Sunday, July 10, 2016

Would Robin Hood help us fight climate change?


Today, a lot of the world's monetary wealth is in the hands of a tiny group of super-rich people; the virtual equivalent of Scrooge McDuck's money bin. What would happen if this money were stolen by the Beagle Boys or redistributed in some way? Would it change something in terms of climate change and resource depletion? 


Two posts recently published on "Cassandra's Legacy" discuss the possible consequences of a redistribution of the world's wealth on greenhouse gas emissions. The first, by Jacopo Simonetta, argues that a more egalitarian distribution, that he calls "Operation Robin Hood," would raise emissions and worsen the climate change problem. The other, by Diego Mantilla, argues the opposite.

Both Simonetta and Mantilla start by analyzing the correlation between carbon emissions and monetary wealth. The data available clearly indicate that there exist a proportionality between the two parameters. And, of course, as long as that proportionality holds, there follows that, no matter how we redistribute the monetary wealth, nothing changes, which is Mantilla's main point. He then cites the example of Cuba as a relatively egalitarian but low-impact country.

However, the correlation wealth-emissions is lost when we go to the extreme end of the curve, that of the super-rich; who emit proportionally less than the poor. For instance, Bill Gates' net worth is presently estimated as around 80 billion USD; but it is unlikely that he emits one million times more CO2 than a middle-class westerner whose net worth is, say, around 80 thousand USD. So, Simonetta argues that taking money from the rich and giving it to the poor would raise emissions and worsen the climate change problem.

Given their initial assumptions, both Mantilla and Simonetta may be right. But the problem is a different one and it lies in the fact that money is a purely virtual entity, while resources are real ones. Today, the fossil fuel industry that produces something of the order of 90 billion barrels per day of combustible liquids, and more fuels in the form of coal and gas. Why should a redistribution of the world's monetary wealth change these productive levels? The oil industry doesn't care about who buys oil and even the hypothetical disappearance of the category of the super-rich would simply mean that there would be fewer personal jets and more small cars. But, from the viewpoint of emissions and of resource depletion, nothing would change.

That's true, however, only as a first approximation because the economic system would change and adapt to a redistribution of wealth. For instance, Simonetta makes the point that "Operation Robin Hood would produce a sensible reduction in mortality, and probably an increment in natality too, among low wage people. So a sharp population increase, at least for one or two generations." This is perfectly possible if, say, the mansions of the super-rich were to be turned into hospitals for the poor.

But it may also be true that a redistribution of wealth would lead a large number of people to go through the "demographic transition". That is, for instance, turning the mansions of the super-rich into public schools would lead to a large number of better-educated women who, then, would tend to have fewer children. And that would reduce emissions.

In the end, a substantial redistribution of the world's wealth in more egalitarian terms would probably have little effect in the short term, but it might have unpredictable ones in the long term. What we can say for sure is that the world is evolving in the opposite direction to the one that Robin Hood would favor: the rich are becoming richer, and the poor poorer. At the same time, we keep emitting greenhouse gases at the highest rates ever observed in history. Are these two trends correlated? Difficult to say, but perhaps moving to a renewable-powered world would be the best way to get a less unbalanced wealth distribution.





8 comments:

  1. Ugo,

    The global inequality of wealth has been increasing, but that of income has not.

    While developed countries like the US, the UK, and Italy are becoming less egalitarian, the world as a whole is becoming more egalitarian, but only barely so, at least if one looks only at income.

    Branko Milanovic says the global Gini coefficient of income has decreased from above 0.70 to close to 0.65 over the past few years.

    Let's assume that the Gini of income is a proxy for the Gini of energy consumption.

    Victor Yakovenko (2012) and Lawrence et al. (2013) say that maximum entropy is achieved at a Gini coefficient of 0.50. And they predict that, if the world economy continues to integrate, the Gini of energy will decrease further until it reaches 0.50, when maximum entropy will be achieved, at which point it will stabilize. That is better than today's global inequality, but it is still an appallingly high Gini, similar to that of Chile.

    Yakovenko (2012) says: "I would like to point out that renewable energy has different characteristics than fossil fuel. Because solar and wind energy is typically generated and consumed locally and not transported on the global scale, it is not subject to the entropy-maximizing redistribution. Thus, a transition from fossil fuel to renewable energy gives a hope for achieving a more equal global society."

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    1. Theft is one of the way to redistribute wealth and even the Beagle Boys play a role in the greater scheme of things!

      About the Gini, yes, it seems to be the case. The system is stabilizing. Except that there remains a 3% of people who don't stay on the Lorenz curve and accumulate gigantic amounts of money

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    2. In the Chancel and Piketty (2015) dataset, the threshold for belonging to the global top 3 percent is about PPP 2014 $40,000 per person per year, five times the global mean.

      In terms of wealth, my back-of-the-envelope calculation, assuming there is a Pareto power law between the top 5 percent and the top 1 percent, is that the threshold for belonging to the top 3 percent is a net worth of about $300,000 (2015 dollars) per adult, more than five times the global mean.

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  3. "For instance, Bill Gates' net worth is presently estimated as around 80 billion USD; but it is unlikely that he emits one million times more CO2 than a middle-class westerner"
    Wealth and industrial production are tied up.
    Industry emits Co2.
    Gates emits Co2.

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    1. I wondered about that too. One could argue that, as individuals, industrialist Henry Ford and oil tycoon John D. Rockefeller didn't emit a million times more carbon than one of their customers. But they made their millions by encouraging such emissions.

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  4. I think that money (and power) transmission follows the same rules of genetic transmission (money IS power, to live fit and have chances to reproduce). We are programmed to keep alive this circle of parental wellness from generation to generation, and this is Thermodynamics, in the end, I think;
    Because in my opinion life mechanisms tend to select and reward individuals and species that maximize energy accumulation, from generation to generation; evolution is in the end the feature, based on DNA sequence, by which Thermodynamics reveal and act for Entropy production in our corner of the Universe; and money accumulation, to be stored for parental transmission, can be seen as a simple consequence;

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Who

Ugo Bardi is a member of the Club of Rome and the author of "Extracted: how the quest for mineral resources is plundering the Planet" (Chelsea Green 2014)