Economics in Context

I think economics is a great tool for understanding business and business behavior but I get frustrated when it is taken out of context. Economics is a new social science and had is kind a fluffly science at best. Economics shines when it is used as a tool to better understand our behaviors around choice AND put context. I've always thought of economist sort of like meteorologist. A meteorologist spends his educational years learning about all the different clouds, pressure systems, psychical land structures  etc and how they will affect the outcome of the weather. If you live in Southern California on the ocean you meteorologist often predicts your weather fairly accurately. They can see the storm and there isn't a whole lot of things that are going to change the outcome. But it gets more complicated when you add mountains, other bodies of water, shifting convergence zones, etc. All this applies to the economist.

The fact that if you ask 5 different economist what they think about a given situation and you get 5 different answers is something that as future business people we need to understand. I believe successful business not only considers the economics of there situation but of the psychology, history, science, etc that will affect heir business. I mean really,  McDonald put a lot of psychology and science into that Big Mac meal and super sized the fries!

Economics is not accounting. Accounting's purpose is to track and provide financial information to evaluate past performance and make future decision. Economics is a social science dedicated to figuring out how we as a complex individual make decision regarding scarcity. When an economist makes a prediction or interprets a series of recent events they have imperfect information and as a result their own belief system and education translates informs their predictions or interpretations. Accounts can spin their information as well but it is based on numbers that have been tracked and collected. Yes, 'creative  accounting' is a realy thing but somewhere there are real number gathered. The point is economist are often smart people but they are often interpreting imperfect information gathered from imperfect sources.

I'm excited to continue looking at economics through the lens of sustainability and in the context of everything else that makes us human. Keynes in 1930 thought by 2030 we would have done away with this obsessive drive to collect and gather wealth. I'm excited to continue this search for ways to use wealth as a tool for our overall well being. Economics is just a tool to be used in context.

The Good Life: Ikigai and Mortality ("well being" and mortality)
http://www.psychologytoday.com/blog/the-good-life/200809/ikigai-and-mortality

Dan Buettner: How to live to be 100+
http://www.ted.com/talks/dan_buettner_how_to_live_to_be_100.html

What is the point of our Food System Anyway?

Is our food system meeting our expectations? What are our expectations? Do we have any? How do we measure and rate the system’s success? Is it a successful system?

I believe these are important question to ask at the individual level, at the city level, at the national level and at the global level.   If we do not put intentions behind our food decisions we are defaulting to create a system that is good at providing cheap, convenient, and shelf ready foods because that is what we are buying.  Unlike many industry sectors you can chose if you participate or not but most of us are not farmers growing everything we eat and thus are using the food system to provide for us.  As individuals we can influence the way business provide us foods and we can influence the priorities that our city and state governments set regarding food, and as cities and state can influence national policy and so on and so on up to the global level.

In the article The City that Ended Hunger (http://www.dailygood.org/view.php?sid=351) the City of Belo Horzonte in Brazil city administrators made a policy that food was a right that everyone should have access to. When the city shifted its goals around food it was able to help facilitate increased access not buy providing more handouts but encouraging direct farmer to city marketing. The City administration subsidies selected healthy produce at the farmers stands. They also created local People’s Restaurants were anyone could come eat regardless of need.  While I have gone into great detail here the shift from quantity of food to the right of everyone to had profound effects on the City. Belo used many creative and innovative ideas because it was tasks with the responsibility to ensure everyone’s right to food.

Restaurante Popular in Belo Brazil

In Norm’s blog The Processed Food Industry And Coronary Capitalism
(http://abnormalecon.blogspot.com/2012/02/processed-food-industry-and-coronary.html) he mentions that a system of “pure capitalism” doesn’t exists because if it did we wouldn't have the big market failures we see in the food system  i.e. obesity and hunger.  If pure capitalism isn't the solution because we live in the imperfect world than it is up to us as evolved human thinkers to set goals for our food system and provide it the intention and direction that it needs. It turns out that just not thinking about it and letting the magical world of business do it for us hasn't worked. This isn't to say business doesn't play a role, it actually plays a huge role it will be the driver and the foundation of the new food system but it will be guided by a higher goal that we as individual have imposed on it.

