The Problem of Ownership in Capitalism

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Transcript

Rob Johnson:

Welcome to economics and beyond. I’m Rob Johnson, President of the Institute for New Economic Thinking.

I’m here today with a friend from the west coast, Peter Barnes, who’s written a number of very interesting books. He previously worked in the private sector with some friends of mine and founded [inaudible 00:00:52] and before that,

Peter Barnes:

Working assets.

Rob Johnson:

Working assets, that’s right. And so he’s got entrepreneurial experiences. He’s felt the foot, the hoof beats of commerce. He has been a reporter. He’s been a writer and a visionary. I’ve learned a great deal from knowing him over the years, but his new book, I just finished reading, here it is. It’s called Ours: The Case for Universal Property, is outstanding. Now he’s got previous books that I certainly would recommend as well. I have read the Capitalism 3.0, I found that a very, very good deep dive and I believe [inaudible 00:01:37] your book Who Owns the Sky always made me think of Jackson Brown song Late for the Sky, but I don’t know why that association cropped up, but I remember reading it.

I was humming that song all the time. So anyway, Peter, thanks for joining me. This is a really exciting book. It is clear that the world has got a lot of troubles right now. And just riding down the tracks in the orthodox structures is kind of scary to contemplate, particularly with the ominous realm of climate, the social unsustainability of the extremes of inequality that we’re seeing. I just worked on a report or excuse me, a podcast on a report from Oxfam, where they talked about the 10 richest people in the world doubled their wealth during the pandemic. And even before that, those 10 people were worth more than half the people on planet earth combined. So there are a lot of things here that are [beckoning 00:02:45] for change, but fueling despair.

And my view is you’re [filling 00:02:51] the void. And I want to share that with my audience and I want to share your way of doing things and seeing things with my Young Scholars Initiative, because these young people are the future economists, scholars, and leaders. And how would I say, that future will be even more ominous than the present unless we start to change course. So thanks for being here. Thanks for joining me. And let’s start with, what inspired you? What was the little bird that went off in your ear, the dream you had? How did you come to seeing the portrait that we’re going to explore in your book, Ours?

Peter Barnes:

Well, in a way it’s been an idea that has been sort of bubbling up in me for a long time. Even when I was a journalist, which I did, that was kind of my first career. And then my second career was being a socially responsible entrepreneur. And then my third career has been being a writer, but even back in the seventies, when I was working for The New Republic magazine, I wrote articles about wealth, inequality and capitalism. I was always interested in trying to understand how capitalism worked and why it didn’t work in rather grievous ways. And so I guess I started exploring these matters way back. And then when I was, I don’t know, how about 35 years old, I kind of put down my typewriter and my pen and said, all right, I’m not just going to write about capitalism and economics.

I’m going to get into it. See what I can do within the sphere of action and sort of test the system, see how far it can be pushed from within. So in those days there wasn’t a lot of “socially responsible” business going on, but me and the friends that you mentioned, we started this socially screened mutual fund. Anyway, I won’t go over all of that, but my 20 years in business were basically spent trying to test capitalism. How far could it be sort of improved from within through socially responsible business. And after 20 years, I concluded that while socially responsible business can do good things, I’m certainly not [opposed 00:05:32] to it. It’s better than the non socially responsible kind of business, but it cannot by itself change the system the way we need to change it. It’s up against a tide that is just far too strong.

So after I retired from Working Assets in 1995, I started hanging out at various think tanks and thinking about these issues. And at that time climate change was just coming into the foreground as a rather dire problem that needed to be solved. And of course we all know that capitalism, I mean, that climate change is the result of a massive market failure as Nicholas Stern said and many others. And during that period, there was a lot of discussion of a carbon tax and cap and trade and Green New Deal and all these things. And I just sort of stepped back and asked a very simple question, I thought, “who owns the sky?” And that turned out to be a kind of a [Zen koan 00:06:46] that raised all sorts of interesting, not just questions, but led me in a direction which ultimately has culminated in this book.

And the obvious question is, well, who does own the sky? It doesn’t have any legal owners at the moment, but morally who owns it. And it seemed to me the right answer to that question was all of us together, that the atmosphere is a gift of creation, whether there’s a God involved [inaudible 00:07:22] doesn’t matter. And if it goes to, belongs to anybody, it belongs to all of us equally. And simultaneously as the co-inheritors, we have a duty to preserve the integrity of the atmosphere or any ecosystem for the benefit of future generations. So that was my sort of starting philosophical premise, but then the question was okay, how do you manifest that idea in a legal structure and introduce it into the economy so that the economy sees the atmosphere as a commonly owned asset.

