I’m just back from four days of workshops and public lectures in London, Paris and Brussels. There is tremendous interest in issues of worktime there. The London event was organized by the new economics foundation (nef) , and a research center at the London School of Economics (CASE). In 2010, nef did a very popular report called 21 hours calling for a 21 hour workweek.

I debated a conservative economist on the BBC World Service who called the idea “totalitarian” and “Draconian.” I think it’s a lot more interesting than that. We had overflow lectures and lots of interesting debate. The podcast of the nef workshop and lecture is available here:

http://www2.lse.ac.uk/newsAndMedia/videoAndAudio/channels/publicLecturesAndEvents/player.aspx?id=1297

Before the meeting,  I published a piece in the Guardian Sustainable Business section. Here it is: http://www.guardian.co.uk/sustainable-business/economy-employee-working-hours

Economists are fond of pointing out fallacies in economic logic, and unorthodox economists are especially fond of the sport. Adam Smith’s famous maxim that the self-interested behavior of individuals produces the common good is one widely-held fallacy. It was spectacularly debunked by the selfish behavior of the 1% who crashed the world economy in 2008.

Keynes’ fallacy of composition is another well-known example of debunking. Standard thinking holds that if people try to save more in order to cope with stagnation, that will lower interest rates, spur investment and create more jobs and growth. Keynes showed that higher saving in the absence of sufficient demand would actually lead to reductions in investment, a contraction in output, and, in the end, less benefits from saving for the thrifty.

There’s another analogous fallacy going around, which is that hard times should lead us to work longer and more intensively. A new economics foundation conference I’m attending in London this week will take up the question of working hours. Should wealthy countries be thinking about raising or lowering hours of work?

On the face of it, the work intensification approach makes sense. The downturn has reduced incomes and growth. For the individual, trying to work more is sensible – future conditions in the labour market are more uncertain. Expected future returns on financial assets are lower. Housing prices are deflating. For a nation experiencing relative decline, putting its nose to the grindstone makes intuitive sense.

But acting this way en masse risks triggering forces that operate in the other direction. Right now we’re experiencing glutted labour markets, in OECD countries as well as globally. Labour economist Richard Freeman estimates that over the last decade, the effective global labour supply has about doubled, from 1.46 to 2.93 billion. If people offer more hours to the market, wages fall and unemployment rises. Excess supply of labour also undermines investment and innovation, which accelerate when labour is scarce relative to capital.

Lump of labour! Lump of labour, the critics will cry. That’s the supposed mistake of economists like me who call for reductions in work hours during times of high unemployment. The critics believe the market can always provide enough work for whoever wants it.

But are they right? There’s little question that most of the OECD now finds itself in a Keynesian world of weak aggregate demand, ineffectual monetary policy and investor pessimism. And reducing budget deficits makes these problems worse. Corporations are sitting on enormous cash reserves, unwilling to invest them, which means that falling wages won’t clear the labour market and lead to more employment.

In the models of neo-classical economics times like the present are assumed away. But when we’re actually living through them, we need to recognise that measures that result in higher hours can be counter-productive by creating more unemployment and investor pessimism. Similarly, responding to shortfalls in pension programs by asking people to stay in the labour force more years further dis-equilibrates the market by creating more demand for a limited number of jobs. Sometimes there are impediments to job creation, and we happen to be living through one of those painful periods.

For most of the last 150 years, the nations of the global north have kept their labour markets in balance partly by continuous reductions in hours of work. These increases in leisure time have been funded by higher labour productivity. But recently, the US, Japan and the UK have done far less of this than other wealthy countries. In the States, hours have actually risen, which is part of why unemployment and underemployment are so high. Worktime reduction has become another causality of the wrong-headed economics of austerity. It’s time to change that, and to recognise that when it comes to hours of work, less is actually more.

Apologies for my long silence. I’ve been busy with many things, including the Occupy movement.  I just published the following piece in the Guardian Sustainable Business section, at: http://www.guardian.co.uk/sustainable-business/blog under the title, Occupy Sustainability. Hope you all have a productive and happy holiday season. More blogs in the new year. Juliet

With the recent failure of the Durban climate talks, the collapse of carbon prices in Europe, and news that emissions grew a record 6% in 2010, it’s time to re-evaluate the economic approach to climate that now dominates the conversation. The creation of carbon markets, carbon offsetting and the valuation of eco-systems are premised on the idea that marketization and reliance on economic incentives will yield sustainable outcomes. Many environmentalists like these policies because they seem to work with, rather than against our existing economic institutions and incentives. But as market-thinking expands with eco- and carbon-footprints, an obvious question is whether economics in command has become part of the problem.