Imagine if we all decided that our food system was only successful if everyone had access to quality, nutrient dense, sustainability grown foods.  We currently would get a big fat F on our grade card. We would need to create new creative solutions to reach this goal. Food would undoubtedly become more expensive because we would begin to pay the true cost but if we pair this with the idea that food is a right and hunger is unacceptable we will get creative. We are a capable and innovative species... when we decide it matters to us.

THE FARM BILL: policy on your plate

I just got back from grocery shopping. I’ll soon be fixing a meal but first I want to take a moment to explore this idea of business and policy in the context of the Farm Bill.  After all the products available and the prices I paid at the grocery store are directly affected by this 79 year old bill. 

I am currently on the Food Team but I admit I am not intimate with every detail of the Farm Bill and doing a little research for this blog I realized why;  the 2008 Farm Bill was 1,770 pages.  The Farm Bill is a very complex policy document that covers many aspects of our food system not just farming.  The Farm Bill is updated and re-enacted every 5 years. The first farm bill was in 1933 and started by Henry Wallace, President Roosevelt’s Secretary of Agriculture. The original idea was to help mitigate the low prices of crops during the Greet Recession. The government would take of the market the commodities when prices where to low and then resold later when prices recovered. The government was able to make money on this program and many farmers benefited. This also led to farmer instituted grain reserves providing flexibility of when they sold their crops. Today the government pays directly to the farmers the difference of what food processors pay and what farmers need to be economically viable. 

The current and proposed Farm Bill covers many topics, called titles. These include: 

• Title I, Commodities : Payment and loan programs for 20 farm commodities.
• Title II, Conservation : Conservation programs, wetlands protection, grasslands protection, farmland protection and incentives for farmers to improve environmental stewardship.
• Title III, Agricultural Trade and Aid : Food aid 
• and meeting World Trade Organization obligations.
• Title IV, Nutrition : Food stamps, child nutrition and supplemental food.
• Title V, Farm Credit : Farm ownership loans and emergency credit.
• Title VI, Rural Development : Grants for rural businesses and small communities, expanding rural broadband access.
• Title VII, Research : Agricultural extension services, research on all areas of food production including biotechnology and organic production.
• Title VIII, Forestry: Funding for various U.S. forest service projects including community forestry.
• Title IX, Energy: Funding for bioenergy projects and research as well as federal procurement for biobased products.
• Title X, Miscellaneous : Includes crop insurance, disaster assistance, animal welfare/inspections and country of-origin labeling.

The largest part of the Farm Bill is our food assistance program (SNAP). The second highest funded title is the commodities support (see the info graphic below). This support of commodities has many hidden cost including the increased obesity rates in our country. (see info graphic provided by takepart.com)

Another thing I was interested in regarding this current Farm Bill was the expansion of Farm Insurance Programs.  In an article, A Risky Proposition: Crop Insurance in the Face of Climate Change, Julia Olmstead talked about the missed opportunity to tie insurance coverage and sustainable farming practices. Most farmers are interested in their soil health and long term sustainability but often the current system is working against those goals. Tying government backed insurance to the sustainable practices a farmer as incentive for farmers to take the appropriate measures to protect soils, water, and general environment.  This is currently not part of the 2012 Farm Bill.  This is a missed opportunity and hopefully we can figure out other ways to create this sort of incentive. 

There is also, although small, continued local food systems support and recognition of the value of small to mid-size farms in the current version of the unauthorized 2012 Farm Bill. These included programs to diversify crops, support small farmers marketing with marketing, creating infrastructure to help small and mid-size farmers reach urban centers, data collection regarding local food system, and programs for beginner farmers. 

The recent news around the passing of the next Farm Bill suggest it will either be passed by the end of the year as part of the larger budget discussions or the Farm Bill will not be passed until April 2013. The 2008 Farm Bill is currently expired and has not been renewed. 

