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This blog discusses ideas, drafts and papers about the whole spectrum of systems theory and anything else that concerns the WissTec R&D Services UG.

22.12.2019 - Foundational Falsehoods 1:

Capitalist solutions to climate change are impossible!

This is the first entry of a series of posts, that investigates often heard factoids and shows with a little general systems modeling, that they are not facts.

In this case we will dissect the factoid, that the problem of human caused climate change can not be solved globally by capitalist means.

First we give the common outline structure of this argument:
  1. Capitalism depends on mass consumption.
  2. Market forces will drive the majority of prices and wages down.
  3. The resulting demand type "creates" an excess of cheap and short lived goods.
  4. This excess production is too wasteful and the primary cause of human induced climate change.
We are systems modelers and are free to define any kind of regulations and additions to the capitalist system, without having to consider any ideological sensitivities. However, for this blog post, we will of course, not fully formalize this idea, but construct the analytic base idea. This is done in clear, plain English, that is characteristic for the analytic philosophy that is usually required for good mathematical modeling.

In this case, the problem can be solved in the capitalist framework with proper regulations. We want to stress, that proper in this context, does not mean a lot of legal text or very restrictive rules. It only means, that the regulation rules must be few, clear and enforced.

Before we can outline the regulation rules for the system, we need to state some presuppositions:
  1. There exists a default VAT, that is sufficiently high, so that decreasing it significantly changes buying decisions.
  2. There exists some default income tax, that also is high enough, so that decreasing it significantly changes buying decisions.
  3. The avoidable effect of humans on the climate primarily is created by wasteful production. If not, any non-capitalist system can't, by definition, solve this problem with a different system for the means of production.
To get to the core of the problem, it is necessary clarify some implicit assumptions of the above argument against the possibility of a capitalist solutions:
  1. In capitalist societies the vast majority of people have a relatively small income.
  2. In capitalist societies, the low income people will not lend money to buy consumer goods, because it is irrational and/or not viable.
The above conditions have the effect, that a lot of high volume, low profit margin and quickly obsolete goods are produced, consumed and wasted. Most people do not have the economic power to choose from the high quality, high profit margin, slowly obsolete goods.

With this stated, it seems to be a natural solution, to make everyone able to select from the high quality, slowly obsolete products. The standard capitalist solutions for this are the much vilified consumer credits.

And here proper regulation comes to play and a systems solution outline is the following:
  1. Use proper regulation, to make the additional costs of lending to buy a slowly obsolete, high quality product tax redeemable for at least the lower income levels.
  2. Add better tax redeemability for greener products.
  3. Add a proper and enforced private insolvency regime, to counter predatory lending and systemic failures.
Given that high quality usually correlates with higher status signaling fitness, these regulation rules alone will provide incentive and make it rational for low incomes to buy appropriate products by lending - provided the combination of tax advantages and costs of lending are attractive. If properly implemented, the market forces then drive the development of fewer, greener, better, but much less often replaced products. The caveat is probably less shopping as activity - at least if shopping is defined by having bought something afterwards and not for example as carefully customizing your next big buy.

High quality products have a bigger profit margin as well, so that it is at least not clear, that such a kind of regulation would reduce a nations revenues in total. Getting insights to this however, would be require a formalized model, like the ones we produce for our customers.

This capitalist solution does by design objective not solve the accumulation problem or what the communists associate with the "internal contradictions of capital accumulations". We do not think, that these problems are unsurmountable anyway. That will be discussed in other posts.

If you have evidence or reason based objections let us know. In any case we hope that this is good food for thought and wish everyone a merry Christmas and a happy new year.

PS.: We apologize for relying on heavy post first publication online editing. We currently are short in time and resources, but also do not want to delay the publication of interesting content.

All posts of this month.