I like about this. It’s called “The Good Ancestor.” And the book is written by guy named Roman Krznaric. And I think that that’s a really good term: the good ancestor. That’s what we have in us. We have in us the capacity be a good ancestor. Like you say, indigenous cultures thinking about seven generations. . . So yeah, we are not just about eating our chocolate bar today.

Rob Dietz
Yeah, you bring up the serious example – of course, my diseased brain always goes to something more pop cultur-y. Do you guys remember? The Philadelphia 76ers? The NBA basketball team that –

Asher Miller
Do we remember did that?

Rob Dietz
Well, this point in their history where they ran “The Process?”

Jason Bradford
I don’t. I don’t know anything about this.

Rob Dietz
Okay, so Philadelphia wa this . . . I think they were a middling team. And then they basically tried to figure out how can we get to championship level? And because the NBA Draft, you know, you’re allowed to draft players that basically, the worse your team is, the higher your draft pick is. So they basically just started tanking their season. And, you know, they put together a roster that wasn’t really capable of winning. And they lost so many games that they’re kind of guaranteeing themselves a pretty high pick in the draft. And the idea is we’ll bank all these draft picks. And then one day, we’ll get this good core of a team together and . . .

Jason Bradford
So all these poor shmucks who are playing for the losing team know they’re going to get like just fired as soon as they can get the –

Rob Dietz
Oh, even talk about them. Talk about the frickin fans in Philly that have to suffer through the well, you know, what was their record? Probably like 12 and 8.

Asher Miller
I think one season they started like 1 and 21

Rob Dietz
And it was all masterminded by . . . wasn’t the guy, Sam Hinkie, who came from Bain & Company. Like a management consulting company.

Asher Miller
Of course he did. Of course he did.

Rob Dietz
But in some sense, playing for the long term.

Jason Bradford
This is a much better example than mine.

Asher Miller
Yeah, I’ve got an even better one. Because it doesn’t have to always be for good and benevolent purposes. You know, the future of our kids or of society, and community. It could be even, if you’re after profit. I mean, think about what Amazon has done. Jeff Bezos, you know?

Rob Dietz
I thought you meant the river at first. I was thinking. . .

Asher Miller
That’s, that’s not valuable at all. What’s really valuable is Amazon, the company, right? So Jeff Bayes is his strategy – and he convinces investors to buy into this – was basically losing a shit ton of money. For a very long time. We’re talking about, maybe it was a decade, I’m not sure exactly how long before Amazon became profitable. And that was basically saying: We’re going to undercut our competitors. We’re going to wind up dominating these marketplaces because we undersell, and we’re going to lose money to undersell. Once we’ve cornered those markets, we’re gonna ratchet it all up. We’ve lost our competition and we’re gonna make hand over fist, and now he’s – he was the richest man in the world – now he’s like fighting with the Elon Musk over that.

Rob Dietz
Yeah, that used to be called predatory pricing. And it was illegal.

Jason Bradford
Yes.

Asher Miller
No, now, it’s it’s vetted as genius.

Rob Dietz
Long term thinking, right?

Jason Bradford
You know, when I was reading this stuff about Stern, and Nordhaus, and then to the context of, well, why are we assuming the future is gonna be brighter and we’re gonna be richer. And then I was thinking about these long term projects and the seven generations. I’m going, wait a second, there’s no way the financial system at all should have anything to do with this. The question of, should our planet be inhabitable by our descendants is not something that’s a financial question. It’s a moral question. It’s an ethical question. And if we have to do things today that go against all the financial logic that every Nobel Prize economist has ever come up with, then so fucking be it. Right?

Rob Dietz
Yeah, it’s weird how all of these world changing future dependent decisions have gotten almost hijacked by a financial sector that it’s just kind of slipped in there. And there’s, there’s a really strange thing that that you can look at like so the discount rate that’s selected, like the Nordhaus rate for climate change. You know, if you have a big discount rate, it essentially tells you don’t put the money towards fixing future problems. Because the wealth you have now is going to expand so greatly that it’s way cheaper to just –

Jason Bradford
Because interest rates are high, yeah.

