Both Brains Required

In my new career in academia, I have been teaching a course on ‘Systems Thinking for Sustainability’.

After considerable iteration, this slide summarizes (for now) the ‘big picture’ I believe systems thinking reveals for sustainability.

It frames the sustainability challenge as a fairly daunting act of collective ‘unlearning to relearn’ – a U-shaped journey from the failing ‘market-led sustainability’ paradigm of today to a possible future of a ‘sustainable culture that has an economy’.

Those who already feel that a ‘sustainable culture’ is the obvious goal – or understand that the indispensable property of a sustainable system is homeostasis (balance) not growth – can effectively ‘jump across the valley’ without troubling themselves with the deeper issues.

Yet the reason to have developed the full U-shaped path is because I believe a collective, culture-scale shift from left to right will ultimately require that the various rationalizations on the left-hand side, which uphold today’s behaviour, be explicitly confronted and dismantled to ease their displacement by the sorts of ideas on the right-hand side. This is not straightforward as the justifications on the left-hand side are historical and culturally embedded and transmitted, and so it requires time and effort to contemplate them explicitly to understand how they emerged to produce today’s unsustainable behaviour.

Alas, the clock is ticking, so I see this U-shaped journey as effectively constituting a Race to Sustainable Cognition. Writ large, the diagram suggests that forty years after ‘sustainability’ entered the lexicon we are still not yet thinking about sustainability in a sustainable way.

There is a large amount of detail accompanying each step, but I share the slide in case it helps people connect and structure various ideas they may be reflecting upon. I doubt this is the perfect or only way to frame such things, but it seems to be serving well as a teaching structure.

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P.S. One subtle but important attribute of the diagram is that the concepts on the right-hand side (right brain, systemic, relational and processual) *transcend and incorporate* the concepts on the left-hand side (left brain, reductionist, materialist). That is to say, the concepts on the right can provide explanations for the concepts on the left – i.e. explain why those ideas were arrived at and can seem valid in certain contexts – but the concepts on the left cannot explain or incorporate the ideas on the right.

Hence, right-side thinking is ‘bigger’ or more universal. E.g., it understands that markets may be useful, but not always; it understands that natural systems may grow at some stages of their life cycle but must balance at every stage etc. Right brain/systemic thinking not only offers more comprehensive explanations of the world, it also contextualizes our past explanations! This is why systems thinking is now ascendant in many fields and why it represents the antidote to mainstream economics that has produced and continues to justify today’s externality-denying capitalism.

It remains maddeningly difficult to convince people of the innate self-destructiveness of ‘free market’ or ‘neoliberal’ culture, which makes it the main engine of our unsustainable behaviour.

Not only does this dynamic overwhelm the efforts of ‘market-led environmentalism’, it increasingly turns such efforts into reinforcements of the problem! This is counter-intuitive but systemically clear.

Neoliberalism is self-destructive as a social form because of its central paradox:

1. Belief in the superiority of markets over non-market institutions cultivates an antipathy to government ‘intervention’…

2. … yet claims that markets are superior allocative institutions depend on markets being ‘complete’…

3. …and it is only government, as an extra-market institution, that can force the internalization of negative externalities to move markets towards the completeness that is the basis for their claim of superiority!

More succinctly: the paradox is that when negative externalities like climate change arise, markets need government intervention to be made efficient!

And because ‘negative externality’ means ‘a real cost that markets ignore’, the process of making markets more ‘complete’ necessarily involves government making a cost real in some form or other (tax, ban etc.)

But a ‘free market’ culture that has run for any length of time will have produced norms and formal powers that allow market participants to resist corrective action by governments. Hence, negative externalities will accumulate, and the ‘free market’ culture will gradually become a runaway ‘doom loop’, taking society and ecology with it. The market’s current propulsion of planet-warming AI epitomises this perfectly.

Neoliberalism is incoherent as a cultural form on its own terms.

The ESG Paradox

The neoliberal paradox repeats at sub-scale in the form of the ‘ESG paradox’

The belief of the ‘ESG’ or ‘win-win’ movement is that markets might deliver solutions without the need to price or limit e.g. GHG emissions., i.e. the belief that markets might self-regulate without any need for external ‘regulation’. Sometimes this can work, but it is plainly not for climate change. GHG emissions reached a new high in 2023.

