I have been reading your blog since 2006. Mainly because this is one of the few places where you find some consistency in explaining what is happening in the world economy. With that said I have learnt a lot from you about how humans and free market function. Still there are situations in which I cannot see the free market will find a solution, and where the human as a collective is acting in a potentially stupid way. I know what you are thinking here, but please do not jump into conclusions about this being about climate change. This is not about climate change. I have not mentioned climate change and I have not even mentioned which side of the debate I am taking. Which brings me to the first point of discussion:
Human race operating under free market conditions are programmed, often stubbornly, to take the other side of an argument for which they often do not even have a clue. For which either side of the argument cannot possibly have a clue. Just because it is fun and because it has served the human race well to test different ideas in a serious way. At some point in time some person must have stubbornly followed the dream of populating snow covered land, against the wisdom of the rest of his group of people. Free market will reward those who are right in taking risks, but those to stubbornly following a stupid idea for too long will just die.
Which means that people are programmed to take an instant side in any debate, and depending on their situation they will stick to their argument for a more or less long period of time until proof will come in having them change their mind. This works fine as long as the feedback of your actions is instant, but the longer it takes to see the consequences of your actions materialize, and the more biased either side of the argument are, the harder it gets to make the free market work.
This is precisely why climate change debate is such an interesting topic to follow. Both sides being very biased, consequences (if there are consequences) of today’s actions will most likely span over generations. In this environment it is very hard for individuals and governments to understand if the absence of consequences of your actions is because of no consequences or because of them coming into effect only after your grandchildren are grown up. And once your grand children grow up they likely do not see the consequences of their grandfather’s decision just because that past world to be used as a reference is by then gone (we would actually need multiple earths to see which earth is run in the best way in a “free market of multiple worlds”) My point here is that I do not see the free market solutions to a problem like the one we potentially now are facing with climate change and I would be very interested in hearing your opinion about it. And just to keep emotions aside in this philosophical example, let us assume the following fictive situation:
• Climate change is not man made • Climate change is happening • Climate change is sparked by temporary solar activity • Climate change is severely compounded and sustained by methane gases from the perm frost melting • Temperatures will rise 4 degrees and the world will turn into a very different and hostile place • Change will take place over several future generations.
Will the free market ever invent methane gas capturing devices if this is the only solution to a problem not even affecting the existing generation?