Green New Deal - The Neo-Classical Empire strikes back


John Barry: Over at Irish Economy, Richard Tol has attacked the Comhar Green New Deal report. What I particularly enjoyed about it and found revealing was the evident display of self-confident 'expertise' and 'authority'.

To take some examples, Richard Tol opines that "Most experts reckon that the transition to a low-carbon economy will take 50 years (give or take a few decades)" - but sadly, we're not told which experts, or that there is a world of a difference between using reformist, orthodox economic tools to encourage the transition to a low carbon (a gentle greening of 'business as usual') and what ought to be done to secure energy security, detox from fossil fuels and combat climate change. The comfortable and comforting assumption which runs right through Richard Tol's analysis (and one of course shared by other orthodox economists) is that politics does not enter the equation and the most we can hope for is a 'market-led' transition to a low carbon economy.

Of course, not even all neo-classical economists shares this view - take Nicholas Stern's view on the economics of climate change. In a recent report, for the German Foreign Ministry, for the G20 summit, he stated that G20 members should “initiate and extend programmes that provide loans to home-owners and small and medium-sized enterprises for boosting energy efficiency in buildings”, and “undertake investments in electricity grid upgrades and extensions, public transportation, integrated freight transport systems and carbon dioxide pipelines for carbon capture and storage projects”. Failure to do so threatens global sustainable growth in his view. This report builds upon a previous report by the London School of Economics ' Grantham Institute for Climate Change the Environment - 'An Outline of the case for a 'Green' Stimulus', which based its analysis using the IMF's assessement that macro-economic stability and recovery required state stimulus packages, and provides empirical as well as theoretical evidence that spending is superior to tradition tax cuts [1][2]

Later in his post, without any supporting evidence, we are told "Green New Deal would raise the price of energy and keep labour taxes higher than needed, the economic recovery is slowed down and jobs are destroyed", but the point of any GND would be to shift taxes from labour to carbon emission - something, of course, outlined in the report from the Commission on Taxation recently. And the whole point of the GND is to jump-start this transition because it makes long-term economic, ecological and energy security sense.

Why I enjoyed this post so much, and why I'll be using it in teaching students about the ethical underpinnings of any theory of political economy, is the following: "I would argue that pension funds should provide pensions, and to that end they need to invest in whatever gives the highest risk-adjusted return, regardless of whether it is green or blue or yellow." - would that extend to investing in countries or companies that abuse human rights? use child labour? use slave labour? or engage in any number of 'race to the bottom' cost-saving measures which raise ethical objections? Neo-classical economics is as political and ethical as any other form of economics, to pretend it has a monopoly on what the economy, how we should conceptualise economics, best expressed in the way neo-classical economists think and assume that their conception of the economy is not only the only 'real' one, but sets the standard and indeed 'grammar' by which ALL other forms of political economy should be judged. Ideological hegemony or what?


[1] Hemming, R, Mahfouz, S, and A Schimmelpfennig (2002): ‘Fiscal policy and economic activity during recessions in advanced economies’ IMF Working Paper 02/87, May

[2] Hemming, R, Kell, M, and S Mahfouz (2002): ‘The effectiveness of fi scal policy in stimulating economic activity – a review of the literature’ IMF Working Paper 02/208, December

Posted in: EnvironmentEconomics

Tagged with: Political EconomyGreen New Deal



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