Can we create transformative climate outcomes by adopting new regulatory strategies? Financial regulation expert Sarah Bloom Raskin helps us explore what levers exist to steer fiscal and monetary policy toward lasting sustainability.
Sarah Bloom Raskin is the former Deputy Secretary of the U.S. Department of the Treasury and a former Governor of the Federal Reserve Board. She served as the Commissioner of Financial Regulation for the State of Maryland from 2007 to 2010. She is currently a visiting professor and distinguished fellow at Duke Law School’s Global Financial Markets Center, and a member of President Biden’s Regenerative Crisis Response Committee, which recommends changes in fiscal, monetary, and financial regulatory policies that are likely to enable the U.S. to achieve net carbon neutrality before 2050.
Twitter: @SBloomRaskin
News clips from: CBS News, PBS NewsHour, and TODAY
Learn more about the Regenerative Crisis Response Committee here: https://regenerativecrisisresponsecommittee.org/
Does environmental regulation kill or create jobs? https://policyintegrity.org/files/media/Jobs_and_Regulation_Factsheet.pdf
Do regulations really kill jobs? https://www.theatlantic.com/business/archive/2017/01/regulations-jobs/513563/
Website: https://pitchforkeconomics.com/
Twitter: @PitchforkEcon
Instagram: @pitchforkeconomics
Nick’s twitter: @NickHanauer
David Goldstein:
We’re fortunate to have an administration again that believes in climate change and believes it’s the role of government to do something about it.
Sarah Bloom Raskin:
We still have quite a bit of work to do in the financial regulatory space.
Nick Hanauer:
The challenge, of course, to addressing climate change is to rewire the economy with new regulations and incentives so that the economic activity creates a more sustainable planet, not a less sustainable planet.
Speaker 4:
From the home offices of Civic Ventures in downtown Seattle, this is Pitchfork Economics. With Nick Hanauer. The best place to get the truth about who gets what and why.
Speaker 5:
The death toll is rising from that historic heat wave broiling the West and it’s fueling a wave of dangerous wildfires.
Speaker 6:
Throughout the heat wave, Washington State reported more than 1300 emergency room visits for heat-related illnesses.
Speaker 7:
Officials believe the increase in fatalities is likely linked to the extreme weather.
Speaker 8:
Death Valley saw 130 degrees, pushing toward the hottest temperature ever recorded on Earth.
Speaker 9:
Nearly one half of the country from the Pacific Coast to the Great Plains and the upper Midwest is experiencing moderate to exceptional drought conditions. It’s expected to get worse through the summer.
Speaker 10:
Snow cover is the lowest it’s been in the 21 years that NASA satellites have been monitoring it. There simply isn’t enough water to go around. It’s shaping up to be the worst water crisis in generations.
Speaker 11:
There is no meteorologist who would’ve said, “Yeah, it can get to 121 in Canada,” but we need to switch our thinking because we live in a climate changed World. That means the things that seemed impossible are now not just possible. They are probable.
Nick Hanauer:
I’m Nick Hanauer, founder of Civic Ventures.
David Goldstein:
I’m David Goldstein, senior fellow at Civic Ventures.
So, Nick, there’s an old saying that everybody talks about the weather, but nobody ever does anything about it. And my god. Sitting in Seattle right now, Nick, I wish somebody could do something about the weather.
Nick Hanauer:
Yeah, it’s going to get hot.
David Goldstein:
The forecast for Monday is 109 degrees. Remember, this is Seattle. Not Phoenix. I moved here for the gloom and the rain. Not for the sun and the heat. I think we’ve had one hundred degree day in the 30 years I’ve been in this city, and now, we’re going to have several in a row. If you don’t believe in climate change, you’re nuts. You’re nuts.
Nick Hanauer:
Or a Republican congressman.
David Goldstein:
Same difference. So, speaking about doing something about the weather… Well, not really the weather. Doing something about climate. I will admit those are two separate things. We’re fortunate to have an administration again that believes in climate change and believes it’s the role of government to do something about it.