Rob Dietz
Yeah, you just handle those problems as they come along. So there’s that side. But then you think the other way. Well, maybe maybe we shouldn’t have a really low discount rate. So yeah, if you have low discount rate, low interest rates in the economy, well guess what? That means that right now, money becomes freely available, and it’s easy to then spend onwhatever you want. And you saw that happening after the 2008-2009 crisis, when the correction for this big downturn was: Let’s flood money into the economy. And people started doing all kinds of dipshit investments. Like, that’s when the fracking boom occurred. And it’s never been profitable, the fracking companies, a lot of them have gone bankrupt, but

Jason Bradford
And that was a low interest rate environment.

Rob Dietz
Yeah, low interest rate. So it’s almost like you’re damned if you do, damned if you don’t with a discount rate. Likemaybe three is a magic number. I don’t know.

Asher Miller
Well, ultimately, I think it’s what you said, Jason. It’s that, yes, there’s this hidden driver of discounting the future. But it’s embedded so deeply in the financial system that we cannot have the financial system involved in these decisions. The whole idea of trying to put a price on nature – you kno we just sort of like financialized everything, even our minds when we think about the choices that we’re making here. And these are not financial decisions.These are moral, ethical, survival decisions.

Jason Bradford
And we need people who are in that frame of mind of am I got to be a good an ancestor here making those decisions.

Unknown Speaker
And anyone who brings up this question should be laughed out of the room.

Jason Bradford
The 1% versus 3%?

Asher Miller
Yeah. What the fuck are we talking about this? It’s the wrong conversation.

Jason Bradford
Yes, I think we need to do my chocolate exercise before we start any conversations like that. Do we agree?

Asher Miller
Yeah, let’s do that. Okay. Every every meeting of economists. including climate economist needs to start with the chocolate exercise

Rob Dietz
Maybe instead of economists every once in a while we should hear from ecologists like Michael Milken.

Asher Miller
Stay tuned for our George Costanza Memorial “Do the Opposite” segment where we discuss things we can do to get the hell out of Crazy Town.

Jason Bradford
You don’t have to just listen to the three of us blather on anymore.

Rob Dietz
We’ve actually invited someone intelligent on the program to provide inspiration. Hey, you guys, we got a recent review on iTunes that I want to share with you.

Asher Miller
Cool.

Rob Dietz
Yeah, this one is from Materthetomater.

Jason Bradford
Materthetomater?

Rob Dietz
Such good handles on our listeners. Okay, so Materthetomater says, “Thank you for this podcast. It is the most accessible plus funny forum to bring the hard reality into the conversations on our compounding planetary crises.” Hey, that’s our goal, right? To laugh at planetary crisis.

Jason Bradford
Well, that was a good short, sweet compact, to the point review. I appreciate the writing style there.

Asher Miller
I’m deeply uncomfortable with compliments, but thank you.

Rob Dietz
Yes, thank you Materthetomater. And anybody else out there that likes the show, lease go rate and review. If you dislike the show, contact us directly. Maybe we’ll read that on the on the air, too.

George Costanza
Every decision I’ve ever made in my entire life has been wrong. My life is the complete opposite of everything I want it to be.

Jerry Seinfeld
If every instinct you have is wrong, then the opposite would have to be right.

Asher Miller
So thinking about doing the opposite when it comes to short term thinking, discounting the future, and ultimately, I think to get somewhere significant, we’re going to really have to change the structures, the policies, incentives that we have in place that tend to reward all the short termism, and tend to punish long term decision making. So for example, if we think about, within politics right now, politicians are incentivized to think about short term, whatever benefits people in the near term that would motivate them to elect them or reelect them? Right. So we have to think about what changes that equation for them. Maybe that’s campaign finance reform, for example.

Jason Bradford
Yeah, to not beholden to raising a bunch of money quickly in large amounts. And then they’re beholden to then those who can then, the donor class, right?

Asher Miller
Who are giving the money because they want something in return, you know, in the near term. There’s also things like, you know, I don’t know how realistic this is, but maybe even, embedding long term thinking and planning into party platforms.

Jason Bradford
Which can happen from the bottom up, right?