And what would happen if we did that I argued was that we could not only deal with climate change, but we could also start dealing with inequality because the system that I proposed at that time, which I called a sky trust, the trust being a human made institution that would act as trustee of the atmosphere and its integrity on behalf of all living persons and future generations, that entity, if we created such an entity and gave it the powers that it needed would be able to in fact, be obliged to limit carbon emissions or all greenhouse emissions and charge for them, which it could do as the owner of the rights [to emit 00:08:56] and the result would be less emissions.

And presumably as a trustee with a fiduciary duty to future generations, the amount of carbon that such a trust would allow to enter the atmosphere would be scientifically based in order to preserve the integrity of the asset. And then the money that came in from selling the limited number of [emission 00:09:27] permits would be distributed to the owners of the asset i.e. everybody equally. And that not only has policy implications in the sense that you offset the higher prices of fossil fuels by giving people money. So that’s important political aspect of it, but what you do also is create a model for, what I’ve now come to call universal property, which goes beyond the atmosphere to other, I won’t say all, but just say the model that I envisioned with regard to the atmosphere, I think can be extended to many other natural gifts, as well as socially created gifts.

In other words, this is what I began to see. And that’s what Capitalism 3.0 starts talking about is that there is a huge cornucopia of very valuable wealth that we co-inherit, gifts of nature and gifts of our ancestors. All the social capital that we’ve built up over centuries is a gift to all of us. And yet all these gifts, they’re invisible in markets. They’re like the dark matter of our economic universe. And because of that, we have these two huge market failures i.e. destruction of nature and ever widening inequality. Those are the two most tragic flaws of capitalism. There are other flaws, but these are the biggies and we need to fix them ASAP or else, as you’ve said, we’re cooked. So I guess my intellectual quest at this point in my life [that point 00:11:37] became figure out sort of how you could blow up that model that I developed with regard to the atmosphere into something larger economy-wide that would achieve the results of fixing those two tragic flaws, destruction of nature, and ever widening inequality. And that’s what led up to this book about universal property.

Rob Johnson:

Okay. I can see all kinds of channels we can explore. Let me start with a little bit about what the core economic model contains and where it might fall short. We have a vision as economists that people have a thing that’s independent and stable called preferences, their desires, and that is what forms their utility function and their demand function. And then the market is viewed as the servant of those demands and as the thing that facilitates your desires. Now there’s a problem, you were talking about social inequality. If you don’t have any money, your communication to the market is zero.

So you’re not included in how the market finds its way, because it’s not getting any signal from you. The second dimension you’re talking about future generations in preservation of the atmosphere, I may be, or you may be, or anybody may be about as generous and warm hearted person, but I don’t know how to price in for five generations from now. I worry about my children, my grandchildren, plenty, because they’re right there before me. And I see all these ominous developments, but it’s still not enough in preserving the infinite future to pretend that the market is solving this. Economists have this idea, they call it externalities or public goods, but there also is a tendency here to diminish what is the relative importance of private, what I’ll call commodification and those public goods or those side effects we call externalities. And if they [loom 00:14:09] really large, like the burning of Northern California, that’s telling us we got to change course.

Finally, we get to the political economy. When money affects and you say this very succinctly in your piece for the [Atlantic in the text of the book 00:14:31], when money can decide what we do, we’re really in a place where the rules, the enforcement, the considerations for society [are intentioned 00:14:53] with the survival of politicians who are subject to the need to raise money for campaign, lobbying pressure and what I’ll call negative media, negative public relations for the people who want to stop them. So as we have constructed governance, it has to be more responsive to money than it should in order to be responsive to people. So I see a whole lot of these, which [inaudible 00:15:23] structural flaws and your vision in this book, the universal rights and the awareness of the social unsustainability and the ways to correct that, I think are an extraordinary, how do I say like an aha moment? Like it’s light at the end of the tunnel, but we still going to have to explore how you going to get there, how you going to get there. Okay.