The problem with persisting with failing ‘market-led sustainability’ efforts is that underneath the details of such efforts, the greater part of what they do is reinforce the already strong cultural bias against government interventions that might harm corporate profits. In helping defend the background norm that governments should not act in ways that impair corporate profit, the ESG community does a large measure of the fossil fuel industry’s work for them.

The dynamic is the ‘Shifting the Burden’ systems archetype. Unfortunately, the label is not intuitive, but the diagram tries to explain. A key insight is that solutions are not always additive. In layered complex systems, deeper change often requires giving up the easier change tried first. This is the key challenge of adaptation.

The ‘Shifting the Burden’ archetype is one of 8-10 patterns that repeat throughout natural and social systems.

Here, a problem, ‘climate crisis’, has two possible solutions: ‘market-led sustainability’ and ‘costly government regulation’.

Both solutions have potential – B₁ and B₂ loops; (‘the more of the problem, the more we apply the solution, the less of the problem’) – but the former is the ‘easier’ solution, the latter more difficult but ‘deeper’ or more fundamental.

The key feature of the archetype is the right-hand loop that describes a recurring dynamic of systems in which pursuit of the easy solution inhibits or even prevents implementation of the fundamental solution.

Specifically, the pursuit of market-based solutions reinforces the existing cultural bias in favour of markets and against costly government intervention, which makes the implementation of regulations hard, if not impossible. (Read: ‘the more we pursue market-led sustainability, the more we reinforce the pro-market/anti-government culture, the less we can implement government regulations.’)

Solutions are not always additive. Implementing a deeper solution may require giving up the easier solution attempted first. This is a basic dynamic of adaptation.  

A telling point about the fit of this pattern for our current predicament is that it also describes addiction problems.

Perfect folly: the Race for Artificial Intelligence is the wrong race at the wrong time. The race we urgently need is a Race to Sustainable Cognition.

The world’s largest companies are now frantically developing AI in total disregard of global climate and ecological crises, for AI triggers vast new demands for energy, water and certain minerals at the worst possible moment.

“We need way more energy than we thought” said Altman recently, while Zuckerberg has mused that new data centres may require dedicated nuclear power plants. This at a time when the ‘clean transition’ is not reducing GHGs anything like fast enough, which ought to be focusing would-be ‘great minds’ on energy reduction, not on new, discretionary, forms of energy consumption. (AI companies invariably have some line about AI’s potential to improve ‘energy efficiency’, which only betrays their ignorance of Jevons’ Paradox.)

In short, the AI race is the enthusiastic bringing of petrol to a fire – just as climate scientists report more concern and despair than ever before (see last week’s Guardian survey).

There is a tendency to portray Huang, Nadella, Cook etc. as ‘leaders’ because they develop technologies few of us understand, but in fact they are more in the grip than most of a deeper tide they either cannot see or do not have the courage to resist.

That deeper tide is ‘externality-denying capitalism’ – the system most of the world now lives under and which has lifted human decision-making entirely off its biophysical moorings. Because the economy does not recognize the real cost of energy, AI leaders are highly incentivized to not reflect on what they are doing to the planet. Per one Twitter wag: “it is difficult to get a person to understand second-order effects, when their stock-based comp depends on their not understanding it.”

In turn, externality-denying capitalism is the result of a long lineage of errant thinking including, in reverse chronology, shareholder value maximization, ‘complete’ and ‘efficient’ markets, disregard of externalities, economics’ physics-envy, and the primacy of reductionism over systemism. For 400 years, the Western world has been enacting a slowly accelerating cognitive-behavioural feedback loop in which how we choose to think about the world gradually shapes how we behave in the world and, eventually, how the world becomes.

In other words, we have been doing ‘artificial intelligence’ for a long time. Its most consequential outputs are heat and entropy. What is new is the pace and scale of consequences, and the strange inclination to celebrate the fact.

The race we need to run, and which ought to be attracting ‘leaders’ is the Race to Sustainable Cognition. This might start by asking whether blindly following a decision-making system that so incentivises AI at this time is a mark of intelligence or stupidity.