Rob Dietz
Yeah, and well you can think about it in business, too. I mean, businesses are probably the most beholden to quarterly profits, or, you know, these very short term markers of success. But you’re able to change that as well. We’ve seen the example of B-Corps or Benefit Corps, which, you know, it’s maybe not perfect, but it does go in the direction of thinking about more than just, how much money we’re going to get next quarter. They actually have markers of what they’re doing for environmental stewardship, how they’re treating employees, and how their labor situation is set up.

Jason Bradford
Yeah. And they can even say, “We will forego some level of profit in order to accomplish these other goals.”

Rob Dietz
Right. Right.

Asher Miller
And I think also doing the opposite when it comes to thinking about how corporations function, whether it’s a B-Corp or not, right now, the officers of these corporations, their understanding of their job and their fiduciary responsibility is to maximize profit. So if you change with the rules are . . .

Rob Dietz
Putting the douche in fiduciary.

Asher Miller
So change what it means to be an officer of a corporation, what the expectation is away from that. Because you can even hear them say, like, “We’re actually doing our fiduciary responsibility. We can’t plan for long term.”

Rob Dietz
How is this stuff not in the rules? You know, I feel like you’re a kid in school, there’s rules about your behavior. You know, you can’t punch the other guy in the face. Like, why do we have rules for companies that allow you –

Asher Miller
Because the market isabout punching other people in the face. Right? Those are the rules.

Rob Dietz
Oh, man, that’s rough. I think also, when you think about doing the opposite, and applying discount rates, and discounting the future generally . . . Like think about climate change, right? Or any of these other planetary boundaries that were surpassing like biodiversity loss, or some of the pollution problems we face? Well, let’s not do the Nordhaus Stern debate of, “Uhh discount rates should be 3%, no it should be 1%, no it should be 3%.” You know, let’s not do that. Let’s just actually deal with the problem; the existential threat that’s in front of us.

Asher Miller
Anybody who wants to have a conversation about whether or not it’s cheaper to save humanity and other species now, or if it’s cheaper to do it later, that’s the person who should get punched in the face. I mean, why are we having this conversation? Do the opposite? Let’s not discuss that.

Jason Bradford
I mean, because like, I’m thinking of it from the perspective of, you know, I’ve been involved in agriculture and looking into things like there’s these carbon markets trying to form. And I can tell you, I have not been able to figure out a way that the market ever pays for carbon sequestration at any kind of rate or scale that is significant. In other words, like, it’s cumbersome. And, it doesn’t make any sense to try to also inject all these financial folks in there with all of their due diligence processes and their fees. It drags it down. And it’s just not going to be workable. In fact, I think most of the stuff we have to do, does not have a financial ROI. There’s not a financial return on investment. So, yes, shrink the financial system tremendously ,and figure out how we can shrink –

Asher Miller
We could drown it in a bathtub. Like, yeah, like who was that guy? Norquist wanted to do with the government

Jason Bradford
Yeah, exactly. I think that’s what we need to do the financial system. We still need the ability to move money around so that we can give people the ability to do things in the world. Money is a good mechanism for that. But you can also grant people money. You can say, like with a PPP program that just came out. It’s like they converted these loans into grants, right? So we know how to make money and say, “Oh, you don’t have to pay it back. Just use it in the world as it’s needed.” And that’s, I think what we have to be doing instead.

Rob Dietz
Think of the, hopefully they’re not all psychopaths, but the brain power as you shrink the financial sector, those folks could be working on something much more valuable for society.

Jason Bradford
And public banking is one of the ways people think that you can actually have these, like a B-Corp. The banking industry can look after a broader public interest and just be these people that help move money around to where it’s needed based upon these social goals that are that are long term.

Rob Dietz
So in the “Do the Opposite” segment, you know, we’re talking about change the whole sector, the whole system, the whole . . . Is there something that maybe I can do as an individual that’s doing the opposite.

Jason Bradford
I don’t know about you personally, Rob.

Asher Miller
Cuz everything you do is perfect.

