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January 31, 2007

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Rob Metcalfe

Nails in the CBA coffin, hardly Dave, come on now.

I was wondering whether you are against CBA full stop, or whether you are against CBA just for environmental appraisal?

I think what Neumayer argues is completely correct. The Index of Sustainable Economic Welfare is a classic example of where today's well-being is intertwinded with sustainable development. If you are to combine them both under the same indicator, you need both current and future well-being within the same function. But, that my friend, is hard conceptualise since what determines well-being can significantly change over time.

Dave Iverson

Rob,

As I have stated before, there are some very limited contexts where CBA can play a role, e.g. "damage claim assessments", "market cost accounting" (where markets actually exist). But even in these contexts, CBA must be appropriately vetted, cussed and discussed.

In the main, however, I agree with Sagoff (THE ECONOMY OF THE EARTH, 1988; "An aggregate measure of what?", Ecological Economics 60 (2006) 9-23 ) that, from Sagoff's book:

"...Utopian capitalism is dead; ... the concepts of resource and welfare economics, as a result, are largely obsolete and irrelevant; and that we must look to other concepts and cultural traditions to set priorities in solving environmental and social problems. (p.22).

"In this book, I shall argue against the use of the efficiency criterion in social regulation, and against the idea that workplace, consumer-product, and environmental problems exist largely because 'commodities' like environmental pollution, workplace safety, and product safety are not traded in markets. I shall argue, in contrast, that these problems are primarily moral, aesthetic, cultural, and political and that they must be addressed in those terms. The notion of allocatory efficiency and related concepts in the literature of resource economics, as I shall show, have become academic abstractions and serve today primarily to distract attention from the moral cultural, aesthetic, and political purposes on which social regulation is appropriately based. (p. 6)

"... I shall argue, however, that although many important virtues may underlie a free market -- freedom, autonomy, competitiveness, respect for property rights, and so on -- efficiency is not one of them. Free markets are rarely if ever efficient. Efficiency, I shall contend, functions not as a vindication of personal or property rights but primarily as a pretext for centralized governmental planning. (p. 6)

"... Discussions of the 'trade-off' between efficiency and equality have become a useless academic pastime to which this book seeks to write an epitaph. These discussions have little to contribute to the practical and political concerns of social regulation. (p. 60)"

Instead, both Sagoff and I argue for public deliberation and inquiry. In Sagoff's words:

"…[T]o solve policy problems we need to develop the ordinary virtues of inquiry and deliberation… [I]t means that we have to get along without certainty; we have to solve practical, not theoretical, problems; and we must adjust the ends we pursue to the means available to accomplish them. Otherwise, method becomes an obstacle to morality, dogma the foe of deliberation, and the ideal society we aspire to in theory will become a formidable enemy of the good society we can achieve in fact." (p. 14).

I believe that in the very political public process of image creation, social identity creation, etc. some aggregate indices of Sustainability will prove useful, although all have aggregation, interpretation biases. I like what Amartya Sen argues, that policy makers need to look at any and all aggregate indices for what they point to generally, then look deeper at more (and other) information. BTW, Sen is on record as thinking as little of CBA as I do. See, e.g. this:

"The Costs and Benefits of Cost-Benefit Analysis," Public Interest, Fall 2001 http://www.findarticles.com/p/articles/mi_m0377/is_2001_Fall/ai_78900303

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