It’s a conclusion one might draw from analyzing the Occupy Wall Street movement. In a few short weeks a rag-tag group of under-thirties has been able to transform the global conversation about economic issues by focusing on three basic points, all of which are essential for stopping runaway climate change and ecological overshoot.

First is the principle of anti-economics: Not everything has, or should have a price. Occupy has reminded us that there are more important things than money. These include human dignity, solidarity, freedom of expression, and morality. By contrast, standard economic thinking rests on the premise that anything can be monetized and that losers can always be bought off by winners. Compensation occurs via the medium of cash, the all-purpose equalizer. This may work for the garden-variety resource cases that economists started with, such as valuing a local park or a minor species, but it’s clearly wrong in the case of climate. The value of unpolluted atmosphere is approaching infinity. We are also reaching that part of the “curve” for water, arable land, and ocean eco-systems. The hijacking of the climate conversation onto the terrain of prices, costs and benefits has obscured the real issues and prevented fair solutions. We should be discussing moratoria on new oil and gas exploration and the timetable for phasing out fossil fuels altogether, rather than how rich people can bribe poor people to let them keep polluting.

The issue of rich and poor is the second of Occupy’s insights. On environment, distribution is primary. It may not be exactly the 1% and the 99%, as the protestors have it, but they’re not too far off. The top 7.5% of the global population are responsible for half of all emissions; the bottom 50% don’t emit anything at all. That should be a starting point for the global conversation on climate.

But in the economic models that dominate the policy-making debate, that crucial reality is ignored. Instead, modelers start by achieving an “efficient” outcome. If they worry about distribution, it’s only at a later stage. After all, as per the standard approach above, losers can always be compensated by the gains achieved with better policy. This is standard operating procedure in mainstream theory, as any student of Economics 101 can attest. But it’s a flawed approach.

One reason is that lack of attention to fairness at the beginning torpedoes chances of implementing policies. Just ask US Congressmen like Ed Markey and Henry Waxman who embedded giveaways to polluters in their climate legislation. It would yield efficient outcomes, their economist supporters assured us. The legislation failed in the end, in large part because of distributional implications that opponents rightly noted were blatantly unfair.

The less obvious reason is that distribution does affect outcomes, unlike in the textbook model. There is now a large body of research on the ways in which income inequality affects health, well-being, social mobility, and the quality of social connections. Emissions and sustainability need to be added to that list. While there’s less research on this connection, we do know that commons management is more successful with a more equal distribution, that land reforms reduce deforestation, and that equality is related to other variables that reduce emissions, such as shorter hours of work.

Occupy’s final point is that the 1% have captured the state and distorted democracy. They’ve mostly talked about monetary and fiscal policy, but in most countries, it’s no less true on climate and environment. In North America, the economic power of the mega-polluters has allowed them to buy politicians and legislative and regulatory outcomes. Flush with cash from the Kochs, coal companies and other polluters, Republicans in the US House of Representatives have moved from climate denial to attempts to shut down the EPA, while the Harper government in Canada, drunk with tar sands profits, has pulled out of the Kyoto Process. But curiously, as the political power of the energy industries has grown, economists’ (along with psychologists’) explanations of political inaction have gone in a completely different direction: to “neuro-economics” and stories about the inadequacy of the human mind to process risk, think abstractly, or delay gratification. Policy paralysis is seen as a shared human failure of brain functioning. But this is an implausible explanation in a world where seemingly similar humans have marshaled widely divergent responses. Occupy has it right. The most obstructionist nations are the ones with powerful energy sectors, not an excess of people whose pre-frontal cortexes are too small.

As grim as the latest ecological news has been, the successes of the Occupiers should be generating a new wave of optimism among environmentalists. Their challenge to economics in command has radically re-framed the debate. With fairness and democracy as our leading values, rather than efficiency and costs, we may yet have a chance.

This fun animation provides a vision of what a post-consumer society could look like, with people working fewer hours and pursuing re-skilling, homesteading, and small-scale enterprises that can help reduce the overall size and impact of the consumer economy.

Originally posted on The Center for a New American Dream’s site.

Today, the Bureau of Economic Analysis released revised figures for the Gross Domestic Product going all the way back to 2007, and they aren’t pretty. The recovery is a failure; the economy is lousy; and the official discourse is in deep, deep denial.

First, the numbers. The last year of growth before the financial panic and subsequent economic collapse was 2007. Since then, the economy has actually shrunk. That’s right, real GDP was less at the end of last year than it was at its peak in 2007. We’re still digging out of the hole that Goldman Sachs and friends put us in.

