At What Price Nature?

7/29/2019 At What Price Nature?

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At what price nature?

Dr Paul Anderson, www.chapter5.org.uk

Cardiff Philosophy Caf, Valuing Nature, 19 March 2013

Aristotle asked how we as human animals could create and design

institutions which assure survival with some measure of the good life

in it. Although the scope of Aristotles question was that of the city,

the question of institutional design is acutely relevant to todays efforts

to arrest global resource degradation.

Neoclassical economics is rare among influential views on this

question. (For present purposes, Ill refer to neoclassical economics

simply as economics). Environmental problems are essentially seen as

economic problems. Behind numerous types of environmental

degradation, it locates the single cause of market failure.

Degradation occurs, so goes the argument, when natural resources are

undervalued. When natural resources are allocated in a way that doesnot reflect peoples valuations of them, and particularly when there are

no markets for resources at all, they effectively come free of charge

and thus tend to be overused and spoiled.

If environmental problems come from missing markets then,

economists insist, the solution is to create markets for natural

resources by privatizing them, so that peoples preferences can be

registered in market transactions. Where this is not feasible, nature

should be priced by other means. Shadow prices should be

constructed for resources by modelling what people would pay for

them, or accept in compensation for their loss, were there a market.

An optimal level of resource use is then established by measuring the

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costs and benefits of the conservation of a resource, for example,

against other uses.

The market failure account of environmental problems and the

corresponding pricing nature to save it approach have assumed

unrivalled dominance in domestic and international environmental law

and policy, from climate change and biodiversity loss, to pollution and

conservation. They provide theoretical support for the plausibility of

green capitalism, which was central to discussions at the Rio+20

Conference last year and which is central, for example, to Defras work

on natural capital1 and the Welsh governments focus on valuing

ecosystem services (in its Natural Environment Framework).2

* * *

There is undeniable attraction in the idea that environmental problems

follows from under-valuing nature and hence that if we valued it more,

then we would harm it less. However, valuing nature more does not

necessarily mean that we should do so by privatising and pricing it.

Let me focus on the pricing nature to save it approach. Although this

approach may be better than doing nothing, there are reasons to

think that it will do little to answer the kind of question that Aristotle

raised. Two reasons should give us pause for thought. The firstis that

the pricing nature to save it approach may in fact be less effective

than is believed. The second is that the market failure explanation of

environmental problems, from which this approach arises, may not

grasp the real nature of the problem at hand.* * *

1 Natural Environment White Paper, the Natural Choice: Securing the Value of Nature.2 See Definition document andA Living Wales document (pp. 3, 5-6),http://wales.gov.uk/consultations/environmentandcountryside/eshlivingwalescons/?lang=en. See also UN Economics of Ecosystems and Biodiversity (TEEB).

2
http://wales.gov.uk/consultations/environmentandcountryside/eshlivingwalescons/?lang=enhttp://wales.gov.uk/consultations/environmentandcountryside/eshlivingwalescons/?lang=enhttp://wales.gov.uk/consultations/environmentandcountryside/eshlivingwalescons/?lang=enhttp://wales.gov.uk/consultations/environmentandcountryside/eshlivingwalescons/?lang=en


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Correcting market failure

Let me note three initial reasons why pricing nature may be less than

effective.

The first concerns operational difficulties. If humans dont have the

information they need to assess the value of ecosystems, for instance,

then their preferences will not approximate to the real, biophysical

value of ecosystems. The problem is that human understanding of

biophysical systems is subject to irresolvable uncertainties, thanks to

the complexity of these systems, and is therefore subject to just such

irremediable informational constraints. This means that there is

ultimately no way of knowing whether nature is over- or under-valued

in any given case, and thus no way of knowing how an optimal level of

resource use, derived from individual preferences, can be established,

perhaps ever established.

The second problem is that an optimal level of resource use appears

inseparable from two sets ofbias:

- First, in the construction of shadow prices, only those able to

register preferences in shadow markets are considered to have

standing. Those unable to register preferences such as future

generations and non-human beings are rendered inarticulate and

thereby divested of standing.

- Second, preferences incapable of being assigned a price are

excluded from the outset, a point to which Ill return.

Taken together, a lower level of environmental protection is mandated

than would apply were bias removed.