Postscript

The structure of the cartoon is an ‘action-justification’ loop, in which a certain way of thinking has justified the development of AI, for which the current high level of enthusiasm despite its evident sustainability and climate problems now prompts an impulse to double down on the enabling justification…

In other words, ‘externality-denying capitalism’ has the basic dynamic of a reinforcing or runaway feedback loop: errant thinking encourages ideas that boost share prices, which to be viewed as ‘sustainable’, rely on re-committing to the errant thinking that spawned the idea…

Runaway feedback loops are the essence of ‘unsustainability’.

To understand this, consider the opposite: the ‘sustainability’ of a system – from small organism to ecosystem to human society – is the ability for the system to self-regulate in the face of internal or external disturbance, i.e. to suppress potential runaway feedback loops that might lead to collapse or unravelling of the system. This is ‘homeostasis’, which is the very essence of sustainability. A system is ‘sustainable’ to the extent that it achieves homeostasis without interruption.

In the human body, for example, we know those runaway processes that overpower the body’s efforts to achieve homeostasis as ‘pathologies’. Alas, one or other pathology eventually achieves enough momentum to bring down the whole system.

Ecologists, biologists, medical doctors etc. know all this as a matter of training and professional experience, but many other disciplines and professions have no inkling of this basic phenomenon of life. In fact, disciplines like economics and finance cultivate a mindset that denies the relevance of this.

The irony of the AI action-justification feedback loop is that one of the disciplines that most cultivates awareness of feedback loops is… computer science! ‘Do…loop’ problems that cause computer ‘crashes’ are well known to coders. Software sometimes gets stuck in loops it cannot get out of. The screen goes blue. You have to turn the computer off and start again.

Human society is effectively stuck in such a loop, because our cultural software – norms, habits, incentives – is stuck in such a loop.

Alas, while AI technicians are presumably highly proficient at recognizing and fixing reinforcing loops that appear in the code in front of them, they would appear to be oblivious to the larger culture-scale reinforcing loop of which their thought and action is merely one link in the chain. They are part of the loop! As is anyone just trying to get by in the system of externality-denying capitalism…

How do you stop a reinforcing loop that is doing damage? You see the loop for what it is, you step outside of the loop, and you stop it.

I’ve posted this image before but find myself repeatedly returning to the tension it expresses. It is sort of a Rorschach test for climate intuition.

It depicts a clash of mindsets about the relationship between economy and environment that I believe lies at the heart of the climate change debate, though is too often left implicit. 
 
The left chart is economics’ view that ‘growth is the solution’ for environmental problems. Yes, economists say, economic growth may initially cause environmental damage – the curve rises up to start – but more growth will bend the curve down again, creating a ‘win-win’ of growth and environmental protection.  
 
The intuition is ‘growth generates the wealth to pay for environmental protection’, or:
 
Growth → wealth → environmental protection
 
Technically, this is the ‘Environmental Kuznets Curve’, or EKC. It is a proposition about the ‘win-win’ potential not of an individual technology or investment but of a whole system defined by a certain type of damage, e.g. the planet for climate change.
 
Critically, the EKC is an *hypothesis*. Growing evidence finds it is only sometimes true, not a law of the universe.
 
Which is exactly what concerns ecologists, who see the world on the right. What they are most worried about is that climate and ecological problems are characterized by the prospect of irreversible tipping points that, if crossed, may trigger ongoing damage that no amount of growth could repair.
 
The contrasting intuition: the growth that generates the wealth to pay for environmental protection may cause irreversible damage before the solutions arrive, or: 
 
Growth → (damage > wealth) → environmental destruction
 
It all hangs on the red dashed line. Are there thresholds and tipping points in the biophysical world, or not?
 
Economics has repeatedly rejected ideas of limits – Malthus, Club of Rome, etc. – but critically today’s limits are a different type to those of past debate.
 
Instead of the age-old concern about running out of inputs – food, energy, etc. – the new concern is that our many outputs and impacts – emissions, waste streams, etc. – may exceed natural absorptive and regenerative capacities and destabilize the planetary systems upon which we depend.
 
Bluntly, the limits problem today is less about ‘running out’, and much more about ‘screwing it all up’. This is what ‘Anthropocene’ is trying to get at.
 
In other words, ecologists are increasingly troubled by possibilities that economics – and hence business and finance – rule out by assumption.
 
Why it matters is that the left chart fosters a view that system-wide sustainability is a grand ‘win-win’, while the right chart suggests sustainability is a ‘race against time’, whether it be profitable or costly.
 
