The Ministry for the Future

42

Asked Mary for a meeting with her and Dick Bosworth, to go over some of the economic plans the software team was developing. She cleared an hour at the end of a Friday and meeting convened in her seminar room.

What’s up, Janus Athena? she said, a bit brusquely. She’s always visibly skeptical that AI could contribute anything substantive to her project.

Went to the whiteboard and tried to show her how AI could help. Always awkward to explain things to computer illiterates, a translation problem, a matter of deploying metaphors and finding gross generalizations that aren’t too gross.

Started this time with rehearsal of Hayek’s argument that markets deliver spontaneous value, and are therefore the best calculator and distributor of value, because central planning can’t collect and correlate all the relevant information fast enough. So planning always got things wrong, and the market was just better as a calculator. The Austrian and Chicago schools had run with that opinion, and thus neoliberalism: the market rules because it’s the best calculator. But now, with computers as strong as they’ve gotten, the Red Plenty argument has gotten stronger and stronger, asserting that people now have so much computing power that central planning could work better than the market. High-frequency trading has been put forth as an example of computers out-achieving the market proper, but instead of improving the system it’s just been used to take rents on every exchange. This a sign of effective computational power, but used by people still stuck in the 1930s terminology of market versus planning, capitalism versus communism. And by people not trying to improve system, but merely to make more money in current system. Thus economists in our time.

In fact, entirely new organizational possibilities now emerging with power of AI. Big data analyzed for best results, all money tracked in its movement all the time, allocations made before price competition distorts real costs into lies and universal multi-generational Ponzi scheme, and so on. Particulars here got both pretty technical and pretty theoretical at the same time, but important to do one’s best to sketch out some things Mary might both understand and consider worth ordering team to do. Dick already up to speed on most of this.

Mary sighed, trying to focus on computer talk without boredom. Tell me how, she said.

So often they don’t even understand the nature of the need. Reminded her that Raftery modeling still showed the vast bulk of the most probable twenty-first centuries experiencing an average temperature rise of 3.2 degrees Celsius. Chances of keeping average temperatures below 2 degrees C were five percent. Keeping it under 1.5 degrees C were one percent.

Mary just stared. We know it’s bad, she said acidly. Give us your ideas to help!

Told her about the Chen paper, useful for its clarity, and now getting discussed in several different discourse communities, it being one of the earlier of various proposals to create some kind of carbon coin. This to be a digital currency, disbursed on proof of carbon sequestration to provide carrot as well as stick, thus enticing loose global capital into virtuous actions on carbon burn reduction. Making an effective carrot of this sort would work best if the central banks backed it, or created it. A new influx of fiat money, paid into the world to reward biosphere-sustaining actions. Getting the central banks to do that would be a stretch, but them doing it would be the strongest version by far.

Mary nodded grimly at that. A stretch, she repeated.

Persisted with arguments for carbon coin. Noted that some environmental economists now discussing the Chen plan and its ramifications, as an aspect of commons theory and sustainability theory. Having debunked the tragedy of the commons, they now were trying to direct our attention to what they called the tragedy of the time horizon. Meaning we can’t imagine the suffering of the people of the future, so nothing much gets done on their behalf. What we do now creates damage that hits decades later, so we don’t charge ourselves for it, and the standard approach has been that future generations will be richer and stronger than us, and they’ll find solutions to their problems. But by the time they get here, these problems will have become too big to solve. That’s the tragedy of the time horizon, that we don’t look more than a few years ahead, or even in many cases, as with high-speed trading, a few micro-seconds ahead. And the tragedy of the time horizon is a true tragedy, because many of the worst climate impacts will be irreversible. Extinctions and ocean warming can’t be fixed no matter how much money future people have, so economics as practiced misses a fundamental aspect of reality.

Mary glanced at Dick, and he nodded. He said to her, It’s another way to describe the damage of a high discount rate. The high discount rate is an index of this larger dismissal of the future that J-A is describing.

Agreed to that.

And this Chen line of thought solves that? Mary asked. It extends the time horizon farther out?

Replied, Yes, it tries to do that.

Explained how the proposal for a carbon coin was time-dependent, like a budget, with fixed amounts of time included in its contracts, as in bonds. New carbon coins backed by hundred-year bonds with guaranteed rates of return, underwritten by all the central banks working together. These investments would be safer than any other, and provide a way to go long on the biosphere, so to speak.

Mary shook her head. Why would people care about a pay-off a hundred years away?

Tried to explain money’s multiple purposes. Exchange of goods, sure, but also storage of value. If central banks issue bonds, they’re a sure thing, and if return set high enough, competitive with other investment. Can be sold before they mature, and so on. Bond market. Then also, since this is a case of central banks issuing new money, as in quantitative easing, investors will believe in it because it’s backed by long-term bonds. And this money could be created and given to people only for doing good things.

Like what? Mary asked. Issued for what?

For not burning carbon.

Started writing on the whiteboard, feeling she was oriented enough to be ready for some figures. Not equations, which might just as well be Sanskrit to her, only some numbers.