Nick Hanauer:
But the challenge, of course, to addressing climate change is to rewire the economy with new regulations and incentives so that the economic activity that takes place in our country and across the world creates a more sustainable planet, not a less sustainable planet. Obviously, thank goodness for the Biden administration, but there will be an unbelievable amount of resistance to these changes from entrenched powerful interests like the oil companies and Republicans in Congress.
David Goldstein:
You know what they’re going to say, Nick, about those regulations.
Nick Hanauer:
Job killer!
David Goldstein:
It’s a job killer. It’s bad for the economy. It’s going to kill jobs. We just can’t afford to save the planet.
Nick Hanauer:
Yes. Exactly. It’s a cost-benefit problem. It will cost too much to make sure that the planet will continue to be habitable.
David Goldstein:
Also, it’s communism, Nick. What we really need to do is leave this to the market and the market will solve this problem for itself. It may sound weird to talk about the climate as an economic issue, but let’s be clear. The climate crisis was created by our economy.
Nick Hanauer:
Yeah, absolutely.
David Goldstein:
Our modern, industrial, fossil fuel-based economy. Now, to be fair, those fossil fuels, harnessing all that energy, was absolutely essential to creating all the prosperity we have today, but it’s also created a climate crisis that, fortunately, we are technologically advanced enough that, if we felt like it, if we wanted to, we could do something about it. In the same way that the economy created this crisis, it’s going to be up to the economy to solve it.
Nick Hanauer:
That’s right. But the economy, the market, will not solve this problem independently without the intervention of the public interest, basically. Which is what regulation is, is encouraging good economic activity and discouraging bad economy activity. But the heart of regulation and deregulation, of course, is the issue of power and who gets what and why. There’s this idea that you can have a deregulated economy or a more regulated economy. And that, of course, is nonsense. The only thing that’s taking place is who’s advantaged in what scenario. There are always regulations. The question is who is the beneficiary of them?
David Goldstein:
Does Exxon get to make the regulations or does the federal government get to make the regulations?
Nick Hanauer:
But more to the point, who benefits from the existing framework? Do the shareholders of Exxon benefit from the existing framework or does the broad public benefit from the existing framework? As our frequent listeners know, deregulation is one of the three legs of the trickle down economics stool. The first two being tax cuts for the rich and wage suppression for everybody else. But this idea embedded in all of neoliberalism that any constraint on the powerful or on corporations will harm economic efficiency, productivity, jobs, and the economy overall… It is so central to what they’re up to and, of course, is a big, total pack of lies. I mean, it is of course true that constraining Exxon may affect their shareholders, but that does not mean that the public interest is not served.
We’re so lucky today to be talking with Sarah Bloom Raskin, who is at the center of President Biden’s push to invest in a clean energy economy. She is a remarkable financial regulation expert with a ton of experience. She was the former Deputy Secretary of the US Treasury… the first woman, by the way… Federal Reserve Governor from 2010 to 2014, and is currently a professor of law at Duke University’s law school. It’ll be super interesting to hear from her how financial regulation can affect these outcomes and what the administration is doing about it.
Sarah Bloom Raskin:
I’m Sarah Bloom Raskin. I am currently a professor of the practice at Duke Law School and I am currently engaged in work with the Regenerative Crisis Response Committee to determine how best to approach climate change from the perspective of the economy.
Nick Hanauer:
Sarah, thank you so much for being with us today.
Sarah Bloom Raskin:
Really happy to be here.
Nick Hanauer:
We were looking at our records and it turns out that I believe you are the fourth member of the Regenerative Crisis Response Committee to be on our podcast. Joe Stiglitz and Stephanie Kelton and Lisa Cook have been on. We’re trying to collect you all, apparently. I did not know that.
Sarah Bloom Raskin:
Terrific.
