Paper Title: The Political Economics of Green Transitions

Author: Timothy Besley, Torsten Persson

Publisher: The Quarterly Journal of Economics, Volume 138 (3), August 2023, 1863 – 1906.

The authors note that reducing the emissions of greenhouse gases may be almost impossible without a green transition, i.e. a substantial transformation of consumption and production patterns.

To study such transitions, the authors propose a dynamic model, which differs from the common approach in economics. First, consumption patterns reflect not just changing prices and taxes, but changing values. Transitions of values and technologies create implications that can help or hinder a green transition. Changing values shift the indifference map of consumers rather than make them adjust along fixed indifference curves.

Second, policy makers in democratic societies cannot commit to future policy paths, as they are subject to regular elections. Incorporating political incentives is essential, which means studying the policies set by governments that are unable to make future policy commitments.

The authors caution that democratic politics may or may not help fix dynamic social problems. The authors argue that even in their own optimistic model of politics—where parties maximize average utility of those currently alive— equilibrium policies may not put society on the right path, and the speed of the green transition may be too slow.

Climate change and environmental degradation is a slow and cumulative process. To protect environment, the efforts also need to be cumulative and consistent. A self-centric secular worldview encourages the self-centric use of private property resources. However, even small things done collectively and consistently can have a larger effect.

The two-worldly view of life in Islam encourages socially responsible behaviour as one of the prime determinants of salvage in the life hereafter. Prophet Muhammad (PBUH) said: “If the Resurrection were established upon one of you while he has in his hand a sapling, then let him plant it.” (Musnad Ahmad, Hadith No. 12491).

The authors show in their model that future consumers with green preferences do not have a say over current policy.

Rawls said ignorance of the veil shall be a guide to behave in a way so as not to be on the wrong side of someone’s prior irresponsible or unjust action. But, living in any age, we exist in current generation and we do not come back again in the future generations. In the lottery of who comes first in the world, we have already won and are here. Then, what can motivate preferences to act rightly and avoid wrong actions permanently and as a well-grounded behaviour, norm, and habit?

The biggest motivation to act on the call to conscience is when there are deterministic rewards. In monotheistic religions, the concept of deterministic rewards in life hereafter on the criterion of sincerity in virtuous and upright conduct in life by each person according to one’s ability and by each person according to personal circumstances makes every living moment in this life meaningful.

There is need for internalizing the moral values so that they affect the preferences more deeply in a lasting way. This is better than relying on electoral politics and political clout. The authors note that activism can have positive implications for speedy transition. It still poses the question that how to strengthen commitment to long-term goals beyond oneself. How to take into account the implications of our actions and policies on future generations and other species? They are not represented in even the most ideal and cleanest of electoral politics.

Islamic worldview expands the responsibility of humans to society, future generations, and other living species on the planet with afterlife accountability for every intentional act done by every human being.

Islamic worldview regards humans as trustees of Allah for whatever material resources and mental faculties they come to possess in this world. We need a worldview or economic system that regards market as an instrument rather than give it the role of allocating every resource as desired by rich people with most dollar votes. Economists not only need to search for right policies, but also look at which institutions and worldviews can complement them.