References: 

A Fair Farm Bill for America: A series of papers on the 2007 Farm Bill. The Institute for Agriculture and Trade Policy.  Found at http://www.iatp.org/files/258_2_97623.pdf

Infographic reference: http://www.takepart.com/article/2012/06/07/farm-bill-infographic

A side by side comparison of the 2008 and the new 2012 Farm bill can be found http://www.fas.org/sgp/crs/misc/R42552.pdf

A Risky Proposition: Crop Insurance in the Face of Climate Change. Julia Olmstead. Found at http://www.iatp.org/documents/a-risky-proposition-crop-insurance-in-the-face-of-climate-change

NYT Articles: http://www.nytimes.com/aponline/2012/11/10/us/politics/ap-us-fiscal-cliff-farm-bill.html?ref=farmbillus&_r=0 & http://www.nytimes.com/reuters/2012/11/05/business/05reuters-usa-politics-farmbill.html?ref=farmbillus

Creating Community does NOT equal Social Equity

so·cial

of or pertaining to human society, especially as a body divided into classes according to status: social rank.

eq·ui·ty

the quality of being fair or impartial; fairness; impartiality:the equity of Solomon. Synonyms: disinterest, equitableness,impartiality, fair-mindedness, fairness, justness,evenhandedness, objectivity; justice, probity. Antonyms:bias, discrimination, inequity, injustice, partiality,partisanship, prejudice, unfairness, unreasonableness;injustice.

com·mu·ni·ty

a social, religious, occupational, or other group sharingcommon characteristics or interests and perceived orperceiving itself as distinct in some respect from the largersociety within which it exists (usually preceded by the  ): thebusiness community; the community of scholars.

I remember not too long ago sitting around at a staff meeting with my boss and talking about our office values, goals, etc. We are a community based architecture firm on Capitol Hill. A lot of our conversation focused around our connections to our neighborhood. How we, as designers, wanted to created spaces that foster and encouraged community. We wanted to create community that was open to all and full of diversity. As a quick exercise my boss asked each team member to talk about what community meant to them. The answers were as you might expect; support, trust, shared values, shared proximity, shared goals, shared history, etc. She pointed out after we all shared that community and creating community does not equal social equity. Creating community was about finding people that often had shared values and social equity was about making space for everyone within a community.

Let’s take a moment here for a quick history lesson. Social equity is a newer word in the sustainable vernacularly and is popularly defined as equal opportunity for all in a safe and healthy environment. It has gained popularity after the President's Council on Sustainable Development, in 1996, defined Social Equity as "equal opportunity, in a safe and healthy environment" in their report.  Today it is considered vital third element in the three legged stool of the sustainability.

So if a community is people with shared histories, things in common, a family, or a group of friend then it is clear that just by creating community we are not ensuring all human beings social equity.

Creating community can foster social equity but there needs to be awareness and intention to allow all human beings to participate in the new community. I think we as future leaders in the new sustainable economy need to be aware of our own mental models of community as we strive for social equity with in our communities. I believe social equity can be at odds with our personal ideas of community. Community by its definition is about creating an ‘us’ and ‘them’ which is the opposite of a club that everyone can belong to. Before I go too far let me be clear there is absolutely nothing wrong with creating communities based on common histories, shared values, geographic location, etc., we just can’t call that creating social equity. A truly social equitable community would not be comprised of all like mined individuals or individuals who have shared histories.  In the end a truly socially equitable community would likely take many of us out of our comfort zone and challenge our mental models of community. It would be the community of the globe.

I think as individuals and as a society we need to be aware the communities we create and the barriers we place on who is allowed into them. Again, I don’t think we must always have socially equitable communities at every level of our life or at every level of society.  What we need is that every individual and every discrete community has the same social opportunity to have expression in our society.  

I realize this is a long rant for what some might consider not a big issues but I challenge you to listen to the how ‘social equity’ and ‘creating community’ are often used interchangeably. They are not interchangeable.