Nick Hanauer:
We’re going to talk about policy a bunch today, but we first wanted to get your feelings about how it is to be working with the Biden administration on climate and jobs. Given the last few years, are you feeling more hopeful now?
Sarah Bloom Raskin:
Well, it’s a great question. Of course, if you compare what the last administration was doing with this administration, I mean, it’s an astronomical shift in a positive direction. And so, of course, the last administration didn’t believe in climate change. As a result, any kind of thinking regarding the use of financial regulation, the use and role of fiscal policy and monetary policy… I mean, those kinds of questions were not at all getting addressed. On this side of the pond. Now, on the other side of the pond, there was quite a bit of robust thought given into this, so we’re behind, frankly, here in the US in terms of how to creatively use the tools that Congress has already given to the financial regulators and to use them in a way that could actually make a difference here. The new administration comes in and they come in with a lot of momentum in terms of looking at climate and understanding the existential threat that it is and understanding that it has to get woven into economic policy. That is all terrific.
So, if you compare it to where we were, I think we’re in great [crosstalk 00:10:01] Unfortunately, that’s probably not the only metric, though. While it’s great to… Again, some of the things that I was talking about in terms of the intersection between climate change and financial stability just a year ago… I mean, that stuff really was not falling… Put it this way. It was falling on a lot of deaf ears. Now, you can talk about this stuff and it has real traction. That said, I think we still have quite a bit of work to do in the financial regulatory space. How the financial regulatory tools get used exactly, what they could possibly do in the realm of climate change, all of that I think we need some work on here in the US.
David Goldstein:
When you talk about regulatory tools, are you talking solely about regulatory powers of the administration or are you talking about additional legislation as well?
Sarah Bloom Raskin:
I think it can all be done, actually, without new legislation. In other words, I think the tools exist. Because they were tools that were used in response to the financial crisis. We’ve seen the use of pretty extraordinary tools by the fed in the response to the pandemic. A lot of this was done without new authorities. Without new legislation. And so when I talk about them, what I mean are things like disclosures or stress tests, capital charges, enhanced prudential supervision, macro prudential supervision, macro operational supervision… These are all the words that are used to describe the different regulatory tools that are scattered across the different federal financial regulatory bodies. Those tools already exist. Now, they haven’t been used to deal with this particular existential risk that confronts us, but they can be and they need to be. They need to be used in a way that is really quite careful and coordinated and tailored. And that’s the work, I think, that we need to be doing much more on now.
Nick Hanauer:
Well, that’s super exciting. Count me surprised to hear that you believe that there are a bunch of existing tools at your disposal that can make a big difference confronting these challenges. I would’ve thought you would’ve told us that a whole bunch of new legislation needed to get passed in order to take a bite out of this problem. Can you give us and our listeners an example that would help us understand better what can be done?
David Goldstein:
To be clear, we’re all familiar with the type of regulations that the Environmental Protection Agency might do, but explain to us how financial regulations can address the climate crisis.
Sarah Bloom Raskin:
Exactly. When we’re talking about regulation today, for purposes of this podcast, we are talking about particular sets of actions that a particular set of economic policymakers can take. They are quite different from the regulations that a lot of the climate community understands. Regulations coming out of, say, EPA or coming out of the Department of Energy or coming out of the local utility boards. Those are all a very important set of regulatory tools, but the tools that I’ve been focused on are the tools that come out of the Federal Reserve, the Securities and Exchange Commission, the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the regulator for Fannie Mae and Freddie Mac, the regulator over derivatives and agricultural futures known as CFTC… What I’m talking about are actions that this dispersed set of financial regulators and economic policymakers have at their disposal.
