While Twitter was getting mad about we are the virus takes about covid & climate, the climate policy/science community was warning that we shouldn’t celebrate the incidental positive effects on Ecology from lockdown is they’d immediately be wiped out by rebound fx

Long and the short of it, is that they were right, at least for US & PRC (as well as places like Brazil that ramped up from the beginning)

Decided to extend this thread a bit, and although the main focus was going to be climate science & ecology I got lost on political economy, as I am wont to do, and will try to return to the climate question at the end.

What’s weird to me is that it’s clear that in every case where the lockdown led to an upswing in extraction of oil & energy, destruction of ecosystems, and/or animal slaughter, despite demand collapse, a state owned, managed or heavily subsidized firm was involved

It was the state owned competition of Saudi Arabia & Russia, as well as the massively over indulged fracking in the US that did so.

Also, this illustrated to us a few things. Namely, most pollution fell even though fossil fuel extraction & burning & animal slaughter went up, showing that its primarily urban industry, shipping, transit & demand side consumer reproduction which drives pollution.

But, it’s also clear that fossil fuels, emissions, animal slaughter, land degradation, forest clearing, are largely driven by state side, subsidy, ownership, production, & investment concerns.

Also, notably a lot of people pointed to the irrationality of burning off surplus oil & slaughtering animals despite demand collapse, as one intrinsic to capitalism. While this is true in a sense, it has to do with peoples mis understandings of capitalism.

Namely, in some idealized market, the excess of supply over demand with rising costs would have led to scale backs of production & falls in price, and eventually firm failures, but the state owned & subsidized side of this prevented that.

Additionally, the high fixed costs, discontinuous units of production, uncertainty, transaction costs, land/space/time & other considerations, make production scalebacks inefficient even from a purely labor & materials point of view.

What’s more, the price system wasn’t working as ‘’’intended’’’—things for which demand rose, like medical, basic, consumer, & other goods didn’t rise, except through the actions of speculators, widely condemned & suppressed & somewhat disconnected from market signals.

On the other side, regulations & so on closed down or highly restricted non essentials, yet the result was either declines in revenue (rather than price), or declines in supply but new scarcity & demand cancelling, leaving prices the same.

On the other side of this, there’s the fact that a lot of goods & services didn’t change aggregate purchase, but switched purveyors, so that while Bars & restaurants closed, consumer purchases of the goods these bought rose, but this means an entire wholesale market disappeared.

In a similar vein, prices for oil and meat and wholesalers often collapsed, yet with no market to pick them up, but the prices for consumers fell substantially less (due to a range of fees, costs, transactions & so on).

What’s more, there’s a certain base level of demand for oil, primary products, fundamental services, money, and govt services below which demand (whether consumer, investor or govt) will not fall.

What’s more, the mass closure of work & consumption (30% unemployment, all consumer services etc), meant that derived excess demand fell, such that even with consumer price falls, there’d be no way to use it

But instead of these counter acting market forces cancelling out in some abstract market, they just created counter valing choke points at *different* points in the supply chain. Eventually markets would ‘equilibrate’ this, but maybe not before lockdown was lifted

What’s more, these countervailing forces *would* have cancelled, if there were totally complete markets, insurance, finance, information, flexible prices & no price/quantity restrictions i.e. in a fantasy capitalist heaven/hell (depending on one’s view) not reality.

So, the neoclassical economist can rightly say that, had the government not introduced inefficiencies through regulation, & subsidies (either not at all or instead used insurance, taxes & externality markets), this perhaps wouldn’t have happened

So, if oil companies weren’t state supported and were allowed to rise & fail on their own, ditto with agriculture. If prices at consumer stores, pharmacies & medicine were allowed to rise, while those of oil, inessentials etc allowed to fall.

I’d say one big difference between much Marxist & PostKeynesian & other radical Econ’s thought, is that the PK will argue that the price system won’t work as intended, but the Marxian says it *would* it just would be a *bad* thibg

There are, of course, all manner of intermediary positions between these. Each school & sub school holds a mixture of both.

For example, PKs rarely deny that if a perfect price system existed, it would ‘work’ as intended, they just deny it can exist, and many Marxians would say that the very equilibrating mechanisms are the *cause* of crisis

Also important is that the *cost* of allowing the market to work properly would require things people find morally reprehensible, such as allowing the price of basics to rise substantially, allowing wages to fall, & allowing the economy to continue despite the plague.

Many of the effects of the plague on the economy would have happened anyway, because we were due for a recession, and it’s not merely the lockdown keeping people from going out (a majority avoids going out while a sizable minority, maybe a third, does so only because of lockdown)

What the reopen the economy people don’t reaize is that their proposa would be the worst of both worlds. Reopening all at once would allow enough people out to restart the plague but vastly short enough to prevent the economy from collapsing.

Only one extreme or the other could ‘work’—total lockdown with support for everyone until it’s over & aggressive medical & testing regimes, or total forcing into the market, at great human cost, until it runs its course. (Or preventing causes of pandemic in the first place)