Previous estimates were for a small level of annual increase (0.1%), but the revisions put the average yearly change between 2007 and 2010 at -0.3%. GDP fell in 2008 by 0.3%. It also fell in 2009, by a much larger 3.5%. And it has risen only 3.0% in 2010. In the first quarter of 2011, the original estimate of 1.9% has since been downward revised to 0.4%, and I don’t think I’m going out on a limb to suggest that the preliminary figure for the second quarter of 2011 of 1.3% will also get knocked down when its time comes.

These downward revisions parallel similar moves at the Bureau of Labor Statistics, which is now in a repeated pattern of announcing big job growth numbers in the spring, only to shrink them months later. And today’s GDP report also helps to explain why the unemployment rate, after falling earlier in the year, jumped up again in June, to 9.2%. If the economy continues to perform as badly for the second half of 2011 as it has in the first, the measured unemployment rate will rise by a whole percentage point.

A key factor in the ongoing weakness of the economy is that the government is spending less. In 5 of the last 7 quarters, trends in government purchasing have pushed down GDP, contributing to job loss, reduced consumption, and economic uncertainty. The farce currently being enacted in Washington will further depress activity: austerity measures reduce employment and incomes. The brouhaha isn’t really about the deficit or future economic growth, the stated rationales. Elites (of both parties) have decided to go after the middle class and the poor, cutting retirement, disability and medical programs, in order to funnel more to the wealthy. (Welcome to life in the corporate republic of Kochistan.)

Today’s news can hardly be a surprise to the millions of Americans who are experiencing the reality behind the revised numbers, having lost jobs, income and livelihood. And it accords with the predictions of we “pessimists,” who, when the collapse began, predicted that true economic recovery would be elusive. As I argued in Plenitude, what lies ahead or the average American is that he or she will have a harder time securing a stable job, earning a good income, or prospering in conventional economic terms. That prediction continues to be borne out, and will be for some time to come, as long as business-as-usual predominates. Things will get much worse as austerity economics, or to use Naomi Klein’s term, shock doctrine, takes hold.

So why is the official conversation about the economy so distorted, and so tilted against the average person? Clearly the power of elites to frame both what gets talked about and how is by far the most important factor. But there’s another dimension to what’s happening today that’s worth recognizing. Progressives, whose brief is to advocate for the interests of working people, are stuck with a macro-economics of indiscriminacy. The standard tack is to argue for government spending in the abstract. Increase aggregate demand and the jobs will follow. As we can see, this argument is losing, rather than gaining traction. That’s not because it’s wrong per se: Keynesian pump priming does work, although less well in a global economy than in a national one. But spending for spending’s sake can’t be the right approach in a country with urgent needs. Far better to advocate for investments that we desperately require, such as getting the country off fossil fuels, funding education and research, repairing crumbling urban infrastructures, and restoring degraded eco-systems. Calls for spending without attention to vital needs ring hollow, as well they should. Indiscriminate growth, while it may yield some jobs in the short run, exacerbates the climate crisis, puts us in hock to the Chinese and the guys at Goldman Sachs, and squanders precious human resources.

In previous posts, I’ve paid a lot of attention to an alternate approach: reducing working hours to bring down unemployment, give people a break, and reduce carbon emissions. That’s the direction we need to go. But in addition, it’s time to revisit the question of how priorities for spending are set, who makes investment decisions and what the vital interests of the country really are.

So back to those dismal GDP numbers. Do they even matter? The chorus of voices calling for a de-throning of GDP is getting louder, in North America and Europe.

There are two main arguments against GDP. The first is that it measures the wrong things and fails to differentiate between goods and bads. Growth of “bads,” like oil spills and poor health, may show up as increases in the GDP, and even create income and jobs, but the country could also be getting “worse off” at the same time. This important point is finally getting some official attention, at least in Europe where a number of governments are studying alternatives to it. The second argument is that rising GDP doesn’t yield much happiness or well-being, once people are out of poverty. That’s probably true too.

But while the case against GDP is a good one, it’s also true that when GDP falls, it’s usually an indicator of true pain. And in the U.S. today, that’s certainly the case. Poverty and food insecurity are rising; widespread unemployment is endemic; foreclosures, evictions and housing instability continue. The downward revisions of the GDP are evidence of an economy, and a nation, in distress. Let’s hope the release of today’s number will help turn the economic conversation to our true problems and some innovative, life-affirming, fair solutions for them.

