woensdag 2 mei 2012

Why economists argue with ecologists (3): consequences versus deontology

A fundamental difference between economists and ecologists is that economists tend to approach environmental pollution as an allocative issue, whereas ecologists tend to approach it as a moral issue. Or, more accurately, economists take a consequentialist approach whereas ecologists tend to be more deontologist.

There are many examples to illustrate this, but none is as sharp as the debate on emissions trading. It used to be no more than a smart idea to limit pollution in an efficient manner, but it has evolved into a political minefield where the Left sees it as a sell-out to Wall Street, whereas the Right sees it as a communist takeover of the economy. The idea is simple: we limit emissions to, say, 100 units, and so we distribute 100 units of emission rights among polluters. Want to pollute more? Then buy rights from another polluter, who will then have to take additional emission reduction measures. You bet he will only agree to that transaction if you pay him more for his right to pollute than it costs him to reduce his pollution by one additional unit. Moreover, you will only agree if the price you pay for the right is lower than it benefits you to increase your pollution. In other words, you can have a voluntary transaction that makes both parties better off without further damaging the environment. This is a way of achieving what economists call allocative efficiency: we shuffle around resources and other inputs to achieve the maximum output at minimum costs, where costs include environmental damage as well as wages and all. An economist would say: we have the same environmental quality, but we increase welfare - what's not to like?

A lot, an ecologist would say. Besides issues with regard to enforcement, windfall profits, etc., an ecologist would also have objections of a moral nature. Here are a few of the objections I've heard from students and researchers:
  • How can you give somebody a right to pollute? Nobody should have any right to pollute the environment.
  • Under such schemes companies can just pay some money and go about their dirty business. They should give a good example to others.
  • It's immoral to commodify the environment.
  • Tradable emission permits are a modern version of medieval indulgences.
I can think of a lot of misguided objections to emissions trading, but these objections are not among them. They are moral objections that are valid within a given moral framework, which may not be my moral framework, but a valid one nonetheless. You hear similar arguments in the debate on economic valuation of the environment, biotechnology, and to some extent Payments for Ecosystem Services (wait until you propose hunting as a source of conservation funding). In all of these examples economists stress the allocative issue: "look, we clean up the environment right? That's what you want, right? So why not make sure that we do this efficiently through emissions trading / cost-benefit analysis / GMOs / hunting concessions?" On the other hand, ecologists tend to stress the moral side of the issue: "rights to pollute / pricing nature / genetic modification / hunting is plain wrong and we shouldn't do it."

Beneath the economist's allocative approach lies the philosophy of utilitarianism. In a nutshell, utilitarians argue that an action is morally right whenever it maximizes the sum of all happiness. This also means that utilitarians judge an action purely by its consequences, whereas other moral philosophies (also called deontological ethics) judge the action itself.

In other words, economists take a consequentialist approach to environmental problems, whereas ecologists tend to be more on the deontological side. Note that the moral objections to emissions trading listed above focus on the trading itself rather than its consequences. The economist's reply will always point to the consequences.

Maybe it is due to my economics training, but I'm more on the consequentialist/utilitarian side. The deontological argument can become self-defeating, for instance when opposition to hunting leads to habitat degradation. If we have to choose between an ailing population of an endangered species without hunting and a thriving population that pays for its own conservation through hunting, I'd choose hunting anytime.

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