Climate change, economy, new economy, risk management

Energy, Economic Trends, and Effecting Change: A Review of the Economic Superorganism

In his book “The Economic Superorganism”, Carey King outlines a novel system to organize economic decision making and to evaluate outcomes in a Climate Changed world. People are becoming increasingly aware of the consequences of climate change. In October of 2018 the UN Panel on Climate Change stated we have 12 years to halt the growth of CO2 if we hope to avoid the worst possible consequences of global warming. (1) The fossil fuel industry is the primary driver of CO2 growth.

In January 2020 the World Economic Forum held its annual gathering at Davos, Switzerland… the primary subject discussed by business and economic leaders was the impact of Climate Change and the need to manage the resulting changing economy.

“The debate on climate change is forcing businesses to respond to demands to stop carbon dioxide and other greenhouse gas emissions. While some have been slow in embracing the fight, executives at Davos highlighted that the overall views from within the business community have dramatically changed over the last decade or so, moving from denial and questioning science into complete acceptance.” (2)

King points out in his years of research, the connections between income, consumption and the effect energy has on the economic system we operate within. Looking at the abstract data points he takes the next step, which many economist do not do, of connecting it to real life outcomes we observe in our daily lives… our collective ability to earn less, poverty and homelessness increasing, students coming out of college unable to support themselves or build a household of their own, debt piling up and drowning the middle class…

“These changes to energy consumption, wage distribution, and debt accumulation are all interrelated…” (3)

King’s central insight is this; The “economic distribution is also affected by the rate of energy consumption, and hence economic growth. When energy consumption increased rapidly the U.S. was able to more equally and more broadly distribute money within the economy.”

The question this raises, and that he addresses in his modeling, is what happens when Climate Change is accelerating, and an economy based on fossil fuels needs to be converted to one that is based on renewables and sustainability? How does the economic system respond? What happens to the people who depend on that economic system? How can we manage the transition in a way that is efficient and beneficial to all?

Neoliberal economic modelling is typically backward looking and dependent upon a static outlook of the environment. When that environmental system is changing the resulting modelling can be less predictive and less effective. “Because most of our public policies are based upon economic analyses, improper economic frameworks allow the projection of outcomes that also are unconstrained by natural resources.”

By taking a different analytical approach of the “economic superorganism” as King offers, policymakers can stress-test assumptions that have previously been left out of the discussion. This can lead to better qualified, more effective decisions. Knowing where to allocate capital, and what effect those allocations could have will be helpful in effecting real change and progress.

As global temperatures rise and climate change has an increasingly larger socio-economic impact, there will be rising chorus of voices calling for effective change.

If you want to learn more about how climate change affects your investments and how to manage this risk please feel free to contact me at james.cox@ffgadvisors.com

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To learn more contact:
James Cox
Cell: 267 323 6936
Email: james.cox@FFGadvisors.com
First Financial Group 150 South Warner Rd.  Suite 120 King of Prussia, PA 19406

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