If you want to see change, you can stop counting at ‘3’

This post is my reaction to, and reflection on, our July 2, 2019 forum post: The 4-3-2-1 PIN code for a more sustainable economy. The PIN code attributes the 10 available units of influence; four to public policy, three to corporations, two to the investment industry and one to the individual citizen. In addition there is the potential for a multiplier to kick in (individuals vote, and consume) and, further, for a ‘multiplier on steroids’ from the intentionality of universal owners (within the ‘two’) working on the system not just within it. My argument here is that, if we want to see real change, we should ignore the ‘four’ – public policy is not going to lead the change we need.

This is counter to consensus opinion. Or, more accurately, does not reflect the majority of conversations I am part of. When I talk to people about my list of the two things that matter (climate change and inequality) the response is typically that the problems are so large and so complex that we just need policy makers to tell us what to do. Implicitly, my conversation partners are acknowledging that public policy is a ‘four’ – it carries the most weight; it has the greatest influence. It is also the wrong answer.

It is the wrong answer because public policy cannot lead us out from under the impending crisis that will certainly follow unchecked climate change and/or inequality. Public policy never rarely leads. I would argue that only an authoritarian regime would have the capability of genuinely leading. But even an authoritarian regime will operate under a prevailing incentive system. So, we need to understand the incentives.

Abolition of slavery – a case study

Recognising that it is dangerous to argue generalisations from specific cases, let’s consider William Wilberforce and the abolition of slavery. Does the UK parliament deserve any kudos for ‘leading’ the world in the abolition of slavery? In my opinion, no. The UK parliament did the right thing – but way too late. It therefore did not lead. Wilberforce was clearly an important part of the process, but anti-slave-trade activists existed before his involvement – he was recruited to their cause in 1787. Wilberforce then headed the parliamentary campaign against the British slave trade for 20 years until the passing of the Slave Trade Act in 1807. He continued to support the campaign for the complete abolition of slavery and the Slavery Abolition Act was passed in 1833, the year of his death. I find this shocking. Wilberforce devoted 43 years of his life to campaigning against something that was obviously wrong. (Yes, that is a moral observation – but all of human life, and therefore all of economics, involves morals.) How many other people devoted how many years of their lives to the same cause? There is no way to claim that public policy led on this issue. In fact it looks as though it was positively obstructive.

It’s the incentives, stupid

Why did the UK parliament take 50 years or so to do the obviously right thing? Because of the incentives. We know that the slave trade was profitable. We know that it comprised one side of the ‘virtuous’ triangle (heavy irony within those quotes). UK manufacturers imported raw materials from the Americas, and exported finished goods to Africa. Rather than have empty, and therefore expensive, ships sail from Africa to the Americas why not fill them with saleable human cargo? The corporations, the ‘three’, were therefore pro-slavery and, presumably, the investment industry (owners, the ‘two’) were happy to receive the financial return and ignore, or deny, the non-financial[1] impact. In our present-day context, we can only hope that universal ownership will allow us to progress differently through our own contentious issues.

So can we conclude that the 50-year delay was due to a five vs five (public policy plus individuals) stand off? I don’t think so. I think the majority of the ‘one’ (individuals) were probably pro-slavery for much of the period. In addition to the natural status quo bias, some of them would have depended on a pro-slavery stance for their employment, and it is likely that the media channels of the day sent a pro-slavery message. As for the ‘four’, my bet is that a fair amount of lobbying was taking place. At best, this was about votes. At worst, it was about personal enrichment.

My narrative, then, for this slavery case study is that change started within a fraction of the ‘one’. It grew its share of the ‘one’ and it gained a toe-hold in the ‘four’. There was then a long, and presumably difficult, campaign to convert enough of the units of influence to the cause. Both before and after the abolition of slavery, public policy endorsed what the non-public sector deemed to be best practice. If we look at the incentives politicians face (career risk, lobbying etc) and their short time frames (re-election cycles) could it be any other way?

It’s up to us

I have argued that, due to the prevailing incentives, legislation tends to be reactive and, at its best, it tends to enforce adoption of established, voluntary, best practice. I also think this reactiveness is close to ideal. If, like us, you believe that economies and societies are complex adaptive systems, then you will know that changes always bring unintended consequences. And sometimes those unintended consequences are painful. There is significant risk associated with public policy inflicting untested change on a system. To put it another way, if you were the proverbial philosopher-king would you be super-confident in the laws you needed to pass to address climate change and inequality?

Therefore change must be led by the ‘six’ (corporations, investment industry and individuals) doing what the ‘six’ does best – experimenting, innovating, competing, adapting and connecting. When best practice emerges the ‘four’ can, ex post, ensure that it is universally adopted thereby accelerating the change.

[1] I don’t believe ‘non-financial’ actually exists – but if you make the framing narrow enough and the time short enough it is a reasonable approximation