Peter Barnes:

Well, thank you for what you just said. And of course I agree with everything, but let me hone in on externalities, which is where we sort of got started. And the fact that markets only respond to money and I would add property rights. That is the problem. And what I proposed with universal property here is a way to solve that problem by giving future generations and all of us as a whole, as opposed to all of us as individuals competing with other individuals, give those key stakeholders a voice in the markets, give them property rights, which would allow them to set prices on what are now these harms that are limitless and don’t have any prices. We [don’t 00:16:56] never charge for pollution and that sort of thing.

So how to do that, it’s an interesting challenge to figure out how you would inject the voices and the interests of future generations, let’s just say that, into real time markets today, that is the question. And economists, they’ve spent a lot of time trying to sort of calculate by all these obtuse methodologies. What is the actual value of this ecosystem service and so forth? What is the social cost of capital? I mean, those are interesting intellectual exercises, but they don’t actually lead to a [systemic system 00:17:44], sorry, that puts actual prices on pollution and other kinds of harmful activities. So you need a mechanism in real time markets that is able to stand up and say, for example, to a corporation that wants to pollute, no, huh, wait a minute. We own this property, if you will. And you cannot trespass on our property with your polluting waste without our permission.

And we will grant a certain amount of permission, but only up to the point that it is sustainable for future generations. And then we will charge tolls as if we were a parking garage and you wanted to park carbon in our garage, we will charge you. And that money will be distributed basically to everybody equally. But the point is you solve the externality problem by creating an entity that has property and presence in markets and can charge prices in real time. That is the key. And that is really what the purpose of universal property is.

Rob Johnson:

And how do we get the existing incentive system, how do I put it, perhaps the extreme crisis is what [your 00:19:17] necessity becomes the mother of invention in the system, but how do we get ahead of the curve? How do we get this [politico-economic 00:19:26] system that under prices externalities, under response to poverty, et cetera, how do we get it to change course and implement your design?

Peter Barnes:

Well, obviously we have to work through the existing political system in order to do that, but let me, I’ll come back to that in a second. But first let me that this is not that complicated. The hard part is getting it started, but once it started, it runs itself. That’s part of the beauty of it. That once you have property rights established and a fiduciary ownership structure established for these gifts of nature and society, once that’s set up, it runs itself, you don’t need further government regulation actually. What we’re doing is fixing markets so that they can solve in real time a lot of the problems that government is trying to clean up after all the harm’s been done. But your point, and then we should talk about this is, theoretically one can see how that system might actually work, but here we are today.

And how do we get from here to there? And obviously we have to go through the political process initially, although I should qualify that by saying that there’s a lot that can be done apolitically at a smaller scale. In Marin County, where I live, we have something called the Marin Agricultural Land Trust, it’s a private nonprofit that has acquired conservation easements on about half the farms in Marin County. And thereby has saved Marin County from this seemingly unstoppable [spread of sprawl in the suburbs and malls 00:21:23] and so forth.

And that was done outside of government. But at a bigger scale, obviously government has to get involved to set up these big trusts, like an atmospheric trust, for example. And so legislation is needed to do that. And so the question, I mean, you’ve raised a rather valid and it’s the perennially daunting point that if our political system at this moment is controlled by the polluters and all the forces that are benefiting from the way capitalism works today and are going to oppose making the changes that we’re talking about, how do we get from here to there?

And my answer, which is, as good as I can do or anybody can do, I think is to say, look, most big changes in our economy and probably any economy happen at crisis moments and think of the new deal, for example, and all the changes that were made during the new deal. So crises are the periods of opportunity for bigger change than just ordinary of politics. I mean, we’re now in a state and unfortunately now we’ve got crises all over the world, but we’re still trapped in our terrible political system. But my assumption is, I guess I’ll just say this, at least once a century, maybe twice a century, we can expect there to be a crisis that is of sufficient magnitude, such as the great depression to open the gates to all sorts of things that weren’t even thinkable before.

We saw a bit of that during the pandemic where we got child tax credits out of the pandemic, of course now they’re gone, but you can see how during a crisis things are possible that aren’t possible during ordinary times. So that’s my answer to your questions. The best answer I can give, that we know crises are coming. We know we’re due for a major crises, probably multiple crises when you look at what’s happening with climate and inequality and so forth. So we need to prepare, the way [inaudible 00:24:06], Milton Friedman and his gang used crises all over the world to install their free market ideology.

Rob Johnson:

Yeah. Naomi Klein’s book, the Shock Doctrine makes-

Peter Barnes:

Exactly.