Third, pricing nature makes prospects of sustainability precarious.

Because the approach reduces incentives for conservation to a

fiduciary one, environmental protection is subject to the vagaries of

the market. One of the problems is that if a species or ecosystem is

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valued at, say, 50 million then it follows that if 60 million can be

made from wiping out the species or destroying the ecosystem then it

would be irrational, according to neoclassical economics, not to do so.

Ultimately, pricing nature means that rather than harm for free,

perpetrators are merely made to pay the market rate to harm.

* * *

The failure of market failure?

The second criticism mentioned was that neoclassical economics

appears not to understand the nature of the problem. The explanation

economics gives for environmental degradation the lack of a price

mechanism for environmental resources is reached by distorting

representations of each of the three terms in the relationship between

humans and environments, namely, environments, persons, and what

persons value. These distortions undermine efforts to achieve

sustainability. Let me elaborate.

First, the environment is only recognised as being of value to the

extent that people are willing to pay for its goods and services. In

essence, it becomes another factor of production, like labour, capital

and technology. The problem is that assumption that the environment

can be substituted for economic factors effectively removes the

rationale for conservation, since almost all natural services required

by humans could theoretically be provided by human-made capital.

Second, Individuals are treated as if they are self-interested utility

maximisers. Like its treatment of the environment, economics does

not treat individuals as persons. Instead, it treats them only as

possessors of monetisable affective states. In effect, economics

answers Aristotles question by redefining what a human animal is. It

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does so partly by collapsing the various roles that people play into the

single role of consumer.

The problem is that the roles people assume as citizens or commoners,

in which they express concerns about the common good as

judgements about what is right, good or appropriate in the

circumstances, is simply not captured by their willingness to pay.

In fact, collapsing the roles of people in this way obstructs the

expression of concern for the common good. It undermines

efforts to achieve sustainability because it is precisely as citizens

or commoners that people express concerns about such common

goods as a sustainable environment.

Finally, by explaining environmental problems as the result of

unrealised price relationships between people and environments,

economics reduces peoples values to mere exchange value. Three

problems are apparent. First, since only the strength of peoples

preferences are taken into account, and not the reasons for those

preferences, economics in effect provides environmental policy without

debate. Far from supporting politics, economics replaces it.

Second, because only monetised preferences are to count in theconstruction of environmental policy, the preferences of the rich are

privileged over those of others, precisely because they are able to pay

disproportionately more. This means that the valuations of the poor

are reduced to a fraction of those of the rich. It also means that the

rich, in particular large commercial operators, are effectively permitted

to pay for the right to pollute. On either account, correcting the

invisible hand of the market by shadow pricing enables the private

interest of the rich to be decidedly more public than that of others.

Third, the reduction of peoples values to exchange value ensures that

what people most care about is disregarded. Many of the things

people most care about3 have the property of constitutive

3 e.g., significant social relations and evaluative commitments including thoseconstitutive of identity and social loyalties

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incommensurability. To assume that core values are in principle

comparable under a common metric such as price and that the

operational problem is merely getting the price right is to

misunderstand what it is that such values constitute.

The value of friendship, for example, is constituted in part by a refusal

to treat it as a commodity. To do so would be to betray that

commitment. A person who is willing to put a price on a friend simply

has not understood what it means to be a friend. To illustrate this,

lets consider one infamous example of an assignment of willingness

to pay, namely, Judas acceptance of thirty pieces of silver to take

soldiers to Jesus. As philosopher John ONeill points out,

the act of so putting a price on Christ is not merely an act ofmeasuring badly done what is wrong with the act is not that

thirty pieces of silver was a poor evaluation, that he should have

gone for more. What is wrong with it, is that it is an act of

betrayal that a persons commitment to another is treated as

something that can be bought and sold. The act of betrayal would

have looked no better, but possibly worse, had Judas put in a

higher bid.

Now, the same commitment can be observed in numerous things and

relations that people value including nonhuman beings, special places

and landscapes. In such cases, we could say that the value of things

we love is better measured by our unwillingness to pay for them.

Constitutive values offer a critical basis for the prevention of harm to

the things which people value. To exclude such values from

consideration undermines the rationale for environmental protection.

To include them, requires that market instruments and norms beremoved from areas that matter most to people. This leads me to

some final observations.

