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April 20, 2007

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David Garen

Dave,

This is my first post to your blog, although I have been reading it with much interest for some time. I am not an economist (I am a hydrologist), but I am interested in the role of economics in environmental protection and the ethics implicit in our economic system.

What do you think about the effort and methodology used in putting dollar values on ecosystem services? I recently ran across these two reports from Boreal Canada:

Counting Canada's Natural Capital: Assessing the Real Value of Canada's Boreal Ecosystems
http://borealcanada.ca/pdf/Boreal_Wealth_Report_Nov_2005.pdf

The Real Value of the Mackenzie Region: Assessing the Natural Capital Values of a Northern Boreal Ecosystem
http://borealcanada.ca/pdf/MackenzieReport.pdf

Are such efforts just "feeding the CBA beast", or do they serve a useful purpose? I have asked for comments on these reports on the Environmental Economics blog, but nobody has responded.

BTW, I appreciate your writings and all of the books and articles you reference on this blog. I'm trying to read up on this stuff and have read several books so far, but, frustratingly, it is just a personal interest, as I am not in a professional position to influence policy etc. However, I remain skeptical of traditional economics and wonder if even the Environmental Economics folks are still too wedded to the traditional system.

David

Dave Iverson

D Garen: "What do you think about the effort and methodology used in putting dollar values on ecosystem services? ... Are such efforts just "feeding the CBA beast", or do they serve a useful purpose? I have asked for comments on these reports on the Environmental Economics blog, but nobody has responded."

I'm in the camp that says. "Let's find ways other than "price tags" to deal with the worth of Nature's services." The folks at Env. Econ. differ, and it's been a source of contention between some Ecological Economists and the Environmental Economics crowd. But it has also been, and remains an "issue" among Ecological Economists as well.

Recently three articles "in-press" in the Ecological Economics literature deal with the issue in ways that align with my thinking. Better stated, these articles deal with a 'rationality' that has framed my thinking, since I am not a stranger to previous work by all the authors. I need to work up a post on these (and other articles):

*********************************************
Ecological Economics, 2007 (in press):
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"Ecology and Valuation: Big Changes Needed" by Bryan G. Norton and Douglas Noonan.

Abstract: "Ecological Economics has developed as a 'transdisciplinary science,' but it has not taken significant steps toward a truly integrated process of evaluating anthropogenic ecological change. The emerging dominance within ecological economics of the movement to monetize 'ecological services,' when combined with the already well-entrenched dominance of contingent pricing as a means to evaluate impacts on amenities, has created a “monistic” approach to valuation studies. It is argued that this monistic approach to evaluating anthropogenic impacts is inconsistent with a sophisticated conception of ecology as a complex science that rests on shifting metaphors. An alternative, pluralistic and iterative approach to valuation of anthropogenic ecological change is proposed. ..."


Snip from article: "… [M]ost environmental/ecological “problems” emerge as “messes,” as what Rittel and Webber (1973) called “wicked problems”: they do not emerge as well-defined problems that are formulated similarly by different participants in the discussion. There will, on the contrary, be varied complaints and varied explanations of what the problem is, often associated with varied value positions and perspectives of the participants. Positivist science, in these early stages of problem formulation, is irrelevant. ...

"We [suggest] that ecological economics abandon the artificial mindscape of positivism. That mindscape encouraged the serial treatment of science, the completion of an account of the key variables constituting a problem before values and human purposes can be consulted and brought to bear upon problem formulation. It has also imposed upon us, relying on the unrealistic and artificial distinction between descriptive and prescriptive discourse, the dualistic discourse that still separates ecologists and economists. The dualistic, serial view of science and policy is a hopeless model because we cannot know what science is relevant, or what data to collect, until we know what is important. As long as problem formulation remains unresolved -- as it typically does in unproductive management processes -- it is impossible to know what data is relevant. Discussion deteriorates into turf wars among disciplines, all urging their particular data and analysis as definitive. In place of the serial view, we suggest making the process of evaluation–and the process of problem re-formulation–endogenous to adaptive management, and that we adopt an experimental approach to understanding and evaluating changes in social values entailed by human impacts on natural systems. This experimental approach -- experimenting with different metaphors and 'models' to characterize a problem -- exemplifies Pickett's third 'aspect' of model-building. This third aspect must embody a reflexive, self-critical and other-critical process of choosing appropriate models for communicating about, and working to solve, environmental problems.

"Making evaluation a sub-process of ongoing adaptive management processes should make us -- philosophers, economists, and ecologists alike -- aware of the choices we make when we “model” deterioration or recovery of ecological systems. The choices we make in scaling models, in locating boundaries -- both spatio-temporal and conceptual -- and in describing the mechanisms and processes driving a problem must be carried out at the metaphorical level as described by Pickett and colleagues. At this deep level, the metaphors we choose and the models we build re-conceptualize 'messes' as emergent problems capable of encouraging learning through doing. This learning can only take place, however, if goals and values are open for public debate in an ongoing discourse that encourages rich metaphors and diverse values.

