maandag 5 oktober 2015

Why (not) price nature?

A few remarks on today's debate on economic valuation of ecosystem services, here in Wageningen:
  • Having two non-economists as the only speakers in a debate on economic valuation of ecosystem services led to the usual misconceptions of economics, some if which I will explain below.
  • I have written most of what I can say about the issue in this post.
  • In my three-species typology in that post, Dolf de Groot is a typical pragmatic ecologist: he literally called valuation "a necessary evil."
  • The same typology might label Bram Büscher (a sociologist) a hardcore ecologist, but actually his arguments were more of a Marxist critique of economics and capitalism than of a moral nature (intrinsic value 'n all). In short his argument is that ecosystem degradation is caused by the logic of capitalism; pricing nature perpetuates that logic rather than abolishing it.
  • De Groot claimed that "conventional economists ignore most externalities, like ecosystem degradation." As a conventional environmental economist, who has been working on nothing else for the past ten years than externalities and other market failures, and who meets hundreds of similar economists every year at the meetings of EAERE, AERE, IIFET, BIOECON, and so on, I found this very strange to hear, to put it mildly.
  • Another statement by De Groot was that unlike pricing, valuing "is not about substitution." Economic valuation is ALWAYS about substitution. If you don't like the idea that people can be compensated for ecological degradation, don't do valuation. De Groot wants to have his cake and eat it too.
  • It is a more general problem I have with the so-called 'ecological economists': a lot of their valuation work is poorly thought through, poorly executed, and done from a political agenda rather than out of scientific curiosity.
  • Common mistakes by ecological economists are (1) not properly defining what they measure (like doing a stated preference survey among tourists to measure indirect use values); (2) aggregating values to such a scale that prices are bound to change (the most fundamental critique of Costanza et al.'s 1997 paper); (3) treating economic values like they would treat biophysical variables such as temperature or density (which are not context-dependent while economic value depends on what question you are asking).
  • Büscher repeated the Suzuki fallacy that "externality" means "not part of the economic system"
  • Büscher "did not have time" to propose an alternative to the capitalist system. Perhaps he should have a look at the historical alternatives to capitalism and their wonderful impact on the environment.
  • Büscher quoted a Chinese philosopher (probably Sun Tzu) that "if you can get your enemy to speak your language you have won the battle" or something in that spirit. I don't agree. Economists study the rules of market allocation (property rights, taxation, and so on) to understand where such rules work and where they don't. This would suggest that our advice would always favour big business. But being market-friendly is not the same as being business-friendly.
  • I'm in favour of pricing ecosystem services, but only in the context of concrete policy decisions, in a proper cost-benefit analysis that is part of a wider policy-making process that also takes into account other considerations besides economic value (such as intrinsic value, distribution of effects, and so on). Don't try to estimate the total value of the planet, as Costanza did.

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