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Mark J. Roe
Says More…

This week in Say More, PS talks with Mark J. Roe, a professor at Harvard Law School and the author of Missing the Target: Why Stock-Market Short-Termism Is Not the Problem.

Project Syndicate:In your new book, Missing the Target: Why Stock-Market Short-Termism Is Not the Problem – and in a number of PS commentaries – you criticize the conventional wisdom that stock-market short-termism is a major contributing factor to some of our biggest long-term challenges. This view is not only wrong, you argue; it leads to ineffective, even counter-productive solutions. For example, you say that forcing companies to pay a price for their emissions would do a lot more good in fighting climate change than anything related to time horizons. Are there similarly straightforward interventions that would help overcome other problems often blamed on short-termism?

Mark J. Roe: Yes, there are. First, though, we should make sure that we see clearly why efforts to reverse climate change by tackling stock-market short-termism are misguided. As I noted in my June piece for PS, when we drive our cars to work – rather than, say, walking, biking, or taking public transportation – we are not deferring the personal costs of those emissions. Rather, we know that we will not ultimately pay much at all for our own emissions. Our contribution to global warming is thus not arising from a time-horizon problem.

The same goes for companies. They emit too much carbon dioxide – or sell too much that emits carbon – because it is profitable to do so, as they will bear only some of the short- and long-terms cost of those emissions. It is a question of who pays, not when. Most companies will never pay up for their own emissions, or for climate damage from their products. So, tinkering with corporate time horizons will do little good. Instead, we have to make sure that the emitter/polluter is also the payer. Remedies like carbon taxes achieve this, thereby better aligning corporations’ (and car-drivers’) incentives with the social good.