Jason Bradford
Right. Well, gosh, plant a frickin tree. Right? All right. So that’s what I’m thinking is like, yeah . . . I mean I’m thinking to myself, well, what could all these high school kids who, the poor things are sitting around in zoom meetings nowadays, given it’s as we’re still in COVID season. . . They need to get out, they want to do something that’s going to make a better future. And almost all this work related to sort of ecosystem restoration, carbon sequestration, and improving soil health, biodiversity, this is all a lot of hands-on high touch, where you go out and you clean up, you plant, you steward. And I think that’s the way to think about it. And you can do it in so many ways, right? You could say, I’m going to become an expert on the local prairie species if you live somewhere. Or the local bird life. And what does it take to have the new metric be, we have more songbirds this year than last year?

Rob Dietz
Yeah. And it’s not like you’re necessarily going to reap the rewards for the action you’re taking. It’s setting up for future generations to experience.

Asher Miller
And I think maybe for us all individually as well. . . You talked about that book, Jason, “The Good Ancestor,” and I think it’s a great way of thinking of it. That in our own decision making, not to the point of paralysis, but to think not just about the, you know, what is the environmental impact of this choice that I’m making? Which I think a lot of our listeners are kind of wired to do. But actually think, how could I be a good ancestor in terms of the choices that I’m making? Not just for my kids if I have them, but for future generations?

Rob Dietz
Yeah. And if if that all fails, do the opposite is punching economist in the face?

Asher Miller
We’ve got to put a disclaimer in there Somebody’s gonna take us literally. Somebody’s gonna go up to poor Nordhaus and punch him in the face. What is that guy? 85 years old now?

Rob Dietz
I don’t know. I would feel really terrible. Yes, I don’t advocate punching anybody in the face.

Asher Miller
Figuratively. Not literally here.

Jason Bradford
Okay, Crazy Towners, Jason here. And I want to give a preamble to the following interview with Jane Davidson. She has an incredible “Do the Opposite” story. And I read her book about this called, “#FutureGen: Lessons from a Small Country.” And the country is Wales, where she lives, and has been involved in politics for quite a while. And so I think her story needs to be widely heard as Wales did something that apparently no other government has done. It put into law the duty of government to care for future generations. And it defined this through activities like delivering on a sustainable, locally oriented economy. So this is exactly the kind of responsible governments needed around the world. Anyhow, instead of listening to me interview Jane, you get to listen to the podcast partner of Crazy Town, a fellow Post Carbon Institute podcast called “What Could Possibly Go Right, hosted by Vicki Robin. And so Vicki had Jane on our podcast, and I figured why should I do any more work? You guys should just listen to Vicki and Jane. So here you go.

Vicki Robin
Hi, Vicki Robin here, host of What Could Possibly Go Right?, in which we have conversations with cultural scouts offering glimmers of hope and insight in the middle of the muddle of the mess that we’re in. Today’s inspiring conversation is with Jane Davidson. She’s the author of “Future Gen”, in which she explains how as a Minister for Environment, Sustainability and Housing in Wales, she proposed what became the Well-being of Future Generations Act, the Wales Act in 2015; the first piece of legislation in history to place regenerative and sustainable practices at the heart of government. I had such a great time talking with Jane and turns out we have two of the same mentors: one is Donella Meadows, and if you don’t know Donella, just look her up. And the other is “Our Common Future”, the Brundtland Commission Report in the late 1980s, which defined sustainable development. And Jane had the courage and the grit and the will to put it into practice. So here’s Jane.

Jane Davidson
I’m very happy to talk to you today.

Vicki Robin
Wonderful, and I’m happy to talk to you. Yeah, I just wanted to, for starters, I wanted to quote a mentor of yours, Morgan Parry, as a way to seed our conversation. He’s envisioning a future in which we make all the right sustainability choices, and he said, “We’ve stopped living as if there’s no tomorrow and it feels like a new era is about to dawn.” And it’s hard to see that in 2020, with the fires and the floods and the political strife and the sickness and injustice. Yet your work gives you another point of view and so thank you for being one of our cultural scouts, shining a light on the road ahead. You can take this wherever you want to go. I just wanted to do that springboard, because I was impressed with that.