Rob Johnson:

This point very vividly.

Peter Barnes:

So that’s a smart strategy. And we who are trying to change capitalism in a different direction than Milton Friedman need to think along those same lines and prepare for the next crisis and be ready for things such as a sky trust. And there are a whole bunch of things that have to do with other financial assets and internet and so forth. We need to have our alternative models ready, and even tested at smaller scale so that when the political opportunities present themselves, we know what to do. So that’s kind of my vision of how we get from here to there. It won’t happen overnight. It’s going to take 40, 50 years, but a little bit at a time. And once we get started down that path, that’s the other point that’s really important.

Going back to the new deal, okay, 1935, Social Security Act, real breakthrough, but it starts very small. In 1935, the initial Social Security Act had a 2% payroll tax split between employers and employees and the monthly benefits were something in the range of $30 a month. Here we are 70, 80 years later, and it’s a lot bigger than that. And the reason is once you get something like that set up and people start getting checks in the mail, they suddenly start thinking, “Hmm, this is not a bad idea. Maybe we need to expand this.” So I apply that same kind of logic to what I’m talking about with universal property, like they had in Alaska, Alaska Permanent Fund, I should mention that is a really good example of how a state took a gift of nature that belonged to all the people of Alaska namely the oil and said, “this is ours, and we’re going to lease it to the oil companies, but the money that comes back, some of it’s going to be used for government, but some of it is going to the people directly in the form of dividends.”

And that obviously is enormously popular in Alaska. So that’s kind of my answer, start small when there’s a crisis and an opportunity, and then build on that over time, 40, 50 years.

Rob Johnson:

Well, you and I have over the years, we’ve had a number of discussions about the economics profession. The thing that since 2009, I’ve really been in the business of trying to explore and evolve. And we’ve talked about innovation in economics. You can see things like peer review journals, tenure process, just habit structures of mind. And we’ve talked a little bit about, [what you might call, 00:27:41] where does the inspiration come from in a time when change is necessary? I know there are some people, Tom Paine, Ronald Coase, and others that have inspired you. And I can see my young scholars now reaching in that direction.

I can see some people also reaching back and saying, we have to reinvigorate the history of economic thought in a way that I remember John Kenneth Galbraith talked about. You have to see the changes in ideas in conjunction with the change in the needs and innovations and transformation of the structure of society. So with that kind of meta perspective, when you look backwards, what would you advise young people to read so that they’re prepared to see this challenge in the way that you’re capable of, [how do I say 00:28:35], exploring and doing and presenting?

Peter Barnes:

Well, you mentioned Thomas Paine, so I’ll start there. I hadn’t read Thomas Paine until I was sort of down this path some distance, but then when I discovered this essay that he wrote in 1796 called Agrarian Justice, but don’t let that confuse you because it’s really about property rights. I was blown away because, and it’s a very short read and it’s free on the internet. So for people who want some historical intellectual grounding, I would start there with Tom Paine’s, Agrarian Justice. And basically my book is just an expansion of the simple idea that he laid out in that pamphlet. I guess he called them pamphlets, which is that there are two kinds of property. This is what Paine said. There’s manmade property, which is inevitably unequal in terms of its distribution, because humans have different aptitudes and so forth, and there’s [inaudible 00:29:50] all these other factors.

So, okay, that’s fine. That’s over there. And then there is the kind of property that we inherit together, natural property and social property. So he spelled that all out and he said, the latter kind, the natural and social property rightfully is a birthright of every person. And so he was talking mostly about land in 1796, because that was before climate change and all these other things, but there were enclosures of land in England and land concentration already starting in the United States. And so he said, the rent from the land belongs to everybody [inaudible 00:30:44] Henry George there. And he proposed the mechanism. This is what’s so extraordinary. He proposed a actual workable financial mechanism for capturing the value of land and sharing it equally among all of its rightful inheritors.

And what he proposed was a national fund be set up that would rely on an inheritance tax on land owners and the revenue from that would be used to pay startup capital to every person, man or woman when they turn 18, the sums translated into current dollars is something like, what was it, it’s I think maybe $18,000, something like that as a startup grant, when people turn 18 and then end of life, when people turned 55, they would get a similar amount of money. I think it was about a thousand dollars a month, Paine talking in 1796 about that. And he showed mathematically how this could actually work. Today, it’s a little more complicated today, but the point is that he not only saw that there are two kinds of property, but he saw how the hidden value of the natural and social property could be captured and shared in a very practical way.