So, let’s talk about one that’s actually currently being talked about, which is disclosure. Here, the SEC, the Securities and Exchange Commission, says, hmm. Maybe what we want to see is we want to have a better understanding of what kind of carbon footprint and what risk that carbon footprint might cause to a particular publicly traded company. Let’s ask those firms that are publicly traded to disclose, to describe for investors, what that footprint might look like. That would be a disclosure that may be mandated. These disclosures currently are not mandated. But the SEC is looking at the idea that perhaps firms should… firms that are publicly traded should disclose these risks. The idea being that investors will then have a better ability to make decisions regarding where their capital goes. Where they choose to invest.
There’s quite a bit of momentum for this. There’s a little bit of a debate regarding whether those disclosures should be mandatory or whether voluntary is good enough. If they’re mandatory, there’s a question as to whether they should be standardized, meaning everybody discloses in the same way so that investors can compare apples to apples and can look across potential investment opportunities and be able to determine whether and where their investment dollars will go. So, disclosure becomes one of those tools and it’s a tool right now that’s being discussed.
Nick Hanauer:
If I could just jump in, I think this is super interesting. For those listeners who have not either run or been on the board of a public company and had to deal with the filings and SEC, I think it’s worth underscoring that corporations today are required to list the risks that they face and the documentation that they create is filled with hundreds of pages of these risk factors. Already today. It’s not like you’re asking companies to do something that they have not before other than to highlight a very real risk that they’re presently mostly ignoring. And so this seems like a no brainer to require.
Sarah Bloom Raskin:
You would think it’s a no brainer, but it’s causing quite a bit of… There’s a lot of resistance to doing it. First of all, the actual rules state that it’s material risks that have to be disclosed. One question is whether the risks that are presented in terms of climate are, for a particular firm, material or not material. That’s one debate that’s shaping up as to whether or not this disclosure has to happen. And then another, of course, is, well, wait a minute. Can firms disclose in exactly with the language they would like or should there be particular rules regarding those disclosures? And by the way, what about particular financial rules associated with those disclosures? For example, let’s say you’re holding a particular physical asset that may depreciate faster if it is carbon-based. What should be the rate of that depreciation? Can the firm choose what rate it would like and put down a value that it just thinks could be a right value or should we have accounting rules regarding what that valuation might look like so that investors can determine, essentially, what those assets are going to be worth in a climate challenged atmosphere? So, there’s quite a bit of resistance to the actual notion of a mandatory disclosure regime.
Nick Hanauer:
Of course, there’s resistance. I meant no brainer from the point of view of policy. That’s so interesting. That’s a fascinating one. Can you give us-
Sarah Bloom Raskin:
That’s just one… Here’s the thing, though. And disclosure… It’s great to see people and firms talking about disclose now. I mean, disclosure… Let’s think about what disclosure does and doesn’t do. It gives information. It doesn’t give a plan. It doesn’t say, essentially, that we will be reducing the systemic risk that can cause destabilization in our economy from climate change. It doesn’t do that. It gives information. It tells investors here’s the information and you can do with it what you want. So, disclosure as a regulatory tool is an information tool. As such, we have to… I would say that’s one tool. That’s but one. It will give information. Is it going to end climate change in time to avoid the two degree tipping point? Probably not.
Nick Hanauer:
But it can’t hurt.
David Goldstein:
So, it’s a very pro market tool. Since markets feed on information. It’s all about information.
Sarah Bloom Raskin:
That’s right. That’s right. It’s a pro market tool.
David Goldstein:
Where else is the committee focusing?
Sarah Bloom Raskin:
The committee is looking at all sorts of tools. For example, there’s something called a stress test. The stress test was a regulatory innovation used after the financial crisis to determine whether a regulated institution, particularly a bank, could withstand the shock of a particular magnitude, an adverse shock, and what would happen to that bank if that shock was long-lasting, if essentially it came from somewhere… In these scenarios, you don’t have to say where they come from, but it shocks the bank in a hypothetical way and it says, okay, what happens to this bank. Can it continue to lend? Can it continue to engage in the payment system function? What happens to its ability to operate? Can it continue to do capital intermediation? Allow borrowers to borrow and savers to save? That’s what the stress test in the context of the financial crisis did. If a bank didn’t so call pass the stress test, it was precluded from being able to engage in giving dividends back to its shareholders. Because, essentially, if it doesn’t pass the shock, it doesn’t withstand the shock, it’s in no position to be taking out capital from its cushion and giving it out to its shareholders. That was the first use of a stress test in the US and it was done in the early days of… It was done after the financial crisis, but in the early days of the aftermath, and was considered a pretty credible tool.