Jane Davidson
Yeah, and I’m so glad you’ve chosen that springboard to start our conversation off, because Morgan Parry was a wonderful person. Morgan ran WWF in Wales, and I think your listeners will know about the work of WWF. And he was the kind of person who, when you wanted to say, “No”, he would say, “Well, why not? Why not do it this way? Why not think about it this way? Can I help you do it?” And he’d do all those things in a really gentlemanly way and you’d want to do it. And we had that conversation back in 2007, when WWF had produced a document called “One Planet Wales”, and I was a new minister in that role in the Welsh Government and I thought this work was absolutely brilliant. Morgan, for me, encompassed what the Brundtland Commission definition of sustainable development was from “Our Common Futures” in 1987; development that meets the needs of the present without compromising the ability of future generations to meet their own needs. I just thought this was a wonderful way of describing what every single minister in the world should be doing. How could we be in this situation, where politics was becoming shorter and shorter term, when all the countries who are members of the UN had signed up to this definition of sustainable development. And of course, we’ve had exactly the same thing in the context of the Sustainable Development Goals. 193 countries signed up to the Sustainable Development Goals in 2014. But I was really shocked to find when I was writing my book, that Wales is the only country in the world at the moment, and it’s not even a member state of the UN, that has actually put the Sustainable Development Goals into law effectively through creating the first Well-Being of Future Generations Act in the world.

So when we think about what can possibly go right, what I’m interested in doing is taking out short termism in politics, and encouraging every country in the world to factor future generations into their thinking, to deliver on that Brundtland Commission definition of sustainable development, and to make sure that we enable future generations to meet their own needs, because of the way that we act in the present. So I’m at the beginning of a journey, because when you find you’re the only country in the world to do this, it’s quite a big journey. But there’s something about this particular moment, this moment, this COVID moment, when people are starting to think again, what they value. I think it’s moments like this that gives us a real opportunity in terms of taking different kinds of approaches.

And it’s probably appropriate for me at this point just to tell listeners what the Well-being of Future Generations Act is. Very simply, it’s about making sure that the people of Wales are factored in, in their current and future generations, into how the world’s government and all its public services take decisions. And it’s done in three ways. Firstly, there are four pillars that underpin decision making, and many people listening to this call will know about social, environmental and economic pillars under-pinning the principle of sustainable development. But in Wales, we’ve added that cultural pillar as well, and culture is critically important. Culture is important because it is where our identities come from. It’s where our creativity and our imagination come from. But it’s also where our culture change comes from. We don’t get behavior change, unless we understand the cultures in which we operate. And I live in a bilingual country, where the language of Welsh, Cymraeg, is of equal status to the language of English and where many, many people in Wales speak Welsh as their first language; where many children in Wales are educated through the medium of Welsh, so culture for us is very important indeed.

The key part of the Well-being of Future Generations Act in terms of delivery, is to set seven goals. These goals are set in law. And if I just give you an example of a couple of those goals, I think you’ll immediately see how very different this is from the way countries normally operate and their governments normally operate. A prosperous Wales is defined in law as an innovative, productive and low carbon society, which recognizes the limits of a global environment and uses resources efficiently and proportionately, including acting on climate change, and which develops a skilled and well-educated population in an economy which generates wealth, and provides employment opportunities, allowing people to take advantage of the wealth generated through secure, decent work. Now, I’m not aware of other countries that have enshrined in law, that principle about a low carbon society, which recognizes the limits of the global environment, and uses resources efficiently and proportionately, including acting on climate change. When we talk about a skilled and well educated population, we’re also talking about people taking advantage of the wealth generated through securing decent work. This is not a lowest common denominator approach. This is what we might call a highest common factor approach.

And there are seven goals. That’s the goal for a prosperous Wales. But a resilient Wales calls for a nation which enhances a biodiverse natural environment, and has the capacity to adapt to climate change. A healthier Wales is a society in which people’s physical and mental well-being is maximized and in which choices and behaviors that benefit future health are understood. A more equal Wales is where people should fulfill their potential, no matter what their background and circumstances. Then it goes on with the Wales of cohesive communities, a Wales of vibrant culture and thriving Welsh language. And a globally responsible Wales is a nation which when doing anything to improve the economic, social, environmental and cultural well-being of Wales takes account of whether doing such a thing may make a positive contribution to global well-being, and the capacity to adapt to change, for example, climate change. So it’s not as if this is a nation which says, We can offload our problems onto someone else. That globally responsible Wales’ goal specifically prohibits that.

