What defines true sustainability?

The idea of sustainability has been around for some time, but I think it is worth some reflection to decide what it really means. True sustainability has to beyond an environmental focus. We have seen in the past few years that financial sustainability is also something that deserves more attention. I wonder what other kinds of sustainability we should be considering in our lives.

Before starting to make a list, let’s revisit what sustainability means in general terms. For something to be sustainable, it means you can keep doing it forever without any degradation in performance. So of course environmental sustainability means that a particular behavior doesn’t cause environmental damage at a faster rate than the environment can repair itself. The related idea of resource sustainability means that a behavior does not use up resources faster than they can be replenished. Financial sustainability means that a behavior doesn’t require more money than it produces and that it doesn’t transfer money from one group to another in a way that would cause the giver to run out.

So what other kinds of sustainability are there? How about political/social sustainability? This would be a behavior that does not alienate others to the point that they would enact a law banning it (political) or to ostracize the actor (social).

How about emotional sustainability? This would be a behavior that does not emotionally drain the actor faster than available rest and relaxation can replenish him or her.

Personal health sustainability would be a behavior that does not damage the actor’s health faster than the body can repair itself (smoking or bad eating habits for example)

And for all of these, we can think in terms of an individual, group, or the world at large. I may do something that is financially sustainable personally, but has externalities on the world that are not sustainable. And the opposite can also be true – I can do something that is not sustainable in some way to myself, but doesn’t impact anyone else. Or maybe the behavior is not sustainable to myself if I do it alone, but as long as other people also do it, we become sustainable as a group because we balance each other out.

Maybe if we put more time into ensuring that the things we do personally and professionally are sustainable in all of these ways, we could really make the world a better place. Or at least avoid destroying it!!!

Better than regulations

Larry Fink, the CEO of Blackrock (the investment company) had an idea to reduce the chances of future financial crises like the one we are coming out of that does not involve more regulation. He suggested eliminating the tax on really long term capital gains (> 5 years) and balancing it with an increase in short term (< 1 year) capital gains and dividends. This would incent people on the long term investments that really benefit the economy while disincenting the short term trading that was part of the problem. Because its not a regulatory solution, it avoids the frictional costs and externalities that usually accompany regulations. It also may be possible to sell, even though there is a tax hike (oh no, not that!!!) inside, because it is balanced and it is clearly related to the emergency.

I think this is a great idea. Hopefully the pols in DC were listening.

Media Hype

When swine flu first hit the news, it was overhyped the way the 24/7 news industry typically does it. We got 24-hour coverage for several days and they made it out to be a disaster just around the corner. Of course they are chasing ratings, which is their business model, so it's hard to blame the media. We should blame ourselves for watching.

Then, after a few days of this, we all realized that is wasn't nearly as bad as all that, and we got burned out of the coverage. Now, we see very little. Again, without demand, there is no supply.

But I suspect the pendulum has now swung too far the other way. Reading about the NY school assistant principal who died from the swine (oh sorry, the H1N1) flu and the predictions of some experts that it could really get worse makes me a bit concerned. When we really do need to pay attention, which will be when the normal flu season hits us next winter, we probably won't. It will be really old news by then.

Usually, I criticize the hype the media gives these stories as a waste of time and for taking away time that should be spent on important issues and debates. But this time, it could cause actually hurt - or even kill people. This may sound like hyperbole, but if no one is paying attention, any future pandemic will be much worse.

I wonder if some enterprising person will think to sue the media over the issue after a loved one dies from the flu. They could claim that the hype cycle was in part responsible for the death because it reduced the public response. I doubt this would stand up in court, but the media would probably settle (without admitting guilt) to avoid the bad PR. If the settlement is large enough, maybe they would be forced to be more responsible and we would get less hype in the future. In general I hate frivolous lawsuits, but if this happens, I won't complain.

Liars, damned liars, statisticians, and then pundits

The jobs report today is a great example of how statistics can be represented to make just about any case you want.

The number of jobs lost last month was reported as 539,000. This compares to an adjusted 680,000 average over the past five months. But the unemployment rate increased from 8.5% to 8.9%.

Anyone who wants to say that this is good news points to the decrease in jobs lost. Anyone who wants to say this is bad news points to the unemployment rate increase. The statistician points out that past numbers have been adjusted higher every month for quite a while, so the 539k will not stand up to the test of time.

Or if someone wants to say this is not as bad as previous recessions, they can point out that the unemployment rate is still much lower than in the 1980-1982 recession. But after adjusting for the older population (which any good statistician SHOULD do), it's actually worse.

Which brings me to pundits. Every news program brings on between 1 and 4 "experts" who opine about the numbers. It is really important to the general public to get a sense of what is going on so they can prepare themselves. Is the economy getting worse, in which case I need to save more, suck up at work more, and in general decrease my risk taking? Or is it getting better, in which case I can start spending again, look around at opportunities, and in general increase my willingness to take risks? So pundits are not just for entertainment; they provide an important service.

Except that they are not. They pick and choose the numbers that make the points that they prefer to make based on politics, selling their latest books, or just to get on TV. The general public are not statistics experts, macroeconomics experts, or mind readers. They need the news to give them a sense of reality. So these pundits are really doing us all a disservice. Shame on them!!!