Peak everything

Reading books like Peak Everything: Waking Up to the Century of Declines by Richard Heinberg one is struck by the apparent certainty and magnitude of the decline we human beings face. We seem to be on the brink of some sort of collapse, whose precise form and precipitating causes cannot be foreseen. It's very much like the unravelling of the world's financial system, whose impacts, even now are uncertain.

Many of the causes, though, are similar. To my mind, the underlying problem is the combination of extreme globalisation with lax regulatory policy. The market for financial instruments is effectively, a single global market. With its massive volumes, the rewards from exploiting even inadvertent regulatory deficiencies can be massive - and entirely legal. No regulatory system can anticipate and stop up all loopholes. What could have been done, though, was to set up countervailing incentives: reward people for avoiding the collapse that we are now seeing.

Disastrously, in my view, we are heading in the same direction in other areas. Take climate change or peak oil. With both these challenges our governments are behaving inadequately. Now government is not all-powerful and, as with financial markets, it cannot foresee which laws, regulations or projects are going to best deal with the problems. But what it can do (apart from obvious things like remove subsidies to oil consumption) is to offer incentives for people to avoid catastrophe, however they do so. One way of doing this would be to issue Social Policy Bonds that would reward investors in the bonds if (say) climate-related disasters are avoided or their impacts minimised. See an earlier post on this theme. The key is to target the desired outcome, rather than try to anticipate and deal with all the impediments to such an outcome - an impossible task, as we have seen in the finance sector. We urgently need outcome-based policy when it comes to climate change and other environmental and social problems, which are just too complex for the conventional approach.