"In place of the methodological debates about how to force all values into a single measure, this approach offers a public discourse focused on choosing appropriate 'indicators' of sustainability. Choices of indicators reflect the choosers' values in the indirect sense that choosing to monitor some ecological process is evidence that that process is of interest to the choosers, or at least that it is associated with some other factor of interest to them. So, discussion of environmental values can be absorbed into a community-level process of choosing some small set of indicators which, if followed and stabilized, would protect most of the community's values. Given shared and varied values drawn from nature, the community decides what indicators to monitor. Values people have remain important in the process, but their values feed into an ongoing process of discussion, debate, and management experiments. Crucial to these experiments is reflexive model-building directed at characterizing and communicating the nature of perceived threats to social values. Embedding the search for models and guiding metaphors in public discourse encourages problem-based model-building -- a process that in turn encourages “social learning” at the deepest, metaphorical, level. ..."


***************

"Toward an Experimental Foundation for Benefit-Cost Analysis," by John M. Gowdy

Snip from article: "BCA was originally designed as a pragmatic way to examine real world tradeoffs, not a universal blueprint to maximize social welfare. Specific government policies are most often formed within a limited frame of reference, for example, a municipality deciding whether or not to build a new bridge or road. These kinds of tradeoffs are not made against 'everything else'. Policy makers choose from a limited range of options and the tradeoffs are made among those options. Many of the complicating issues discussed above can be safely ignored by a municipality deciding whether or not to build a bridge, a road or a community center. These are very different kinds of decisions than formulating policies to deal with the impacts of global climate change or worldwide biodiversity loss on future generations.

"Many environmental policies have been designed to create the fictitious world of Walrasian competitive equilibrium rather than deal with the specific problems under consideration. Numerous theoretical papers have been written and conferences organized on global trading of carbon credits, putting 'proper' prices on biodiversity, or assigning property rights to protect renewable environmental resources. These are important policy tools for economists, but they are not the only game in town. Market-based approaches have frequently failed because they bury the objective (protecting biodiversity, reducing the amount of carbon in the atmosphere, mitigating the effects of acid rain) within the fictitious and unreachable goal of maximizing Hicksian income with all its scientifically unsound assumptions about human nature, the structure of actual economies, and the production process.

"Experimental results suggest that context is critical for applying BCA. This further suggests that the policy focus should be on the specific problem faced, not on meeting the conditions of abstract economic theory. Economic theory only provides tools of analysis, it does not provide the end goal. The behavioral findings discussed above point to the need for pragmatism and flexibility in applying BCA. ..."

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"Environmental Regulations and the Problem of Sustainability: Moving Beyond "Market Failure," by Daniel W. Bromley

Snip from article: "... When economists offer advice—policy prescriptions—about actions that ought to be taken in the interest of 'rational' environmental policy, costs and benefits are discounted back to the present. This practice is central to maximizing the net present value of the potential benefits of public action. We see this most clearly in the struggle with global climate change. The costs of reducing emissions of greenhouse gases occur largely in the present, while the benefits will not occur until some time off in the future. The large literature on discounting in environmental policy addresses precisely this problem. Notice that discounting considers the future in terms of the present. That is, future outcomes (less global warming) are dominated by the fact that benefits and costs are reduced to present values. If all of the benefits of corrective action occurred immediately, while the costs of that corrective action were borne by future generations, discounting would yield a quite different 'efficient' policy. And that is precisely the point.

"Sustainability is about the world to be inherited by future persons .... Sustainability is not about what would be efficient (or even fair) for the present generation to bequeath to the future. When environmental policy is re-cast as a problem of considering the present in terms of the future, we are compelled to ask not about what would be optimal (or efficient) for those of us now living to do for future persons. Rather, we are compelled to ask what future persons would like for us to do now in order that their world might be more to their liking than if we were to pass on to them what is efficient for us. ..."

David Garen

Dave,

Thanks for the comments and the pointers to recent papers. I got all three papers and will read them through.

This kind of reminds me of the multi-objective optimization in water resources stuff that was big in the '70s when I was in grad school. I remember the "surrogate worth tradeoff method", which didn't force all project benefits to be put in commensurate units but rather required the "decision maker" to make subjective tradeoffs between benefits.

Your blog and writings confirm my own feelings that it seems completely unrealistic that we could ever hope to put dollar values on everything, have well-defined property rights, and a market for trading for environmental things. Not only is this not possible, but it sucks the soul out of our relationship to Earth. I am reading E. F. Schumacher's "Small is Beautiful" right now, and I appreciate his worldview, which includes spiritual components, that drives his approach to economics.

David

Dave Iverson

Part of the reason I put "Ecological Econoimcs" together as a blog was the predominance of the "add it up," "run the numbers," analytical determinism of many econoimcs practitioners. I wanted to let folks know that there are others who approach the subject matter diffently.

I have always held Schumacher in high regard. I love his "Buddhist Economics" from Small is Beautiful.

And I love his less-well-known book A Guide for the Perplexed. One quote:

"The maps produced by modern materialistic Scientism leave all the questions that really matter unanswered; more than that, they deny the validity of the questions."

David Garen

Dave,

Sounds like we're very much on the same page. I really liked the "Buddhist Economics" chapter too -- something I definitely resonate with. And, it is right in line with the spiritual tradition I associate with -- Mennonite -- and other Christian historic peace church traditions.

I recently purchased "Guide for the Perplexed" and will read it soon. I also bought "For the Common Good" by Daly and Cobb.

I also really like Wendell Berry for his ethic of care for the land and healthy communities, which, of course, has economic implications. There's more to all of this than dollars and cents, and I don't think that is being naive or wishing for the "good old days".

Thanks for your efforts in putting up this blog. There's a definite need for presenting alternatives to the prevailing paradigm, with all of its implicit assumptions about human behavior and motivations, our relationship to the environment, etc.

David

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