The economic news of the last few weeks has not been encouraging. In Europe, the various national debt crises remain unresolved, with a continued monopoly of banker-friendly austerity programs, and their predictable consequences of rising unemployment and stagnation. Debtor countries are being forced into the same financial orthodoxies that prolonged the depression of the 1920s and 30s, so we shouldn’t be surprised at the failures they will bring. More recession may also be the future of the countries enforcing these once-discredited policies, as weak demand across the region represses consumer demand, investor confidence, and government spending. In the United States the details are different, but the main story is the same. The country is experiencing continuing mass unemployment (25 million Americans remain unemployed or underemployed), further collapse in the housing market and an extremist political movement determined to slash all government spending directed at the people who are most likely to spend: the poor, the unemployed, and the middle classes. The outlook among wealthy countries is for more economic “weakness,” a conclusion supported by the plummeting stock markets of recent weeks.

Protecting bankers’ and creditors’ interests above all else is foolish economic policy. It enriches one group of people at the expense of nearly everyone else. But these days, it’s hard to get a hearing for the view that the wealthy countries remain wealthy, that we can solve our economic problems without making most people worse off, and that we can also do it while addressing the much larger challenge we face: climate change and growing ecological devastation.

So what’s the alternative to slashing government programs, budget cutting, and more concentrated wealth at the top? The centerpiece of a new approach is to re-structure the labor market by reducing hours of work. That may seem counter-intuitive in a period when the mainstream message is that we are poorer than ever and have to work harder. But the historical record suggests it’s a smart move that will create what economists call a triple dividend: three positive outcomes from one policy innovation.

The first benefit of hours reductions is a significant reduction in unemployment. In the wealthy countries, many of the jobs lost in the 2008 downturn will not re-appear. The revolution in information technology has made many jobs unnecessary, raised labor productivity, and undermined a good swathe of the labor market, as firms introduce radical technological and product innovation. (And some of the jobs are being created in low wage countries.) This is familiar territory, as it has been occurring since the 19^th century. The buggy and barrel makers are long gone. Toll takers and the workers in DVD factories are on their way out. So too are household tax accountants and retail check-out clerks.

Historically, market economies have absorbed this displaced labor in two ways. The first is the creative of jobs in new industries making new products. The 20^th century brought automobile workers, higher education administrators and medical personnel. But new jobs, spurred on by growth in GDP, are only half the story. The other mechanism for maintaining balance in the labor market has always been reductions in hours of work. Without the advances of a shorter workweek, vacation time, earlier retirement and later labor force entrance, the economies of the OECD would never have attained the “golden age” of high employment that prevailed after the1930s depression. Between 1870 and 1970, hours of work fell roughly in half. These countries have re-balanced the labor market by re-distributing work to make its allocation fairer. We need shorter hours because it is unrealistic to count on growth in GDP to absorb all this current and future “surplus” labor. Rich countries just never grow that rapidly. So the austerity economics that says work longer and retire later has it exactly wrong.

But even if GDP growth could solve the unemployment problem, it shouldn’t, because the cost in GHG emissions is prohibitive. North America and Europe have already blown their carbon budgets and until we re-structure energy systems, growth isn’t reconcilable with responsible emissions levels. Here too shorter hours of work provide a dividend. They are associated with lower ecological and carbon footprints. Countries that work more pollute more. That both because their scale of production is larger (the GDP effect) and because time-stressed households and societies do things in more carbon intensive ways than societies in which time is more abundant. Longer hours of work lead people to travel, eat, and live faster-paced lives, which in turn require more energy.

The third benefit of shorter hours is the time itself. As a growing movement of “downshifters” attests, short hour lifestyles allow people to build stronger social connections, maintain their physical and mental health, and engage in activities that are creative and meaningful. Time is especially valuable in rich countries where material needs can be met for everyone, and deprivation is caused by mal-distribution of income and wealth.

So that’s the triple dividend: reduce unemployment, cut carbon emissions, and give people quality of life. Austerity economics says we can’t afford to work less. A serious reading of our economic history suggests we can’t afford not to.

The recent headlines on Congressional hearings on light bulbs and toilets prompted the NY Times to do a Room for Debate feature, which I contributed to. They confine us to 300 words, so I didn’t get to say much, but for the record, here’s what I weighed in with:

Let’s re-write the question. The trope of “offended consumers” is a trap set by the PR folks at climate denier central: in fact, Americans are believe strongly in energy efficient appliances, love the financial payback, and appreciate the chance to help the environment.

Rand Paul, on the other hand, sure looks like he’s trying to provide a large and quick return on investment to his two largest campaign contributors. Those would be ARP, a repeated safety offender from the industry that is doing the most to stop the shift to clean energy—coal—and the Koch Brothers, notorious oil barons, climate deniers and stealth political donors.