So then you mentioned Coase and Pigou and all these others. Pigou is one of my heroes as well. And he, in his classic book, The Economics of Welfare, which I reread in the course of doing this, he hones in on the fact that markets produce not only [inaudible 00:32:54] or harms and that welfare [inaudible 00:32:58] in his definition of welfare is not the sum of all the goods produced by an economy i.e. GDP. But the difference between that sum and the sum of all the harms caused by the economy and the process of creating the goods and it is the difference between the is two that actually constitutes welfare. And of course, that’s absolutely right on, but somewhere that got lost in the history of practice of economic thought, but his other point was that one of the big harms, the two big harms that he wanted to get rid of or diminish were poverty and pollution. Pollution in his day meant all the coal smoke that was going up in London and Manchester and all the cities that were everybody was burning coal for heat.

So his proposal was that governments would tax the coal that was causing the pollution, and that would diminish the pollution and increase government revenue that they could do various things with. So that’s the idea of Pigouvian taxes, which has been around for over a hundred years now. It’s an interesting, good idea, but it doesn’t really go far enough.

And then, some number of years later along comes Ronald Coase, another English Nobel prize winner, who says, Pigou is wrong. We don’t need taxes. What we need is property rights. And he wrote a very influential paper. I think it’s called the social cost of pollution, I forget exactly. But his remedy for the problem of pollution was to establish property rights in a way that they were private property rights. So if somehow polluters and [pollutees 00:35:04] could have their defined rights, they would negotiate some kind of a deal where polluters would have to compensate [pollutees 00:35:13] and the blah, blah, blah, interesting idea, but it wasn’t actually functional. And it also was off base in thinking that it would be okay for polluters to be grandfathered rights to pollute.

And so anyway, but I liked the fact that Coase introduced this role of property rights as opposed to taxation and regulation and that theme that there might be a way to solve capitalism’s biggest flaws through a new form of property rights, as opposed to taxation and regulation really intrigued me. And it’s what led to the model that I’m proposing, but they are different. You need to make that work. You need a different kind of property right. And that’s what I’ve defined as universal property as distinct from private or state property. And the distinguishing features of universal property are first of all, the assets that it applies to are these co-inherited assets, the gifts of nature and society. So we’re not taking any private property and expropriating it or anything like that. We’re leaving private property just as it is, but we are [propertizing 00:36:46] if that is a [word 00:36:48], some of this enormous amount of hidden wealth, that markets completely ignore.

So we’re [propertizing 00:36:56] some of that in a way that it is held in trust for future generations, so that’s the first piece of it. There are literally fiduciary trusts established to manage these property rights, which could include things like, what do you call those things, the conservation easements is a new form, relatively new kind of property right, which means you don’t own the underlying asset, but what you own is the right to limit the use of that asset. And I mentioned the Marin Agricultural Land Trust, that’s completely based on conservation easements and a lot of the work that the nature conservancy does also based on conservation easements.

Rob Johnson:

There’s some things up in Alaska that I remember reading in your book that are [inaudible 00:37:48].

Peter Barnes:

Yeah, I mean, conservation easements in the last 20 years have become big thing. So it’s an interesting legal, it’s a property right and we can use it at a much larger scale. So anyway, where was I? The fiduciary trust is the first thing. And then once those rights are established, then you have an entity that is able to charge for a limited amount of use of underlying assets and use the money to compensate the owners of the assets. So that’s universal property as I see it. It [propertizes 00:38:39] a huge amount of wealth that is currently invisible to markets. And that’s a good thing. That’s how we deal with the externality failure. And then it also provides a source of property income to everybody as a birthright. And that’s how we deal with the inequality failure.

And I just want to say another thing about property income. There’s this inequality, the way it manifests is that more and more people are struggling to either get into the middle class or remain in the middle class. And according to sort of conventional economic and political thinking, it’s basically the only way you can get into the middle class and stay there is through labor income. And I mean, not everybody is going to be an entrepreneur and develop sources of non-labor income. The vast majority of people are totally dependent on labor income alone, and that’s just not working anymore. It kind of worked after World War II for 30, 40 years, but it didn’t work before that time. And it’s not working after that time. That was a blip. And the fact is that people nowadays need non-labor income to top off their labor income, or to underlie, to be a foundation for their labor income, if they’re ever going to have a chance of getting into and staying in the middle class.