* * *

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Towards sustainability

In conclusion, common to alternative views on the kind of question that

Aristotle raised is the idea that environmental sustainability is unlikely

to be served by introducing and extending market instruments and

norms to various areas of society, but quite the reverse. These views

hold that sustainability would be better served by supporting and

expanding the public sphere both procedurally and substantively.

This would enable the many-sided qualities of values, persons and

environments to be recognised as such. It would also enable people to

arrive at public judgements about how to appropriately value nature.

For this to happen, market instruments and norms need to be removed

from areas for which they are simply not appropriate. In essence, the

project for sustainability appears part of the wider project to arrest all

manner of social ills produced by unfettered markets. It is part of the

social project of re-subjecting markets, in particular key resource use,

to genuine democratic, decentralised control so that markets may be

made to serve people and planet rather than the other way around.

Numerous perspectives now exist on institutions capable of making

economic practice sustainable, of ensuring survival with some measure

of the good life in it4 As an idea whose time has come, genuine

resource democratisation appears long overdue. Such democratisation

appears utopian only if we refuse to seriously consider the prevailing,

unsustainable alternative of putting the planet up for sale.

4 Perspectives range from those which are within hetrodox economics such as oldinstitutional (e.g., Bromley), ecological and green economics, to those outwitheconomics such as Elinor Ostroms on the commons and Schumachers on businessdemocratisation, Schweickarts economic democracy and the Building GlobalDemocracy coalition.

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Further reading.

Anderson, P. Critical Thought for Turbulent Times: Reforming Law and Economy for a

Sustainable Earth (under review)

Barry, J. 2012. The Politics of Actually Existing Unsustainability: Human Flourishing in

a Climate-changed, Carbon-constrained World. Oxford: Oxford University Press

Becker, C. and E. Ostrom. 1995. Human Ecology and Resource Sustainability: The

Importance of Institutional Diversity. Annual Review of Ecological Systems, vol. 26,

pp. 113-33

Clark, C. 1973. Profit Maximisation and the Extinction of Animal Species. Journal of

Political Economy, vol. 81, no. 4, pp. 950-61

Dryzek, J. 1994. Ecology and Discursive Democracy: Beyond Liberal Capitalism and

the Administrative State in OConnor, M. (ed.) Is Capitalism Sustainable? Political

Economy and the Politics of Ecology. London: Guilford Press.

Dryzek, J. 2005. The Politics of the Earth: Environmental Discourses. 2nd ed. Oxford:

Oxford University Press

Groves, C. 2010. Living in Uncertainty: Anthropogenic Global Warming and the Limits

of Risk Thinking in Skrimshire, S. (ed.) Future Ethics: Climate Change and the

Apocalyptic Imagination. London: Continuum Books

Michaelson, J. 1996. Rethinking Regulatory Reform: Toxics, Politics and Ethics. Yale

Law Journal, vol. 105, no. 7, pp. 1891-1925

OConnor, M. 1994. On the Misadventures of Capitalist Nature in OConnor, M. (ed.)Is Capitalism Sustainable? Political Economy and the Politics of Ecology. London:

Guilford Press

ONeill, J. 1993. Ecology, Policy and Politics: Human Well-being and the Natural

World. London: Routledge

ONeill, J. 2001. Markets and the Environment: The Solution is the Problem.

Economic and Political Weekly, May 26, pp. 1865-1873

ONeill, J., A. Holland and A. Light. 2008. Environmental Values. Abingdon, Oxon.:

Routledge

Sagoff, M. 1988. Economy of the Earth. Cambridge: Cambridge University Press

Saurin, J. 2001. Global Environmental Crisis as the Disaster Triumphant: the Private

Capture of Public Goods. Environmental Politics, vol. 10, no. 4, pp. 63-84, p. 77

Schumacher, E. 1993 [1973]. Small is Beautiful: a Study of Economics as if People

Mattered. London: Vintage

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Schweickart, D. 2009. Is Sustainable Capitalism an Oxymoron? Perspectives on

Global Development and Technology, vol. 8, no. 2-3, pp. 559-80

Winter, G. 2010. The Climate is No Commodity: Taking Stock of the Emissions

Trading System. Journal of Environmental Law, vol. 22, no. 1, pp. 1-25

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At What Price Nature?