Now, the question coming up primarily from across the pond… the Bank of England is experimenting with this, the European Central Bank is looking at it… is what about a stress test that thinks about an adverse shock coming from climate? Will our banks be able to withstand such an adverse climate scenario? That work is underway in Europe and in the UK. Even in Asia. The use of a stress test is being looked at. The US… The fed is not looking at that right now, but that would be an example of a tool… of a regulatory tool that also could be deployed in a precautionary way, a way ahead of a stress, that would let banks know whether or not they’re actually able to continue to operate in a crisis or will they require some kind of bailout or some kind of nationalization? What would happen to them? That’s another example of a tool.
David Goldstein:
I’m wondering if you have any insight to what the climate impact has been of our past couple decades of deregulation and where we might want to reverse some of the deregulation we’ve had in the past.
Sarah Bloom Raskin:
Do you mean deregulation on the environmental side or deregulation in terms of the economic side?
David Goldstein:
On all sides. Wherever you see that there might’ve been a climate impact from deregulation.
Sarah Bloom Raskin:
Right. Climate impact from deregulation. So, probably the way to think about it is that climate hasn’t been thought about as a particular stressor to-
David Goldstein:
Funny..
Sarah Bloom Raskin:
Yeah. I know. It’s funny if you’re not… for people who are… Yeah. It just hasn’t been incorporated as a particular factor that is producing costs. Economic costs. Of course, now, we’re slowly starting to monitor those costs and starting to account for them, but it’s a pretty… Again, it’s a pretty slow process. I mean, the costs we know about are ranging from quantifiable short-term ones to harder to quantify but altogether real medium term and long-term ones. The obvious short-term ones that the financial regulators are now starting to think about are things like the costs to clear and repair or rebuild destruction of physical property that comes from wildfires or hurricanes, property that’s been damaged by sea level rise, but then there are less obvious costs and still quite real. Costs associated with the effects of more drought, more extreme heat, on agriculture. The effects of drought on labor productivity.
And even less obvious and where you see… I haven’t seen any attempt to quantify yet are the costs associated with strains on public and private infrastructure. The costs associated with increased levels of disease. The costs associated with more frequent migration patterns. Costs associated with disputes, some of which will be violent. Over scarce resources. Costs associated with health and with political instability. All of that is just way, way on the frontier here and there’s been no attempt by the financial regulators to start quantifying.
David Goldstein:
It’s kind of amazing. Because one of the biggest bailouts in the Great Recession was an insurance company. There’s obviously huge insurance risks. Not just straight up insurance companies, but in terms of all the hedging that goes on in the commodities markets and so forth. If there’s one thing we learned from that financial crisis was how interconnected the whole financial industry is. To not see this as a huge potential risk to the markets is just… It’s beyond me. We never learn anything.
Sarah Bloom Raskin:
Right. And we also don’t learn that emergency responses… responses that come after the fact… really don’t completely address all the costs. I mean, in our country, our approach is, okay, we can probably deal with this major crisis, but we’re going to deal with it after the fact. We’re going to wait for it to happen and then we’re going to spend tons of money and we’re going to see all sorts of collateral damage that comes from the spending of this extraordinary amount of money and then we’re not going to have addressed really everything. I mean, there were social costs that came… significant social costs that came after the financial crisis. We could have a whole session on what those were. We had a real exacerbation of economic injustice that came after the financial crisis. Even thought there was a response. So, what I’m thinking about is how do… what RCRC is thinking about… How do we shift into a more precautionary mode of doing financial regulation? Can it be done ahead of time or are we going to really rely on markets and market-based solutions to be primary mechanism that will essentially protect us?
