How trade can become a gateway to climate resilience

    Most people don't think about climate change when they lift a café latte to their lips or nibble on a square of chocolate — but this could soon change.

    Based on current trajectories, around a quarter of Brazil’s coffee farms and 37% of Indonesia’s are likely to be lost to climate change. Swathes of Ghana and Côte d’Ivoire — where most of the world’s chocolate is sourced — will become too hot to grow cocoa by 2050.

    Climate-related droughts and deadly heatwaves across the world have coincided with severe storms, cyclones, hurricanes, and, of course, a pandemic. As a consequence of these shocks, millions of people have been left without homes, and a growing number of people now face starvation and a total collapse of livelihoods as growing and exporting staple crops becomes untenable.

    We must immediately rethink the shape of our economies, agricultural systems and consumption patterns. Our priority is to manufacture climate resilience in global economies and societies — and we must do it quickly.

    Trade can kickstart the emergence of climate-resilient economies, especially in the poorest countries. Trade has a multiplier effect on economies by driving production growth and fostering the expansion of export industries. By shifting focus to production and exports that increase climate resilience, there is potential to exponentially increase the land surface and trade processes prepared to withstand the climate crisis.

Adapted from: https://www.weforum.org/agenda/2022/07/trade-can-be-agateway-to-climate-resilience 

Adding ethics to public finance

    Evolutionary moral psychologists point the way to garnering broader support for fiscal policies

    Policy decisions on taxation and public expenditures intrinsically reflect moral choices. How much of your hard-earned money is it fair for the state to collect through taxes? Should the rich pay more? Should the state provide basic public services such as education and health care for free to all citizens? And so on.

    Economists and public finance practitioners have traditionally focused on economic efficiency. When considering distributional issues, they have generally steered clear of moral considerations, perhaps fearing these could be seen as subjective. However, recent work by evolutionary moral psychologists suggests that policies can be better designed and muster broader support if policymakers consider the full range of moral perspectives on public finance. A few pioneering empirical applications of this approach in the field of economics have shown promise.

    For the most part, economists have customarily analyzed redistribution in a way that requires users to provide their own preferences with regard to inequality: Tell economists how much you care about inequality, and they can tell you how much redistribution is appropriate through the tax and benefit system. People (or families or households) have usually been considered as individuals, and the only relevant characteristics for these exercises have been their incomes, wealth, or spending potential.

    There are two — understandable but not fully satisfactory — reasons for this approach. First, economists often wish to be viewed as objective social scientists. Second, most public finance scholars have been educated in a tradition steeped in values of societies that are WEIRD (Western, Educated, Industrialized, Rich, and Democratic). In this context, individuals are at the center of the analysis, and morality is fundamentally about the golden rule — treat other people the way that you would want them to treat you, regardless of who those people are. These are crucial but ultimately insufficient perspectives on how humans make moral choices.

    Evolutionary moral psychologists during the past couple of decades have shown that, faced with a moral dilemma, humans decide quickly what seems right or wrong based on instinct and later justify their decision through more deliberate reasoning. Based on evidence presented by these researchers, our instincts in the moral domain evolved as a way of fostering cooperation within a group, to help ensure survival. This modern perspective harks back to two moral philosophers of the Scottish Enlightenment — David Hume and Adam Smith — who noted that sentiments are integral to people’s views on right and wrong. But most later philosophers in the Western tradition sought to base morality on reason alone.

    Moral psychologists have recently shown that many people draw on moral perspectives that go well beyond the golden rule. Community, authority, divinity, purity, loyalty, and sanctity are important considerations not only in many non-Western countries, but also among politically influential segments of the population in advanced economies, as emphasized by proponents of moral foundations theory.

    Regardless of whether one agrees with those broader moral perspectives, familiarity with them makes it easier to understand the underlying motivations for various groups’ positions in debates on public policies. Such understanding may help in the design of policies that can muster support from a wide range of groups with differing moral values.

Adapted from: https://www.imf.org/en/Publications/fandd/issues/2022/03/Addingethics-to-public-finance-Mauro