This “debate” about light bulbs and toilets is a page from of a playbook we’ve seen time and again. For years, the tobacco industry framed their attempts to hook consumers on an addictive and dangerous product through the prism of individual choice and freedom. The junk food industry set up the Center for Consumer Freedom to scare people into thinking that the government wants to take away their Twinkies. The dirty fuels industry is now doing the same, perhaps because public opinion is turning against them.

A January survey by the Consumer Federation of America finds that 95% of Americans support more energy-efficient appliances and 72% support federal minimum standards. Ninety-six percent consider the financial savings important, and they’re also motivated by reducing air pollution (92%) and cutting greenhouse gas emissions (84%). But the industry saw an opening here, as only two-thirds of the public even know that the government sets standards.
Isn’t there some aspect of consumer choice? Yes. But the small segment of the market that wants the outdated products can still get them: while the big producers move on to provide cheaper, cleaner products, a few legacy companies can provide the old bulbs or appliances. That’s not what Rand Paul or Michele Bachmann want—they’re out to torpedo energy conservation and the shift to clean fuels. But it’s time to expose this well-worn trope for what it is: an under-handed attempt by polluters to escape public accountability.

For the whole debate, including the many comments it generated, you can go to: http://www.nytimes.com/roomfordebate/2011/03/17/the-politicized-light-bulb

The new year is a perfect time to resume my blog posts, which fell victim to a heavy schedule of speaking about Plenitude as well as two new courses at Boston College, where I teach full time. It’s a pleasure to be writing again, and to have the opportunity to send greetings for a good 2011. I hope you are healthy and thriving, despite the difficult political and economic circumstances in which the US and the world finds itself.

In the months since I’ve last written, I’ve become more convinced that the economic analysis in Plenitude was on-target. A major prediction, indeed premise of the book is that the labor market was unlikely to recover any time soon. This has now become the new conventional wisdom, in sharp contrast to the official story when the book was written, and for much of 2009 and even the first part of 2010. The punditry now reports that the unemployment rate is expected not to fall below 9% in 2011. Not much is being said about 2012. But sadly, we pessimists are looking too correct. At the current time, after a year of recovery, the economy is producing only as many jobs as are needed to absorb new entrants—the young people who leave school each  year (with or without degrees). If the private economy doesn’t do better than this, the people who have suffered from the 8.5 million or so jobs lost in this recession/depression will never be employed again. There are currently 14.8 million Americans officially unemployed, with many more under-employed, discouraged and marginally attached to the labor force. The November figures for that more comprehensive measure are 26.6 million.

As I noted in the book, GDP growth, the solution for unemployment that remains virtually the only large-scale approach to joblessness, is no longer a viable one. In December, economist Robert Scott of the Economic Policy Institute reported that while US corporations did create 1 million domestic jobs in 2010, they created far more abroad—1.4 million. Outsourcing will continue and is a major reason why just increasing the rate of growth of GDP cannot solve the nation’s unemployment problem. There are currently more than 4 people looking for each available position. And the GOP take on the unemployed is that they are lazy slackers, unwilling to search for work. This is a lie that is likely to become more prevalent. There is increasing cultural pressure to deny the reality of unemployment, as those affected become more socially excluded and less politically potent. A key goal for 2011 is to keep the unemployed in the public eye and active in the political arena. Efforts to organize the unemployed are going on around the country, with informal groups such as UWAG, and official efforts by the AFL-CIO and some individual unions (eg., the Machinists), but these fall well short of what’s  necessary to put these folks back to work.

That’s why it’s time for the 80% solution. It’s a fresh idea that solves a number of problems: unemployment, work-family pressure, and an impoverished civic sphere.

At the beginning of the 1980s, there was a sharp worldwide downturn, and Western Europe was hard hit. The Netherlands took an especially pro-active stance, opting for stable real wages and declining hours of work in order to get people back to work. New government employees were hired at 80% of a full-time schedule. Many got a four-day workweek, which was well-suited to a small country where quite a few young people commuted by train to their places of employment. The 80% schedule caught on, and by the time I arrived in the Netherlands in 1995 as a Professor at Tilburg University, the nation was heavily invested in 80% schedules. Public sector workers were joined by academics. It was possible to be not only an 80% time faculty member, but also a 60%, 40%, or even a 20%, i.e., a one day a week professor. And in what is likely to be most surprising to American readers, the whole banking industry had gone to 80% schedules and a four-day workweek. People weren’t filling up their garages with consumer goods, but they did have loads of time. By 2000, the country  passed the Working Hours Adjustment Act that gave every employee the right to reduce their hours, without losing their job, hourly pay rate, health insurance or benefits. (Benefits are pro-rated).