Nick Hanauer:
This brings us around to narrative, which is so important with respect to these projects. Our podcast, Pitchfork Economics, is largely devoted to tearing down the neoliberal ideological framework around economic cause and effect, like raising wages always kills jobs and that tax cuts for rich people create growth, but a central tenant of all of that is that any constraint on big corporations or power, any regulation, harms the economy overall and kills jobs and is bad for everyone, which is basically what you’re up against, right? At every turn, everything your team will suggest will be countered with these arguments. That we could do the right thing, but that would be bad for everyone. I guess I’m interested in how you fight through that. How do we teach people that these things that we’re trying to accomplish actually don’t cost you more money, they cost you less money in the end? Even if they may be bad for a few shareholders at Exxon Corporation.
Sarah Bloom Raskin:
I mean, one thing I have learned over the years from engaging in financial regulation is that it’s a very abstract concept. It’s really hard to get your head around. I think we need to do better in using visual images. Using particular metaphors that will really help make the case on this. Because this is… First of all, when people hear the word regulation, they immediately say, “Ah, well, that’s a cost. I mean, that can’t be something good.” Even people who might understand the positive power of regulation. They see it as classical economists see it, which is as a shift in the supply curve. It’s something that is not-
Nick Hanauer:
It’s friction.
Sarah Bloom Raskin:
Exactly. So, I think one way to deal with this is through metaphors. And I have one, actually. It’s a kind of navigational metaphor that I’ve been working with. I’m no sailor, but I did read an account of some sailors that brought to mind this supreme maritime challenge. It turns out that up off the coast of British Columbia, there are these two powerful sets of currents that are very close to each other and they nearly intersect. One powerful set of currents is called the Strait of Georgia and the other set… that is very close and also very powerful… is called the Queen Charlotte Strait.
Although the straits produce vortexes that can spin you under, there lies between them… between the two of them… a single narrow passage. Traversing the straights while not becoming subject to the vortexes is exceedingly challenging because of the instability and the narrowness of this single passage that exists between them. If you are navigating this passage, you know that any wrong move can throw your boat into one or the other powerful and dangerous currents and vortexes. The only way to maneuver through this passage between the two straits is to have instruments. Instruments like rudders of the most sensitive kind and someone who can deploy these instruments and rudders in such a way that a glide path is created for safe passage.
Maneuvering through the unpredictability and the costliness of weather-related events really isn’t unlike this exceptional maritime challenge. One set of currents is the historically established and foundational carbon-based economy and the other set of currents is the yet to be realized, aspirational, future resilient economy that we need to glide towards in order to avoid the costs that are going to arise from a one and a half degree increase in temperature. Right now, where are we? Right now, it’s as if we’re in between these currents and we’re attempting to maneuver away from the destructive and costly forces that the carbon-based economy is creating while heading towards the regenerative and beneficial systems that are associated with a more durable future state of the economy. This is the treacherous passageway that we’re in today, that we’re navigating, and we’re trying to neither stay too long in the carbon-based system nor to veer too quickly towards resilient systems that have to be scaled to meet the world’s demand.
The point is we need skill to do this. We need coordination. We can’t just put down the rudder, hands off, and put down the navigational instruments and assume that the boat is going to take care of its own maneuvering. The skill and coordination are what smartly crafted financial regulation, including market regulation and prudential regulation. That is what those regulatory tools do. They are the rudders that are going to get us through the passageway. Through this transition. And we need them… the way we need a rudder… to help us transition to a net zero economy in the most stable and least dangerous way possible.
Nick Hanauer:
That’s a fantastic answer to that question.
Sarah Bloom Raskin:
A long answer.
