As the world grapples with the urgent need to address climate change, a unique perspective has emerged from a state university in New England. This university, known for its progressive research, has put forth an unexpected argument: using the economic theory of Milton Friedman, a prominent economist associated with conservative ideology. This unconventional approach suggests targeting the ultrawealthy, who disproportionately contribute to climate change while remaining largely unaffected by its consequences.
Wealth Disparity and Climate Impact
A significant inconvenience in the climate debate is the reality that affluent nations and individuals, responsible for significant contributions to climate change, are often the last to experience its adverse effects. Pacific Islanders and American outdoor workers are already bearing the brunt of climate-related challenges such as floods, droughts, heat strokes, and wildfires. However, reshaping capitalism in a more environmentally friendly direction is complex due to the immense profitability of the status quo.
The Role of Milton Friedman’s Economic Theory
The state university’s research offers a provocative argument on solving this issue by employing the economic theory of Milton Friedman. The study contends that the wealthy not only consume carbon-intensive products but also benefit disproportionately from climate-damaging investments. This contributes to a significant portion of emissions, leading to the suggestion of taxing the shareholder class as a means to curtail the influence of fossil fuel companies.
The Wealthy’s Carbon-Intensive Lifestyle
The research reveals that the top 1% of households, with an average income of $1.5 million per year, are linked to approximately $600,000 of annual income tied to climate-damaging investments. Similarly, the top 0.1% of households, with an average income of $6.8 million per year, have around $3.8 million of annual income linked to such investments. This group includes “super emitters” responsible for an outsized carbon footprint, emitting 300 times the amount produced by lower- or middle-class Americans.
Framing the Issue through Friedman’s Lens
The study takes inspiration from Milton Friedman’s theory of shareholder supremacy, which asserts that a company’s primary responsibility is to increase profits for shareholders. The researchers argue that targeting the ultrawealthy with taxes on carbon-heavy investments aligns with this theory and places accountability for corporate activities on the investor class. Such a tax would offer clearer investment signals than current Environmental, Social, and Governance (ESG) rankings and could potentially garner public support.
Potential Positive Impact
This innovative approach aims to make the ultrawealthy responsible for the consequences of their investments, encouraging them to make environmentally conscious choices. By focusing on taxing carbon-heavy investments, the proposal avoids the pitfalls of a broad-based carbon tax that might disproportionately affect lower-income individuals. Furthermore, it could serve as a more direct way to reduce greenhouse gas emissions.
The application of Milton Friedman’s economic theory to combat climate change represents an unexpected and thought-provoking solution. By targeting the investor class and incentivizing greener investments, this approach seeks to address the root causes of emissions while leveraging established economic principles. As climate concerns continue to gain prominence, innovative strategies that transcend ideological boundaries could play a pivotal role in steering humanity toward a sustainable future.