For every ton of carbon not burned, or sequestered in a way that would be certified to be real for an agreed-upon time, one century being typical in these discussions so far, you are given one carbon coin. You can trade that coin immediately for any other currency on the currency exchanges, so one carbon coin would be worth a certain amount of other fiat currencies. The central banks would guarantee it at a certain minimum price, they would support a floor so it couldn’t crash. But also, it could rise above that floor as people get a sense of its value, in the usual way of currencies in the currency exchange markets.

Mary said, So really this is just a form of quantitative easing.

Yes. But directed, targeted. Meaning the creation, the first spending of the new money, would have been specifically aimed at carbon reduction. That reduction is what makes the new money in the first place. The Chen papers sometimes call it CQE, carbon quantitative easing.

Mary said, So anyone could get issued one of these coins after sequestering a ton of carbon?

Yes. Or also a fraction of a coin. There would have to be a whole monitoring and certification industry, which could be public-private in nature, like the bond rating agencies are now. Probably see some cheating and gaming the system, but that could be controlled by the usual kinds of policing. And the carbon coins would all be registered, so everyone could see how many of them there were, and the banks would only issue as many coins as carbon was mitigated, year by year, so there would be less worry about devaluing money by flooding the supply. If a lot of carbon coins were being created, that would mean lots of carbon was getting sequestered, and that would be a sign of biosphere health that would increase confidence in the system. Quantitative easing thus directed to good work first, then free to join economy however.

Mary said, So if you combined this thing with carbon taxes, you would get taxed if you burn carbon, but paid if you sequester carbon.

Agreed, and added that any carbon tax should be set progressively, meaning larger use more pay, to keep it from being a regressive tax. Then it becomes a good thing, and feebates can be added that pass some of this tax income back to citizens, to make it even better. A carbon tax thus added to the carbon coin was said by Chen and others to be a crucial feature of the plan. When both taxes and carbon coins were applied together, the modeling and social experiments got much better results than when either strategy was applied by itself. Not just twice as good, but ten times as good.

Mary said, Why is that?

Confessed did not know. Synergy of carrot and stick, human psychology—waved hands. Why people did what they did—that was her bailiwick.

Dick pointed out that for economists, carrots and sticks are both just incentives, and thus the same, although they tend to assume sticks are more efficient than carrots.

Mary shook her head vigorously. No fucking way, she said. We’re animals, not economists. For animals, negative and positive are generally regarded as quite distinct from each other. A kick versus a kiss. Jesus Christ. She looked back and forth at us, said, It’s a question which of the two of you are the more inhuman, the computer geek or the economist.

Both referents nodded at this. Point of pride, in fact. Trying to out-do each other; attempt to attain Spocklike scientific objectivity a worthy goal, and so on. Dick quite hilarious on this matter.

Mary saw the nods and sighed again. All right, when you align both negative and positive reinforcements to press us toward a certain behavior, we then do that behavior. It’s just Pavlov, right? Stimulus and response. So how could we get this started?

Said, If the dozen biggest central banks agreed to do it together, it would go.

But that’s true of almost anything! Mary exclaimed. What’s the minimum you think it would need to succeed?

Said, Any central bank could experiment with it. Best would be the US, China, and the EU. India might be the most motivated to go it alone, they’re still very anxious to get carbon out of the air fast. But the more the merrier, as always.

She asked to be led through the time element again.

Explained how the central banks could simply publish the rate of return that they planned to pay out in the future, no matter what. Investors would therefore have a sure thing, which they would love. It would be a way to go long, and to securitize their more speculative bets. The stick, the carbon tax, also needed to rise over time. With that tax rate and its angle of increase published in advance, and a long-term rate of return guaranteed for investing in carbon coins, one could then calculate the cost of burning carbon, and the benefits of sequestering it. Normal currencies float against each other in the exchange markets, but if one currency is guaranteed to rise in value over time no matter what, then it becomes more valuable to investors. It will always stay strong in the currency market because it’s got a time stamp guarantee of a rise in value. The carbon coin designed in that way would eventually probably replace the US dollar as the world’s benchmark currency, which would strengthen it even more.

It’s like compound interest again, Dick remarked to Mary.

Said, Yes, but this time guaranteed by being delinked from current interest rates, which often hit zero, or even go negative. With this coin, you’re good to go no matter what happens.

Dick said, That could make for a liquidity trap, because investors would stash money there for safety rather than put it to use.

Shook head at that. Set the rate low enough that it’s seen as more of a back-up.

Dick said, If the central banks announced they were upping the amount of carbon needed to earn a coin, they could then balance it with other safe asset classes like treasury bonds and infrastructure bonds. That would add liquidity and give traders something about this that they could short, which is something they like to do.

Agreed this might be good.

Mary said, Could we issue these carbon coins ourselves from the ministry?

Shook head. You have to be able to buy them all back at some floor rate, to make people believe in them. We might not have the reserves to do that.

We can barely pay our staff, Mary said.

We’ve noticed, Dick joked. Good to see he liked this plan.

Mary brought the meeting to a close. Work this up into a full proposal, she said. One I can take to the central banks and defend. I’ve got meetings with them already scheduled. We’ll see where it takes us.