What in many ways is more important in the legislation is you have the pillars, and you have the goals. But you also, in the law, have five mandated ways of working. The government and public services in Wales have to think long-term. They have to think preventatively, they have to integrate their objectives in relation to the goals, they have to collaborate with others. And most importantly, they have to involve those about whom decisions are being made in those decisions. And thus, in Wales, a tiny country, a population of about 3 million, there is the first legislation in the world that not only enables the country to deliver on the principles, the Sustainable Development Goals, but offers young people in this country and the generations to come as yet unborn, a new future, because the government and the public services in Wales are now charged with the responsibility of making sure there is a future for those people. And I’m really excited about that.

Vicki Robin
Yeah, I just want to say that while you’re talking, number one, I want to cry because it’s so not my country. I mean, it’s so painful to live in the midst of exactly not that. You could put “Not” in front of every policy, “Not” in front of every value, and you would sort of end up with the United States at the moment. At the same time, I feel like there’s this pathway. Where I live, I live on an island with 80,000 people, it’s not many. But you know, maybe it’s possible in the United States to do this county up. So, I just like to hear your reflections, thinking about how many places in the world are unravelling, as you’re ravelling. What could you say is the secret sauce? Is it your size? Is it your history? What is the secret sauce that allowed Wales to pull this off? Besides you, and your massive enthusiasm. What is that? Tell us. Give us some guidance and advice and hints and clues based on what you see elsewhere in the world.

Jane Davidson
Well, it’s never about one person. I think that’s really, really important. What started us off in Wales was the fact that when the National Assembly for Wales was created in 1999, which was when the UK Government devolved responsibilities to Wales, Scotland and Northern Ireland, Wales had very, very few powers at the time. But the parliamentarians who created the first Government of Wales Act, the first piece of legislation that gave us any powers in Wales since 1404, which is when the previous Welsh parliament was; in their wisdom, they actually had followed the Brundtland story, and they gave the new National Assembly a duty to promote sustainable development and everything that it did. And we tried to do that over a decade and what we found was that, when you have a duty that is as wide as that, nobody knows how to interpret it. When you don’t have a mechanism for delivery, nobody knows how to do it.

Therefore, what is particularly important about the Well-being of Future Generations Act now is that, I might have proposed it and I proposed a lot of components of it, but I left politics in 2011. And it was that next generation of politicians who actually created that legislation, but in doing that, they therefore stood up for the ideas that have been so popular in Wales for actually a number of generations. I think partly, it’s because Wales was at the heart of the Industrial Revolution and therefore, we were a very dirty country with people living lives in the pit, on the quarry face, working with iron and steel. They were living appalling lives. They were making people rich, but they weren’t making people rich in Wales. They were making people rich elsewhere. The first million pound check ever was signed in the coal exchange in Wales. But that money was leaving Wales. I mean, Wales became famous for exporting wealth and exporting teachers, many of whom went to the United States.

But the message at the moment in the context of other countries is that there is something about being a small country. But there’s something about being a city, or a town, or a university, or a business. All those categories of organization are also doing work like this, in their own settings. If you think about the cities, the 40 cities that have signed up to delivering on climate change; if you think about the number of towns that have joined the Transition Movement; if you think about the number of people who are doing incredible work, holding the fossil fuel industry to account. And if you think about two of the people who have influenced me most in my life, they are American, Vicki, and they’ve been so important to me. One is John Rawls, with his theory of intergenerational justice, and that simple statement, “Do unto future generations, what you would have had past generations do unto you.” And the other, of course, is Professor Donella Meadows. And what I loved about Donella, and she just sent goosebumps up my spine when I first read her, was the fact that she was one of the first people who taught me that evidence is not enough. Because she put her evidence out there in terms of “Limits to Growth” back in the 1970s, when she thought that actually if you told governments what the problem was, they would act upon it. And I think in 1987, when we had the Brundtland Commission, and of course, also that was the decade of the first Earth Summit. I think they thought that too. And when I started in politics in 1999, I thought that too.