Oh, and how the heck does this relate to economics you ask.. well let me tell you! Fostering both communities and social equality (and understanding the difference) for individuals, groups, and communities to express themselves will develop positive human capital. Empowered expressive people are no longer liabilities but rather assets to society. They contribute to society as equals making the whole system stronger.

“Social Equity is the cornerstone of Social Capital, which cannot be maintained for a few at the expense of the many.” (wikipeda.com)

EcoDistrit Summit Recap: will it pencil out?

This week I attended the EcoDistricts Summit Tuesday and Wednesday of this week and I can’t tell you how many times I heard the phrase “it may be a good idea but will it pencil out.”  Coincidentally this week’s BGI topics centered on the bottom line and the metrics we use to evaluate a successful business’s bottom line. The EcoDistrict Summit experience has definitely  renewed my desire to not only understand personally the metrics for a projects or business financial success but also to continue to empower others to learn these tools and use to use them for good! The next paragraphs are a brief recap of the EcoDistricts Summit in context of the bottom line.

While I haven’t personally attended a lot of conferences I felt this one was pretty good. There was a diverse global representation of people, an engaging keynote speaker, a wide variety of professionals, and a pretty good diversity of topics and issues addressed in the breakout sessions. The Summit’s one weakness is the broad overarching topic itself: EcoDistrict but I’m not sure that can be helped.

EcoDistrict is loosely defined as an area that is more than one building but not more than a city sharing resources in the collective pursuit of sustainability. You can immediately see how this gets messy.  Sustainability is a complex idea; it is more than just protecting our natural resources it also includes fostering social equity and financial security for all.  On a building scale the ideas of sustainability are more focused on the environmental footprint of that building; example metrics/certifications include Living Building Challenge, LEED, Evergreen Standards, etc.  But when you move to the neighborhood scale a collection of LEED buildings does not automatically make a neighborhood sustainable.  We can all agree that if a neighborhood has social inequalities and financial disparities it is not sustainable.  The good news our human brain is capable of dealing with complex ideas and issues. This one is no different.  As I ranted about in my blog las week complex messy problems are the spark of innovation!

“Fix the cities fix the world.” This is maybe my favorite quote of the weekend. It represents this idea that if we can make changes for good in our own communities we make changes for good in our nation and our world.  We have to remember there is no cookie cutter option that can be applied to every city or every neighborhood. Each ‘district’ has to come up with what works for them socially, financially, and environmentally. At the summit we learned about some great Swedish examples of EcoDistricts planning and implementation.  Malmo’s Wester Harbour is one of their shining examples (http://www.malmo.se/English/Western-Harbour.html).  One fact I think is worth passing along is that Sweden has continued to increase their Gross National Product while reducing Carbon Emission. They've learned lessons and improved their technology and now share it through their special Swedish Sustainable brand SymbioCity (http://www.symbiocity.org/en/). It is both informative and inspiring, and I recommend checking it out.  But again, the big take away from their presentation is this is not a ‘plug and play’ way to build a sustainable neighborhood. Sweden has much higher energy prices and is an important trigger point to spur developers towards high energy efficiency. In the U.S. we need to get creative and find different triggers.  We need to find triggers that get us to the place where the bottom line still ‘pencils out.’ My opinion our trigger may be valuing the human and environmental capitol in the bottom line. If human and environmental capitol are valued upfront as investments in the project those investments will pay off later with financial rewards. But a few individuals need to think outside the box and take a few risk to prove to everyone this kind of bottom line thinking will pay off.

The keynote speaker at the conference Carol Colletta, executive director of ArtSpace, talked about place making. The top three things she listed that create place for people are (1) the social fabric, (2) the aesthetics of the place, and (3) it’s distinctiveness.  I want to take a moment to expand on her third point as it was a topic that came up a lot at the conference as a way to engage the community. Example after example project success depended on citizen involvement. Citizens felt more engaged when they had a sense of place and that sense of place was derived from something distinctive about their collective neighborhood.  One example given was a web platform that citizens could engage public agencies by posting what they thought should be done to enhance the city in different location. When the city acted on one of the unique ideas by adding a spray park to a neighborhood park it instantly became a place of pride for the neighborhood. It then spurred even more citizen involvement, continued funding and innovation in the neighborhood.