Dutch hours stood at 1367 in 2009 (2010 not yet available) in comparison to the US, where hours are 364 higher. (That’s about 9 weeks more work here than in the Netherlands). Dutch productivity per hour has been considerably higher than in the US, although right now (2010) it is at rough parity, because they haven’t laid many people off since the 2008 downturn, in comparison to the US, which has had massive employment losses. In the Netherlands, part-time work is the new full-time. Three quarters of Dutch women workers are on PT schedules. Twenty-three percent of men are also on PT schedules, with an additional 9% on a compressed 4-day workweek. What began as an extreme gender imbalance is being eroded as men have also begun to prefer shorter hours of work. Life satisfaction, the well-being of children, and a variety of other quality of life measures are far higher there than in the US. Worktime is a big part of why.

If the US started down the 80% solution road it would make a huge dent in unemployment. Employers could hire 5 people for every 4 jobs that are available. It’s a shorter worktime policy that doesn’t require cutting the hours and pay of people who have jobs. Instead, new people come on at 80% pay and work only 4 days. It’s especially feasible for younger workers who are getting salaries for the first time and for many of whom shorter hours are appealing.

While 80% pay may not be feasible for people in very low wage jobs, if these schedules become more widespread across the higher-wage parts of the labor market, they will raise wages. Shorter hours eventually lead to “tighter” labor markets, in which employees can capture more of their productivity gains. Right now workers can’t get those gains, because their labor market position is so poor. With this huge unemployment pool, downward pressure on wages is strong, especially for the lowest-paid. Through this mechanism, the 80% solution could also serve to help alleviate poverty and low incomes. Combined with a minimum wage increase, it would do even more.

So spread the word and put the 80% solution on the table at the local, state and federal level, as the debate about persistent unemployment and the economy drags on through 2011.

Sorry I’ve been unable to post lately. The semester started and I’ve got two new classes, including one entitled “People and Nature,” which I am teaching with a historian and really enjoying.

The good folks at Zocalo Public Square, who featured Plenitude during the summer, asked me to comment on the financial reform bill. What’s the most important thing it got wrong? Here’s my answer:

The conversation on financial reform has been dominated by questions of systemic risk, too big to fail, consumer rights and protections, confidence, and compensation excess. These are all important. But there’s another set of issues that are even more pressing, and that’s the relation between finance and ecological sustainability.

Right now, investment proceeds with virtually no concern for the effects of the investment — that is, the activities it supports — on the planet. Both corporate entities and international financial institutions like the World Bank are funneling money to build highly-polluting coal-fired power plants, destroy tropical rain forests, erect McMansions farther out from urban centers, blast off mountaintops for coal mining, and the like. Much of this activity is truly suicidal — finance is flowing to activities that are profitable, but only because we’re using an accounting system that ignores virtually all environmental destruction. (In fact, in the GDP, environmental destruction often shows up as a positive.)

My one reform is full-cost environmental accounting. That means financial institutions would have to make decisions based on a price for carbon that is compatible with keeping global warming to an increase of 1.5 degrees, that the impacts on air and water quality and eco-system services would be a part of what determines where and how money flows.

If we did this, we’d be getting a wealth of beneficial innovation in the financial sector: location-efficient mortgages, protection of valuable bio-diverse forest resources, accelerated investment in clean, renewable energy, and an end to destructive extractive practices that are imperiling the livelihoods of people around the globe.

A few days ago I gave a keynote address to the International Society for Ecological Economics which was held in Bremen, Germany. First time teleconferencing for a keynote, which was a nice, minimal carbon way to get the message out. Afterwards, people in the audience asked for some more detail on high-tech self-providing. Here’s my answer to them, which is also available online here.

I argued that to reduce ecological footprint and solve the unemployment crisis, hours of work should be reduced. This shares the available work and reduces pressure on eco-systems. The additional time off work available to households can then be deployed to what visionary philosopher Fritjhof Bergmann has called high-tech self-providing. That is, people make and do for themselves in areas such as food, shelter, energy, clothing and small manufactures. The high tech dimension is that the methods of production used require sophisticated knowledges and skills and in many cases, computers and other high-technology machinery. With HTSP, small scale production is high productivity and therefore sensible to undertake in an advanced modern economy.

The high tech self-providing economy is one that has a great deal of initial appeal, but also raises many questions. Is it really possible that people could go back to doing so much for themselves? Is it a viable option for the unemployed? What can be done to promote such a model?