And that was the subject of my previous book, With Liberty and Dividends for All. Labor income alone is not enough. So if we’re looking for sources of non-labor income, what are the options? Well, the sort of conventional model is that you have government transfers, you tax Jill, who is perhaps rich, and then you pay Jack who’s poor. That’s basically the only method that we’ve come up with so far. But that method, as we know, has a lot of problems, the rich people don’t like paying the taxes and the poor people are humiliated by having to be on welfare. So it’s not the ideal way to do it. On the other hand, if we take this invisible wealth, which is really worth more than actually all the private wealth that has been created and figure out ways to monetize it, that invisible wealth and protect it for future generations and share the monetized value among living persons equally, we have another way to provide non-labor income to people who need it. So that’s kind of in the back of my thinking.

Rob Johnson:

Let me ask you along these lines, we’re talking as though there is “a society” and you’re implementing these innovations, but a lot of scholars have been concerned, particularly this group called the Commission on Global Economic Transformation that I had set up, that in the era of globalization, the metaphor, the [treaty of Westphalia 00:42:21] is gone. People with wealth can transfer it in nanoseconds and they can play off regions against each other. And so when we’re talking about that universal right, there’s a thing called planet earth and there’s universal rights. And then you send out [shares 00:42:43] to everybody, but I don’t know how to organize on that scale, but how does a nation organize within the global escape hatches that have been illustrated by the Panama Papers and other things, and the difference between tax evasion and tax avoidance, that’s been legalized by lobbyists for the wealthy, how do we get what you might call, what the universal thing we all own is, and for who?

Peter Barnes:

Well, unfortunately I [can’t 00:43:20] answer that question in terms of the global framework that you were painting. I can only think of it, I mean, we don’t have enough global governance [in this 00:43:33] at this moment to do it at a global level, but we do at a national level or a regional level or a state level. And I think, I mean, this is kind of wonky, but doing it on a national or even in Europe and EU wide level would be very significant, would have significant global impacts. And especially if national efforts were included, what has been called border adjustment fees.

I don’t know if you are familiar with that concept or you want to talk about it, but the [basic idea 00:44:17], let’s say if one nation, let’s say the US or the EU decides it wants to limit carbon emissions within its borders, but it doesn’t want, but it also wants to have an impact on China and some of these other countries, you have a border adjustment fee, which means that if China has a lower carbon price than we do, they have to pay the difference at the border. If you set up something like that, you put economic pressure on China to raise its own carbon prices, because why should they be paying money to us instead of paying it to themselves?

So even though [inaudible 00:44:59] what I’m saying is even if we can’t negotiate a global agreement to solve all these problems, and God knows we’ve been trying for 25 years and not getting very far, we can still take steps [at 00:45:11] national or regional EU type levels that if you add in things like border adjustment fees will actually without negotiating a big treaty, but will push the world in that direction. And I think that’s the best that we can reasonably hope for and whether it’s going to be enough, I don’t know, but that’s my best answer to your question.

Rob Johnson:

Okay, good. Well, there’s so many things that I see, not only with your vision, but ways to propel young curious people forward. We’ve been talking about Tom Paine and Arthur Pigou, Ronald Coase. I think the paper you were going to cite was the problem of social cost, which is his 1960, but he has another book called The Nature of the Firm, which also was quite prominent as I recall. But this notion of restoring the history of thought always takes me back to when I listen to people, what I’ll call dogmatically talk about market systems, they always tend to ground themselves in Adam Smith until you actually read Adam Smith. And from the theory of moral sentiments to the, [what you might call, 00:46:30] despondency with the church in moral discourse, because of the corruption of [feudalism 00:46:38] and how the church combined with the oppressors to the technocratic language, which I’d say from the theory of moral sentiments to a wealth of nations, it’s moving in that direction, but there’s still a tremendous amount of texture, and yet I remember a man they call, his name was James Maitland.

He was called the Earl of Lauderdale. He’s the 8th Earl of Lauderdale. He wrote a book in 1804, right after, not long after in the scheme of things, the wealth of nations. And it’s called an Inquiry Into the Nature and Origin of Public Wealth and Into the Means and Causes of its Increase. And when I read your book, that one was the one that just kept popping up into my imagination, because the Lauderdale paradox to make it very simple was about these guys say value is price, but if you turned off the water and you turned off the oxygen, we’d all die. And yet it’s priced at zero. This is when there’s a much smaller population on planet earth in relation to the environment that we have now. So nobody was afraid of that. And then he goes on and he makes distinction between use value and exchange value and that they are not the same thing.