I was struck at the conference by a few participants who are still hoping for the magic bullet that will make their idea reality. This magic bullet is often either some public or private grant money. This type of waiting around hoping for funding is a function of the grantor/grantee system. It is not an empowering way to think about creating change. A great example of creating change that is not grant dependent is ioby.com. The co- founder of ioby.com, Erin Barnes, spoke at the conference and she shared some great examples of small demonstrative projects that got citizens excited about change and used crowd sources as a tool to start the momentum. I won’t go into examples here but again check it out (ioby.com) along with this great pdf guide about Tactical Urbanism (http://issuu.com/streetplanscollaborative/docs/tactical_urbanism_vol_2_final?mode=window&backgroundColor=%23222222). These are both powerful tools to get beyond the doom and gloom of ‘we have no funding, so I can’t make a change.’ Start small, demonstrate, and make a case for your idea by showing people exactly what is so awesome about your project!

Another speaker at the forum was Mark Edlen of Gerding Edlen, a Portland based developer company. Mr. Edlen said the formation of his company was based in his own personal ethic not about the profit.  In fact many of the decision his company has made over the years went against conventional wisdom but years after those decision were made they are considered the new standards. Today Gerding Edlen is a successful development company that is asked to participate in projects across the nation. I think this is a great example of the benefits Bob Willard talked about in his book The New Sustainability Advantage. It’s a company that is not only profitable because it manages risks, invests wisely but because its foundation is rooted in sustainable culture; their tag line is People-Prosperity-Planet.  As a private property developer they are truly benefiting from their sustainable advantage in all 7 of the advantages Willard addresses: (1) increased revenue and market share, (2) reduced energy expenses, (3) reduced waste expenses, (4) reduced material and water expenses, (5) increased employee productivity, (6) reduced hiring and attrition expenses, and (7) reduced risk.  I think Gerding Edlen is a great example of several innovative thinkers with passion and ethics  made it ‘pencil out.’

I think too often the saying ‘it just won’t pencil out’ is a cop out. It’s a way of saying, yes, that is a brilliant idea, but it is too hard to think about ways to make it happen.  Often as individual or communities groups with great ideas we can be talked out of our idea by someone the bank, grantor, financial consultant simply saying ‘it won’t pencil out.’ This is why we all need to take control over our own knowledge. If we have a basic understanding of bottom line metrics we can challenge the experts by pointing out non-traditional revenue streams and sustainable savings helping them realize that our brilliant idea will ‘totally pencil out!’ 

Whole Human & Whole Environment

Reading the NYT Reckoning Series over the last couple of weeks really set the stage for our first term here at BGI.  It seems our task is to begin to understand the current economic system and its influences over human interactions.  The NYT articles characterized the key players leading to the financial crisis as greedy and corrupt.  While I don’t explicitly disagree with this characterization I know the system encouraged and handsomely rewarded those willing to dive in and play the game.  It seems we could spend a long time playing the ‘blame game’  about what started and who contributed the most to the spiraling downward crash of the financial industry but really it just feels like another story about the Tragedy Of The Commons.

The problems of the financial industry are complex. Maybe even purposefully so. When I focus and try to understand even small parts of the financial system, with all its complex relationships and inner workings, I wonder how we will ever fix or change it. It’s overwhelming and I feel defeated before I even begin because I know so many people who are much smarter (or maybe just more motivated) are working to keep the system exactly how it is so they can get the most out of it before the rules change. How am I supposed to make a change for good when it’s such a big mess.