Nick Hanauer:
It’s okay. It is a fantastic answer to that question.
David Goldstein:
You’re ready for the final question, Nick?
Nick Hanauer:
Yeah. Sarah, why do you do this work?
Sarah Bloom Raskin:
Wow. Well, this is… We call this is a risk. We say climate risk. We say climate change is coming. We say this is something that is going to end civilization the way we know it. But the reality of it is it’s here. It’s here right now. We’re actually dealing with it right now and we have to be doing more. We call it a risk, but it’s here. It’s not a risk. We’re seeing it with 100% probability. It’s here. We have responsibilities. We have responsibilities to our next generation. I certainly don’t want to look back at my life or have my children look back at what I did and say, “And you did what? Nothing? You didn’t think about this? You didn’t incorporate this into your work?”
Now, I’m not a climate scientist. I can’t explain the climate science of this. But I do know what I know and that is financial regulation. It seems to me that we all know something. We all have something that we bring to the table. Bring to the collective table of figuring out how we’re going to make the world better. We bring what we can. For me, this is my knowledge. My expertise. I’m not saying I’m 100% right, but I do feel a responsibility to bring what I know and share it for the common good.
Nick Hanauer:
Absolutely fantastic. Well, Sarah, this was just a terrific interview. Thank you so much for spending the time to talk to us.
Sarah Bloom Raskin:
Well, you guys are great.
Nick Hanauer:
I must say. I was genuinely surprised by the… Surprised and encouraged that there’s a bunch of existing regulation around that may help us get a handle on some of these problems. It doesn’t require new legislation.
David Goldstein:
Existing regulatory powers.
Nick Hanauer:
That’s right. I think Sarah’s absolutely right that making some of things more transparent could make a huge difference. I find it very, very interesting. I was really struck by her raising the issue of metaphor because I’ve felt very, very strongly about that for a long time. In our book, The Gardens of Democracy, we devote a lot of thinking to metaphors. In particular, the mechanistic metaphor that most people use to describe the workings of an economy. They think of it, mostly subconsciously, as this machine-like apparatus that churns out prosperity like donuts from a donut making machine or something like that, which is, of course, not the way it actually is. It’s best to think of an economy like an ecosystem.
But if you think about it as a machine as we do and use words like regulation as the way in which we describe it, you automatically put folks unconsciously in this framework of believing that it will bring harm. Because the word regulation literally means in the dictionary to constrain. To slow down. If a good economy is going fast and a bad economy is going slow, then regulation by definition creates broad public harm. And so Eric Liu and I in our book said that we need to get rid of the word regulation and talk instead about standards as a way for people to understand how this stuff works. High standards are good, low standards are bad, and everybody needs to be held to a high standard. Including companies that are subject to financial standards. If the standards are high, they’ll behave well and if the standards are low, they’ll pollute and do terrible things.
David Goldstein:
That metaphor around regulation is so baked into orthodox economics, into the equilibrium systems, that people just have that automatic knee jerk reaction that regulation slows growth. I’ll just add a biological metaphor there. You know what unregulated growth is in a body? It’s cancer. It’s not the kind of growth we want. We want to regulate growth. We have all these mechanisms built into our bodies to regulate growth so that we don’t get cancer. When those regulations fail, that’s when things go bad. The same is true in the economy. A little regulation actually is good for growth. The right kind of growth.
Nick Hanauer:
It is indeed.
David Goldstein:
On the next episode of Pitchfork Economics, we’re doing another ask me anything. Tune in as we answer listener questions.
Speaker 4:
Pitchfork Economics is produced by Civic Ventures. If you like the show, make sure to subscribe, rate, and review us wherever you get your podcasts. Find us on Twitter and Facebook at Civic Action and Nick Hanauer. Follow our writing on Medium at Civic Skunk Words and peek behind the podcast scenes on Instagram @pitchforkeconomics. As always, from our team at Civic Ventures, thanks for listening. See you next week.