And I think just uncovering these dilemmas, I mean, what I guess I would say is scientific inquiry requires one to scrutinize the tribal customs in the, [what you might call, 00:48:19] ad hoc hypotheses because when you put something in to a model, it has ramifications and those assumptions are sometimes not derived scientifically. They may have been used with the language of mathematics to create what I’ll call tractability for expression. And there is benefit in simplifying models. So you can separate the signal from the noise and see what the essence is about.

I understand that about modeling technique is a, but you can have really severe adverse side effects from pretending something is wrapped in the veil of science when it’s a tribal custom that has enormous consequences. It isn’t necessarily part of the truth. And so when you and I have talked, we talk about how it’s often people and this isn’t just true economics. It’s often people outside of a profession like Thomas Kuhn talked about in The Structure of Scientific Resolutions. The paradigm [patchers 00:49:26] are the ones trying to keep it on the rails. I can’t remember the name of the physicist, was it Max Planck who talked about evolution has made [one a funeral 00:49:36] at a time. The change of ideas when people stop protecting their contribution or their lineage when it’s contradicted. But I really think you are doing a tremendous service in challenging economics right now [and in 00:49:54] challenging this in light of the contradictions between the assertion that everything’s going to be good if you just follow this recipe and what’s coming out of the kitchen isn’t so good.

Peter Barnes:

Well, thank you for that. I am not an economist. I’m not an academic economist, I think all the time about economics. So I suppose that makes me an economic thinker, but my father, I should mention was a PhD economist, got his PhD at the New School in New York with Robert Heilbroner and all of that. So in some sense, I probably ingested some of his [Keynesianism 00:50:37] in my youth.

Rob Johnson:

I was going to say, you [got 00:50:41] your rebellion and you [got 00:50:42] your emulation and admiration in the same box, right.

Peter Barnes:

But as I said earlier, I sort of approached this first as a journalist and then as an actual entrepreneur and just with beginner’s mind, you might say just what is happening and what do we need to happen? And what’s wrong here? And sort of flash back to Adam Smith and the Earl of Lauderdale and those guys, those were different times. In those days, nature was abundant. Capital was scarce. And the economic system that emerged responded to that. Today, we’re entering, or maybe in this geological age called the Anthropocene, everything is different. Capital is not scarce anymore. It’s in oversupply, I would say. And nature is the big scarcity. And personal time is another big scarcity.

So today the scarcities are completely different from when they, in the days when economic theory and practice were, as we know it developed. So we have got to change our economic thinking and our economic structure to sync with the realities that exist today. And this sort of approach that I’ve offered with universal property is one way to do that. I’m sure there are other ways, but I’m seconding what you just said that we really need to rethink the sort of basics of economic theory and market structure.

Rob Johnson:

Well, I see all kinds of, how do I say, hopeful signs. I think Pope Francis has done a very good job of illuminating the importance of the common good, the collective good. He may not be building the system like you’re doing in understanding the texture, because that’s not his point, but what does a good world look like? He’s done with his Laudato Si and I think it’s called Fratelli tutti, the common good and brotherhood and sisterhood. Those two documents since 2015 are real bellwethers of [inaudible 00:53:20] setting light at the end of the tunnel, something to strive for. And that’s what I think about [inaudible 00:53:27] I would say joyful for me in reading your book. Despondency is fuel to conflict, further dysfunction and perhaps authoritarian resolution, but being constructive invigorates hope. It shows at times to people that things can get better.

The young people who count on all of us to shepherd them into the future, if they can see, feel glimmers of hope, particularly in these times where the things like the pandemic just descended upon their lives, how would I say, we have to reestablish our reputation for protecting them and being the guardians of their future. But I think you’re making a contribution. I think the spirit of book, of all of your books, but this one in particular, at this critical juncture is really an extraordinary effort and contribution. So I really want to thank you for that.

That’s the kind of example I want the 17,000 young scholars in the Young Scholars Initiative at INET to draw upon as they’re building their career. And there’s a whole lot of thing in every profession of coping with the customs and getting promoted, getting rewards, et cetera. But then there’s this other bird kind of chirping in your ear. What’s real meaning, what’s real purpose. What’s the true self looking to contribute during that time on earth. And I think you’re a guiding light as an example of how to pursue that pathway in that direction.

