Saturday, December 17, 2011

Gore on sustainable capitalism

This week WSJ provided beaucoup op-ed space with Al Gore where he provides his perspective on the societal changes that will be needed to make capitalism consistent with sustainability.  Whatever you think of Al Gore (always beware when an author talks about "We are once again facing one of those rare turning points in history," whether its Newt or Al), this piece is well worth reading to see the underpinnings of his arguments. 

Gore focuses on two main issues: externalities and short termism.  He argues that we need policies to establish a fair price on externalities.  An example would be a carbon tax to account for the environmental and national defense costs generated by our use of certain forms of energy.  Gore would make sweeping changes in business practices: expand corporate recruiting to include the full triple bottom line, dump quarterly earnings reports and realign incentives for top executives so that they are focused on the long term. 

My take: I see eye-to-eye with Gore in terms of needed changes in executive pay.  I also believe in taxing goods that impose negative externalities on society, but I am not sure how one would determine a "fair" price.  Economic research has not converged to a single, simple answer.  I also was puzzled as to why Gore wants corporations to produce more information about societal and environmental impact in their annual reports but he then wants them to reveal less information by ditching quarterly reports.  Let's keep the quarterlies, but make sure they are not driving CEO pay. 

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