And then I pause. I take a deep breath. I find my voice. I don’t need to change the whole system rather I just need to follow my curiosity, explore the parts of the system that interest me, and maybe along the way find new inspiring ways of creating value to myself and my world. I’m inspired by Marjorie Kelly who says this in the forward of her book, Owning Our Future,  “It’s hard to talk about hope in these troubled times, but hope is what we are called to. My sense is that a new kind of economy-one that serves the many rather than the few, one that’s ecologically beneficial rather than harmful – is sprouting in little experiments here and there, in ways that weren’t possible before….A lot of us don’t see this, because we don’t believe good things might come from the messes we’re in.”

If I can be so indulge I’m going to go on a bit of a tangent, I guess it is my blog so here we go.. My tangent starts with those words of Marjorie Kelly about the future economic possibilities and how it rings true in my personal life. Like all of us I’ve created plenty of messes in my life that I had to figure out how to clean up (and I’m sure I will have plenty more).  But what is amazing about those messes is their capacity to teach me sometime useful. I may have learned something that helps me avoid a similar mess the next time around, or I learned some techniques to quickly clean up the mess, and sometimes I learned that the mess wasn't even a mess rather something amazing.  No matter what the outcome of the mess was I learned and I grew. Without those messes I would be the same person I was 15 years ago. That would be weird.  So I wrap up this mini rant to just say this: messes are part of life. We grow, we learn, and we innovate because we make messes. Our collective economic mess is an opportunity to do something different.

For those willing and eager to learn from our mistakes we have an opportunity to create new economic and social models. Studying our recent and even more distant economic history we will learn from our messy mistakes and create innovated new ideas.  Marjorie Kelly focuses on reconnecting each of us with economic ownership. As she says “Ownership is the underlying architecture of our economy.” What a simple yet empowering statement that provides so much room for a new generative economy!

Related to my musing over or recent economic history is Dr. Norm Becker’s Perspective on learning and adapting to our new economy in a recent blog called “What Have Economist Ever done for Us.”  He talked about how economists need to take some steps to learn from the messes they helped contribute in the recent financial crisis. He suggested two ideas: (1) making sure we learn the history and teach the history of economics and (2) move beyond old models of economic analysis. Today's economics are complex and require we look at them from multiple perspectives. As Andre Haldrew wrote in his recent blog “The construction and simulation of highly non-linear dynamics in systems of multiple equilibria represents unfamiliar territory for most economists. But this is not a journey into the unknown. Sociologists, physicists, ecologists, epidemiologists and anthropologists have for many years sought to understand just such systems. Following their footsteps will require a sense of academic adventure sadly absent in the pre-crisis period.”  

Creating innovate new economic models that take into account individuals as complex whole human beings as well as taking into account our whole environment  makes it a truly exciting time to be involved in business; we are the new economy.  

Related Links: 

Andre Haldrew’s Blog Article: http://www.voxeu.org/article/what-have-economists-ever-done-us

Dr. Beckers Article: http://abnormalecon.blogspot.com/2012/10/the-role-of-economics-in-financial.html

Hello BGI, Hello World!

My name is Domonique Juleon. I’m pursing my MBA at Bainbridge Graduate Institute with the goal of taking the next steps in my career. I’m passionate about food and food systems. I’m inspired by the way food connects each of us to our own health, our community, and our environment.  I was drawn to BGI because I feel that business will be a powerful tool of change and the specific BGI approach of sustainability will be a critical aspect of that change.

My undergraduate degree is in economics. I was not always the best economics student. I often struggled through the number crunching aspects of economics but I still found it a very interesting way to observe and interpret people’s behaviors.  I also love the big picture stuff and how the study of economics can reveal fascinating patterns in behavior.  I think it is this early education that brings me back to a business degree.  I never dreamed of being a banker as I pursued my economics undergraduate degree but rather I felt that economics was a solid foundation for understanding the world we operate in. I still believe economic studies to be a useful took but during my graduate studies I’m ready to challenge the status quo and shake it up.

I expect the coming year, actually two years, to be full of opportunities to see the world’s current struggles through a new lens, to learn new tools for change, and to inspire those around me to join in my journey in making our collective future a brighter one.