People might reflect not just which chart feels more intuitive for them, but why? Based on what formal education, professional experience or cultural upbringing? And does the original learning context still apply?

Can economic growth really solve global ecological problems like climate change?

Economics’ case that growth can solve problems like climate change is based on the ‘Environmental Kuznets Curve’ (EKC) hypothesis (left-hand graph). The story the EKC tells is that economic growth first increases environmental damage, but then reliably reduces it.

Unfortunately, the EKC is just a hypothesis and is increasingly challenged both empirically and conceptually, raising difficult questions that cannot be ignored.

Empirically, the evidence from hundreds of studies into the EKC is very mixed. Sometimes the curve bends down, sometimes it doesn’t.

Conceptually, the EKC denies the irreversible thresholds and ‘tipping points’ that scientists increasingly point out are the key features of climate change and other global ecological challenges. If tipping points exist, the EKC may bend backwards – a thought that seems not to have occurred to economists, betraying the sort of thinking that economics has been.

For much more on this, see the presentation on economic growth and the EKC:

“Can Growth Really Solve Climate Change? Or What if the Environmental Kuznets Curve Can Bend Backwards?”

Donella (Dana) Meadows famously identified 12 ‘leverage points’ for changing human systems, from tweaking parameters to rewriting major rules. More effective interventions typically required greater effort. Number 12 on her list – with greatest potential leverage but most difficult – was to transcend the prevailing system to see it for what it was and reject it for something new. This was to apply Kuhn’s ‘paradigm shift’ idea to the scale of whole societies. 
 
The image is an adaptation of Meadows’ idea for the current ecological crisis – which continues to be shaped predominantly by the attitudes of wealthier nations. It might be thought of as 4 ‘leverage attitudes’ for sustainability, depicting an uphill struggle against various forms of resistance to reach more effective stances.

The embracing paradigm is the reductionist worldview that is the peculiar legacy of the Scientific Revolution. While a fruitful perspective for working out how atoms and cells work, when applied to social systems it has somehow resulted in externality-denying capitalism and expertise-debasing democracy. The shared premise of capitalism and democracy, echoing the method of reductionism, is that you can ‘add back up’ expressions of self-interest – whether spending or voting – to arrive at the best possible outcome. But unless all expressions of self-interest fully reflect latest ecological understanding, the aggregation may fall well short of a sustainable outcome.  
 
Most difficult of all is that global ecological challenges are fundamentally ‘stop doing’ problems, i.e., stop emitting GHGs, stop destroying the Amazon etc.
 
The hope has been that ‘stop doing’ problems could be solved by the ‘more doing’ strategy of technological substitution – renewables, greener products etc. The private sector is felt to have advantages in innovation and so market-led sustainability has been a major form of response.
 
However, the evident fact of much historical technological substitution (cars replaced carts, computers replaced typewriters, etc.) is no guarantee that technological substitution can always happen fast enough to solve every problem. Instead, the main learning from 25 years of CSR, SRI, ESG, etc., is that substitution is not happening anything like fast enough to prevent climate change. While technologies like wind and solar have grown strongly, their growth is still proving more additive to fossil fuel use than substitutive:

So, we continue to face innately ‘stop doing’ problems for which the first-choice ‘more doing’ mindset is not working well enough. Not only does that challenge the modern impulse to be ‘productive’ and do more, but the capacity to do less is very unevenly distributed. Some can, some cannot.
 
The broader point is that sustainability may now depend upon people and institutions asking the question one – or two or three – along from the question they are currently asking themselves.

Can financial directors really feel comfortable signing off on today’s externality-denying financial statements?  

Central to the sustainability challenge is that the modern world increasingly directs matter, energy, and human effort in line with what financial statements deem ‘profitable’. Projects that pencil out to a profit get a green light, while businesses that make a loss eventually go bankrupt and stop influencing the world. Such is how we ‘make’ the world today. Yet, the all-important financial statements at the heart of the process exclude large and mounting social and ecological costs.  
 
Just to take carbon as one major external cost, the World Bank estimates less than 4 percent of global carbon emissions are priced at a level consistent with Paris Agreement temperature targets. If so, for this one metric alone, can any corporate financial statement be said to be ‘fully costed’? Including – sobering thought – the statements of solar, wind, battery companies etc, which may be ‘solutions’ and better than alternatives, but which themselves are not paying the full price for their material and energy inputs…?  
 
