No 2117 Posted by fw, December 8, 2017
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In Section 1, the Introduction to Chapter 9, I wrote: “Brace yourself for some heavy cognitive lifting.”
Sure enough, an avalanche of heavy lifting has arrived in a landslide in Section 5, titled “Does sustainable investment increase or diminish growth?”
My apologies for not being willing to spend the time to extract the meaning from Jackson’s burst of “economese” in his explanation.
In terms of answering the question he posed in the title of this section, I found his summary, below, ambiguous. But maybe that’s my fault.
Conventionally, investment has two functions: 1) increase labour productivity; 2) stimulate innovation. As Jackson points out, if stimulating innovation fails to increase demand, then pushing labour productivity could spark unemployment.
Contrast the conventional approach to investment with Jackson’s prosperity-driven approach. In Section 4, Chapter 8, titled “Investment as commitment”, Jackson characterized investment as a means “to build, protect and maintain the assets on which tomorrow’s lasting prosperity depends” — aspects of wellbeing such as “nutrition, health, education, enjoyment, ecological resilience.”
If Jackson’s prosperity-driven investment portfolio were implemented, labour productivity would likely diminish in importance, and innovation would focus on lasting prosperity featuring better goods and services, with fewer environmental side effects.
At this point, Jackson risks losing the attention of ordinary folks like me, because he breaks into a burst of “economese” — that is, jargon used by economists.
The result is we get explanations such as this:
“The most conventional response would suggest that its growth potential is lower than the conventional portfolio. The reasoning here is very simple: by placing any constraint on the universe of investment you necessarily reduce the available returns. It seems logical that an unconstrained portfolio is more profitable than a constrained portfolio…”
And further along, this:
“Such ecological investments (like all investments) still contribute to aggregate demand. But they make no direct contribution to aggregate supply. They are absolutely vital in protecting environmental integrity. And this in its turn is vital for sustaining production at all over the long term. But in the short term, they appear to ‘soak up’ income without increasing economic output.”
For non-specialists, paragraphs like this are heavy cognitive lifting. And this abstruse writing style runs on for paragraphs. Perhaps with devoted perseverance, demanding extensive parsing, one might be able to extract some meaning. But the time and cognitive demands are more than I’m willing to devote.
So, jumping directly to Jackson’s closing summary of Chapter 9’s Section 5, what sense can we make of it? —
Jackson advocates transition to a prosperity-driven approach to investment as a means “to build, protect and maintain the assets on which tomorrow’s lasting prosperity depends — aspects of wellbeing such as “nutrition, health, education, enjoyment, ecological resilience.” He acknowledges that this new investment portfolio — which he refers to as “slow capital” — “is likely to have lower rates of return and longer periods of return than the extractive and speculative investments that characterized investment markets over the last few decades.” He further concedes that the characteristics of this new approach are a better fit for “long-term savings vehicles such as pension funds.”
He concludes his summary with this ambiguous sentence in answer to the question posed in his title: “Does sustainable investment increase or diminish growth?” — “Some of these new investments, essential though they are, for long-term output, may well slow economic growth down.”
Is this good news or bad news? Given the title of his book, Prosperity without Growth, one presumes “slow economic growth” is good news. But maybe not, if the economic growth becomes so slow that it imperils economic stability.
Or maybe I missed his point entirely when I skipped through his economese-laden explanations.