Peter Barnes:

Well, that’s very kind of you Rob and I just want to say that I’m really excited about what you’re talking about these young scholars, and if there’s some way I could participate talking with these young scholars, I’d be thrilled and delighted to do that.

Rob Johnson:

Great. Well, we’ll definitely arrange that. And I would like to stay in touch. It’s been too long since I guess the pandemic kept me away from [Bolinas 00:55:50], California, but I really would like to stay in touch with you as your writing unfolds. I understood from our preparation that you have another book that you envision, would you like to foreshadow where you’re going with that, or is that a secret we should save?

Peter Barnes:

It’s not about economics. I’m done with economics, but the working title of my book is My Tangled Bank. Rob knows where I live in Point Reyes. It’s on the edge of the bank. You might say of Tomales Bay, this beautiful bay on the sort of a tongue of the Pacific ocean. Anyway, I’ve been living here for 25 years and hope to continue living here for a while, but there’s the phrase tangled bank comes from Darwin when he talked about all of life is contained in a tangled bank and it’s [grandeur 00:56:44] is beyond belief. So I’m going to write about what I can learn from my little tangled bank, how it applies to everything else. I don’t know where it’s going. This is just a concept, but we’ll see. I’m about to turn 80 and I can’t write these long books with footnotes anymore. So this is going to be [inaudible 00:57:10].

Rob Johnson:

[Going to the heart 00:57:10], you’re in a region of the country that I think of often. There’s a gentleman I’ve been reading a lot about this year, named William Everson and Everson’s name for a long time, because he was in the Catholic church, was Brother Antoninus, but he has a book called A Canticle to the Waterbirds and he’s got lots of poetry. One of the people I was most inspired by in my formative years, because I was very much a sailor and [what have you 00:57:46] is Peter Matthiessen. His book on the wild birds, his book, Snow Leopard, The Tree Where Man Was Born. All of these things resonate with the beauty of the mother nature that you’re trying to change the economic system to revere. So I don’t think your books are [inaudible 00:58:10] I think they’re complimentary, where the spirit that motivated this book comes from is what you’re going to explore in the feelings of the next is my guess.

Peter Barnes:

Oh yes. That’s correct. Thank you.

Rob Johnson:

Well, thank you for being here and sharing with us. I do promise we will put together some seminars with our young scholars and perhaps a reading group around your book and maybe how it relates to the history of thought, some of the antecedence that you bring to mind. I want to raise one last book that I think is very important because this is not just technocratic purity, this is political struggle. And there’s a wonderful book by a lady named Mary Furner, F-U-R-N-E-R and it’s called Advocacy Versus Objectivity. And it’s about the struggle that took place between what I’ll call the institutional economists in the German historical school and the mathematical [marginalists 00:59:10] as people like Karl Marx were fanning the flames about the questions of distribution. And I thought Mary’s book, which has won many awards in the historical profession. It’s a history of ideas about political economy may have [what you might call 00:59:28] may shed light on the struggles that are before us now.

Peter Barnes:

Well thank you. I will take a look at that. Yeah. I was a history major at Harvard. So that’s more my background than economics and I like-

Rob Johnson:

Well, people are screaming out now for multidisciplinarity.

Peter Barnes:

Yeah, yeah.

Rob Johnson:

Historians are that. They use all the tools [from it 00:59:50] and they try to see the pattern recognition and put things together and tell the story of what did happen. And at times I find that very illuminating. The person that inspired me to becoming a economist was Charles Kindleberger, who wrote Manias, Panics, and Crashes, Financial History of Western Europe and some other things. And that inductive looking at the past and seeing it in relation to the challenge of the present can be dangerous because people can, what you might call, take a subset of what happened and project it onto the future to argue for what they want to feel rather than what they see. But on the other hand, I think history and history of thought are very, very powerful contributors to the kind of wisdom that the economics profession needs at this time. Let’s adjourn now. Thank you very much. And I’m sure we’re going to call you again for another chapter, not too far down the road.

Peter Barnes:

Thank you so much, Rob. I really appreciate it. Take care.

Rob Johnson:

Bye, bye. And check out more from the Institute for New Economic Thinking at ineteconomics.org.