The de facto decision-making of modern society continues to deny external costs that have become glaringly apparent on this generation’s watch. This has overturned economists’ earlier belief that externalities were negligible residuals of market activity – too small to worry about, or possibly if large too soon remedied by growth to dwell on. Instead, stubborn externalities are becoming the main event of the economy; a growing share of the market’s value consequences are off-balance sheet, not on.   
 
One of the key moments when external costs are denied is when directors sign off on financial statements that represent the aggregation of myriad underlying transactions. Yes, those statements may be ‘generally accepted’, but are they meaningful statements of value? Indeed, what does net income or profit even mean if all costs are not reflected?
 
In being ‘generally accepted’, financial norms do a lot of difficult psychological work for us as the established shared conventions by which we collectively excuse ourselves from thinking about what the economy as a system is actually doing. Indeed, directors might claim they are just fulfilling a commendable fiduciary duty – yet this increasingly has the disturbing ring of ‘just following orders’ with its connotation of abnegating greater responsibility. Responsibility is just shunted back up the principal-agent chain to who…?
 
Signing off on financial statements may seem a routine confirmation of ‘the numbers’, but it is a political and cultural act of great significance in that the moment when directors lend their name to a statement is a micro-reinforcement of the legitimacy of what those numbers exclude – and all those micro-reinforcements accumulate up to perpetuate an unsustainable collective system.  
 
This should be a real dilemma for directors.  

I really wish the ubiquitous GHG ‘decoupling’ charts were better news than they are (as it would make things much easier) but unfortunately they fall foul of the ‘fallacy of composition’ and are fostering a dangerous complacency about climate change efforts.

(The following is a repost of a Twitter thread with clearer images.)

TL/DR: decoupling charts show some countries are now reducing emissions while still growing GDP, but the climate challenge is to reduce absolute global emissions to near zero before it is too late. The former does not at all guarantee the latter. 

While Adam Smith’s Invisible Hand has many beneficial attributes, somewhere along the way the Invisible Hand was recast as the Infallible Hand, seeding today’s widespread faith that markets can solve large-scale social and ecological problems they are ill matched for.

In the formidable shadow of the Infallible Hand, non-market solutions – policy, regulatory, cultural, behavioural – are often deemed ‘impractical’, so remain under-utilized. ‘Green growth’, ‘sustainable profit’ ‘shared value’ etc. are the solutions of the day.  

Yet, if a market system denies its external costs and consequences – as contemporary markets do in spades – then the Hand is not Infallible at all, but rather it is powerfully, ubiquitously, and possibly existentially very fallible indeed.

Excess faith in markets is starting to feel like a major wrong turn of human cognition – indeed, a trap that seems very difficult to reverse out of. The sustainability challenge increasingly has the character of whether we can collectively unlearn modern myths about the superiority of market outcomes before it is too late. For, if markets deny their external consequences and are not fully costed, they are not the most efficient and distributed means of allocating resources, as textbooks proclaim, so much as the most efficient and distributed method we have yet devised to extract and appropriate value.

Of course, governments and cultures are fallible too, so it is a question of matching problems to decision-making domains. Markets do valuable work in handling myriad diverse expressions of self-interest, but the inevitable social and ecological fallout of all that self-interested activity requires the constant re-directing and re-regulating of markets that only ‘meta-market’ (?) government and cultural influences can provide.

It’s a real pity that Smith offered the world a disembodied hand. Hands seem to work best when they are connected to arms and bodies. It may be more helpful to view the Fallible Hand as being dependent on the arm and body of government and culture, which, while they cannot rival the Hand’s dexterity, have the gross motor capabilities to direct and place the Hand where its dexterity can be most beneficial. It is almost as if gross motor and fine motor skills have evolved as useful complements that exemplify the layered, nested ‘wisdom of systems’.      

For private sector actors sincere about developing a sustainable human culture, rather than double down on the latest greatest firm- or portfolio-level sustainability strategy, it may be more effective – more ‘sustainable’, even – to concede the limitations of trying to solve global ecological problems as a profit-bound private entity, and instead help re-invigorate the public sector’s capacity to internalize the substantial externalities that have become irrefutably known on our generation’s watch.

I have finally organized some of Matt’s best illustrations on a new gallery page.

These and many more there. All free to use.