The answer to these questions is yes, this is a viable model. Once households and individuals have time available to engage in it, the way to accelerate its adoption most quickly is to organize it at a community level. Bergmann has been active in Germany for many years, encouraging what he has termed New Work Centers. These community gathering places were initially aimed at the unemployed, who were time rich and cash poor. The centers purchase the machinery needed for some of the HTSP activities, such as the small-scale manufacturing technologies. (One version of these is the “fabrication laboratory,” pioneered at MIT in the US, which is a complementary set of small-scale machines that can be programmed and used to make small numbers of almost any kind of simple manufactured item.) Centers can also be used to house lower-tech tools for woodworking, sewing, etc. and they are also centers for skill development. Workshops, classes, talks and informal skill development activities take place at centers. They serve as nodes of networks of people who are practicing self-providing (of the high and low tech variety).  By bringing people together who are involved in these activities, centers lead to faster adoption of this way of life, both because it becomes socially normative and because of the practical advantages of learning that are possible in a communal setting. Such centers also build social capital, and with it the potential to be organized for political change.

In coming years, the economics of HTSP are likely to improve, for two reasons. First, fabrication technology and practice and other high-knowledge ways of production such as permaculture are being refined and improved on a continual basis. The extra work required by early adopters will be lessened over time. The transmission of knowledge and machinery will become more routinized and easier. These ways of producing things will become more feasible for those who are technologically less adept. Second, with economic stagnation and high unemployment likely to continue, and income growth predicted to be low, the financial benefits to individuals will increase. When households have surplus time and are short on cash, self-providing becomes a more intelligent way to meet needs than in eras of plentiful market work and easy money.

Finally, HTSP is also a high satisfaction way to spend time. In contrast to more passive or spectatorial methods of entertaining oneself, self-providing activates our creative impulses. That in turn creates deep satisfaction and happiness. In the end, the joys of making and doing may turn out to be the most important factor promoting a return to this way of life.

Despite the lack of policy progress on climate change and ecosystem degradation there is no shortage of solutions currently on offer. While the specifics may differ, those getting most attention share one characteristic—they focus on technological change. Whether it’s Pacala et al’s wedges, Jeffrey Sachs’ plan to reduce carbon emissions through plug in hybrids and carbon capture and storage, McKinsey’s cost abatement curve approach, or Jacobson and DeLucchi’s 100% renewables by 2030 plan, the emphasis is on technology. Most conspicuously lack a number of obvious changes that would reduce emissions and footprint. They barely address households’ lifestyles and “behavioral” changes (the first McKinsey report calls these too “difficult”), ignore changes in distribution of assets and structure of enterprises, and are light on the conditions of knowledge generation and dissemination. Furthermore, with the exception of the green jobs literature, they generally fail to integrate their analyses with current labor market conditions. As readers of this blog are well aware, the dominant discourse also pays scant attention to the equity implications and opportunities of environmental policy.

In Plenitude: the new economics of true wealth, I argue against the techno-fix approach. We also need deeper, systemic change that incorporates economic structures, the rate and pattern of growth, as well as alterations in cultural and social norms. Technology is heroic, but the task of making a grossly unbalanced system sustainable on its back alone is asking too much. Grappling with not only emissions reductions, but the full material requirements of a shift to a new energy paradigm, plus an additional 2 billion people requires technology plus.

But even more importantly, a wider array of changes is also a desiderata for a transition to a truly sustainable economy. That’s because what was efficient (or even just profitable, to put a finer point on it, and differentiate between true efficiency and profitability) in an industrial economy is not what is efficient, optimal or profitable in an ecologically-oriented economy.

Both for households and firms, shifting to sustainability opens up new possibilities, and intersects with ongoing changes in the economy. In Plenitude, I lay out a number of principles that should inform our thinking about how to solve the climate and eco-crises. These include re-thinking the question of scale, knowledge transmission, the role of informal economies and social capital, new consumer patterns, and the relation among productivity growth, output and hours of work. Here I will address two of these: scale and worktime.

Mainstream thinking on the shift to clean energy has a bias toward large-scale installations, such as nuclear power stations, big wind farms, concentrated solar, CCS and other capital intensive approaches which will be dominated by large energy providers. Both the technologies and the firms are outsized. But is big and even bigger the right future as we transition out of the industrial era? There are good reasons to think not, and that small is finally becoming not only beautiful, but also efficient. Information technology is key to why. We need a lot more research on this issue. But at a minimum, scale is one of the variables that needs to be seriously raised as we contemplate economic futures. The argument that the optimal scale of enterprise is falling relies in part on the role of information technology in undermining the need for the (classically inefficient) command and control functions of the modern corporation and making possible efficient, low-cost communication among distributed networks. Networks can share certain functions, while competing on others. Indeed, the experience of the US economy over the last few decades suggests that it’s the small and medium firms who have provided the bulk of innovation and employment growth.