I thought all you had to do was enable people to understand what was going on, and that they would take the appropriate action. It’s a massive wake up call to somebody like me who’s been a politician, to realize that they don’t. They don’t, because there are other things driving them. Their constituency of voters is driving them; their ideology, their party’s ideology, is driving them. And actually, they’re so far down a route sometimes, it becomes almost impossible to come back. That’s why Donella became so important, because she said, “You have to have that science. You have to have that evidence. But you have to have other components as well.” And in 2002, when she wrote her 30 year update to Limits to Growth, of course, she talks about the fact that you have to have visioning. You have to have the networking when you engage with as wide a number of people as possible. You have to have the truth telling, so that people really understand and truth telling is critically important, and is often absent now, in the context of governments because governments often surround themselves with sycophants who actually support their views and the truth telling doesn’t necessarily get near them. You have to have learning from that truth telling.

But above all, you have to have loving. And I just think that, however dark the day is, it’s that point there’s always a dawn. It’s so important to think that if we build this obligation to future generations, we have to go through the dark to that dawn, because there will be a dawn. We know that younger people now, 80% of British young people understand the threats of climate change. Now, I don’t know what those figures are in America. But I bet it’s more than 50% of young people understand the threats facing them. How can they not when we’ve seen the fires and the floods this year? How can they not? Well, if they’re interested in nature, they’re seeing what’s happening to both the Arctic and the Antarctic, and the consequences in the context of ice. We’re seeing all sorts of houses for sale where I live sadly, because people don’t want to stay there, because they’re getting flooded. You’re seeing tremendous loss of houses, and luckily, less loss – but I’m sure there’ll be wider loss – of life that’s probably anticipated, as the fires have just munched their way through your states. Of course earlier this year, we were seeing what happened in terms of, I think what’s now meant to be 5 million animals losing their life in Australia in the context of fire. So we’re in very dangerous times.

But COVID is a moment, and if we can turn that moment into a movement, where people wake up to what really matters – and what COVID has done here in the UK, and particularly in Wales, which has had, I suppose, the strongest health response to COVID. You know, we’ve been kept in lockdown longer; we’ve had a much more health rather than wealth approach to COVID from our First Minister. It’s been similar actually in Scotland, too. But that has actually meant that people in Wales have felt much more supportive about their politicians here. I think if we just think of all those things that are happening at the moment in terms of COVID, or the big agenda around Black Lives Matter, after the murder of George Floyd; if we then think about climate change, what we have in the Well-being of Future Generations Act in Wales is a values framework that can provide answers to all of those.

And all I’m trying to promote is, this is all about good decision making. When I talked about how you make decisions, if you can think long term, if you can be preventative, if you can be collaborative, if you can integrate your thinking with others, if you can involve those about whom decisions are being made in those decisions. This is not just about well-being of future generations. This is OECD advice on good decision-making. So good decision-making factors longer term solutions into the mix. What we’ve seen in COVID in the UK is sometimes decisions made by the UK Government that have been overturned in a day – about examinations, about COVID, about housing, about giving free school meals to the poorest children – decisions over taken in a day, when if you’d been thinking about future generations as Wales was doing, all those decisions were already taken with the interest of future generations in mind, and they could be taken in a timely manner, and they could be taken with evidence. But it’s evidence plus hope, evidence plus hope and love, has to be the kind of equation that takes this significantly forward.

Vicki Robin
Yeah. It’s so beautiful. I feel inspired myself. Anyway, I want to thank you so much, Jane. This is marvellous, and I know people will be really inspired. So thank you.

Jane Davidson
Oh, Vicki, thank you so much. I just think that it’s all about seizing the moment. It’s that carpe diem. And if I can just leave you with one thought: Britain has returned to loving nature through COVID. And I don’t think anything is more exciting than that, because we have to look after our natural environment. Because if we don’t, we don’t survive as a race. Ecology does come before economy, and therefore just the love affair that people are now in with nature, that on its own gives me hope. So let’s both just seize these moments, carpe diem. Look for the new dawn. But fundamentally, just promote an idea that good decision-making factors in more than one generation.

Vicki Robin
Excellent. Thank you.

Jane Davidson: Thank you.