Cory Doctorow recently cited this article which talks about how insurance is a terrible instrument for mitigating climate risk. The standard neoliberal patter on this runs that insurance will send a price signal that steers investment away from environmentally damaging activity and towards adaptive responses.
One problem with this is that the people doing the damage are not necessarily (or even likely to be) the people who will experience the worst of its' effects, so this will do little to prevent investment in — for instance — fossil fuel extraction. In fact, you'll likely see investment flowing away from the uncertain business of keeping populations alive and secure, and directed towards digging up minerals and sludge.
Another problem is that insurance functions, at best, to spread risk rather than reduce it. Climate change catastrophe doesn't work like burglary. It won't hit a tiny percentage of those insured at a pretty steady rate; it will hit everybody in a given region all at once.
However insurance companies are almost certainly not going to redline huge geographical areas as sacrifice zones, they'll just adjust their pricing in those areas to fit the new reality. The upshot is that most people with mansions in Florida will keep them, and accept their inflating insurance premiums as the cost of gracious living. When the hurricane hits and their properties slip into the sea, they'll just move to one of their other properties (in Colorado, or New Zealand, or possibly Mars) and receive a payout.
On the other hand, the much more numerous segment of the population who cleaned their mansions, mowed their lawns, prepared and served their food, etc. will not have been able to afford to keep their insurance, or to give up their jobs and relocate to somewhere with a lower chance of catastrophe.
So, absent other interventions, the prognosis is that if we leave it to the market to reallocate investment and manage the risks associated with climate change, it will not only fail utterly in the long term, but have massive distributional effects in the medium term. Which means that, as far as the wealthy are concerned, what's the problem? They can keep themselves comfortable for the duration of their own lives. Après moi, le déluge!
Anyway, that's all very interesting and there's flowcharts for those who are into that sort of thing. Basically the argument is for more public sector spending, and you'll get no disagreement on that from me.
What caught my attention was this line:
The state must also prevent Wall Street from disciplining the public sector—institutions like a National Investment Authority could protect necessary investments, transforming public debt into safe assets where private capital might be parked.
The state already has this! Public debt, at least at the federal level (in both the US and Australia), is by definition the safest possible asset into which private capital can be parked! Why do you think your retirement holdings (if, unlike Muggins here, you have an appreciable amount thereof) contain so many government bonds? The radical new institution you desire already exists!
I can only assume that the author is suffering from the "bond vigilantes" myth. What can the private sector do to "discipline" the federal government? Panic sell at a discount the bonds they have? To whom? Somebody else in the private sector; unless the government volunteers to buy them, there is nobody else. So the private sector gives itself a haircut in selling some cheap bonds, but makes it up by buying them: fine. Sounds silly, but fine.
What if the market refuses to buy bonds from the government in the first place? Again fine. The public sector doesn't need to sell them in order to spend. Let the private sector hold their idle money as claims on cash instead and forego the interest payments. It's the private sector's funeral.
As Warren Mosler says, government bonds are just basic income for people who already have money. Neoliberal governments pretend there's some law of nature that requires all government spending to be matched by taxation or bond issue. Neither is that true, nor does slapping a "National Investment Authority" facade on the treasury and central bank give a government any spending power it does not already have.
The real problem is that there is a growing industry of well-intentioned experts tying themselves into knots concocting all sorts of utterly redundant new public sector financial institutions like this.
We (collectively) have as much money as we want. We have a shortage of viable planets, not spending capacity.