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Spring 2024


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New in Project Syndicate
Why Markets Can’t Cool the Planet: A Feature Article by Ivan Ascher

In a new article for Project Syndicate, Ivan Ascher, author of Portfolio Society, writes about climate-change solutions and the free market. Click here to learn more about his book. Click here to read the full article. An excerpt appears below.

“In a capitalist economy, our relationship with the future is guided by economic forces that are notoriously fickle. Commodities like sugar, soybeans, oil, and gas are relatively standardized products, meaning that they can be traded instantly and globally through the use of derivative contracts. But because these contracts price in assumptions about the future, commodity prices can fluctuate wildly. And that variability complicates environmental planning in three important ways.

For starters, price unpredictability makes it virtually impossible to detect the depletion of natural resources merely by looking at short-term changes in value. On the contrary, the more uncertainty there is about the scarcity of a resource, the greater the price swing, which only compounds the planning difficulty. As the French mathematician Nicolas Bouleau observed in a 2013 paper, “markets cannot spell out trends; it is absolutely impossible on an ontological level.” If resource-related trends were discernible from outcomes in financial markets, those who could see them would trade accordingly and the trends would disappear.

Second, uncertainty about the future price of any commodity makes it exceedingly risky for producers to invest in whatever new technologies might help reduce greenhouse-gas emissions. For most producers and consumers, it usually makes more economic sense to maintain the status quo than to change their habits, even if they know that the status quo will be disastrous for the environment.

Finally, although it’s possible to put a price tag on precious but non-marketable natural resources – like the capacity of a boreal forest to absorb atmospheric CO2 – the price fluctuations for resources that can be traded make most conservation strategies untenable in the long run. That’s because at some point, the volatile price of the tradable resource will exceed the fixed cost of destroying it.”