There are other reasons why leaving the sustainable future to large corporate entities is problematic: their excessive political power makes them capable of blocking needed policy reforms, a problem that will only get worse in the US after Citizens United. Furthermore, resilience models suggest that highly centralized systems are vulnerable, a point hammered home by the financial meltdown of 2008. With climatic uncertainties predicted to increase, and financial crises occurring regularly, a shift to smaller enterprises, operating in a more de-centralized way is both prudent and likely to be more efficient. These arguments are in addition to the more conventional one that local or regionalized economies are less transport and energy intensive. Finally, de-centralization promotes equity, by making small-scale ownership, either in cooperatives or small businesses, more economically feasible.

A second area is the nexus of output growth, productivity and hours of work. There is now growing evidence that de-carbonization and de-materialization (the de-linking of production from materials flow) are only occurring on a limited basis. The material flows associated with a dollar of GDP have been declining by about 1% a year for decades, a phenomenon known in the literature as relative de-coupling. However, increases in total production have lead to rising materials use, including fossil fuels and their emissions. Since 1980, total materials use (including fossil fuels) climbed 45%. GHG emissions have also continued to rise, with a sharp acceleration since 2000. We haven’t yet cracked the nut of translating efficiency gains into lower emissions, nor are we likely to without addressing the rate of growth of output.

One approach, which is getting more attention in the last few years, is that the wealthy countries of the global North should reduce their growth rates in order to provide ecological space for the global South. (Indeed, even mainstream figures such as Lord Stern and Anthony Giddens have begun to question Northern growth. See also the recent statement of a global group of economists, of which I and other E3 economists are a part.

But how to achieve such a feat? As I first argued in 1991 in World Development, and have elaborated in Plenitude, the key is to reduce average hours of work. The economy will continue to produce productivity increases. If they are not absorbed by rising output, then equilibrium needs to be restored through declines in hours. People can work shorter weeks or years, or less of their lifetimes. That’s flexible. What matters is that productivity growth isn’t channeled into more production, but into more time off the job. Shorter hours are associated with lower emissions and less ecological impact.

This path also has two other virtues. It yields a significant benefit to employees in the form of more time off the job. It won’t be possible to get global North populations to accept slow or no growth without a corresponding benefit. This at least creates the possibility of political feasibility. And once hours reductions begin, they tend to be popular.

Second, if average hours fall, it becomes far easier to create new jobs, because firms need to generate less revenue for every new position. In the long-hours US it is now necessary to generate between 15 and 25% more revenue per job than in shorter-hours Western European countries. To date the recover has failed to produce job growth anywhere near the pace which is required to restore pre-crash levels, and opposition to additional federal stimulus is hardening. Hours reductions represent a fresh, possibly politically feasible approach. States are turning to the unemployment insurance system to subsidize hours reductions, and these policies are currently seen as politically neutral and even business-friendly. Reducing hours of work is a policy reform that satisfies the three E criteria: it reduces eco-impact, improves economic efficiency, and enhances equity.

Taken together a decline in enterprise size and a reduction in average hours of work can facilitate the growth of a low-impact sector of self-providing households, self-employment and small-scale businesses and coops. That’s because people will have more time away from their formal jobs and the competition from large enterprises will abate. Fostering such a sector will help individuals build skills and assets, reduce their personal footprints, and lay the groundwork for functioning local and regional economies. The web and digital technologies are central to this vision: because so much knowledge and skill can be readily transmitted digitally, it is far more feasible to have high productivity household and small-scale production. Indeed, household production should no longer be seen as an antiquated pre-industrial paradigm. Rather, it’s one of the new possibilities that are available to us in the 21^st century. In addition to its economic and ecological aspects, it can also be a highly desirable lifestyle, allowing people more creativity, freedom and flexibility.

The silver lining of the recession is that we could use it to accelerate a movement toward this kind of systemic change.  We could re-balance the labor market with policies that facilitate shorter hours, the development of cooperatives and small businesses, and skills-training in small-scale green technologies and knowledges. In the process, we’d be on the road to reducing CO2 emissions, lowering footprints, and creating a more equitable and well-functioning economy.

Also at http://realclimateeconomics.org/wp/ which is highly recommended