Paul Anderson 2013

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 Behind numerous types of environmental the single cause of market failure. simply as economics). Environmental problems are essentially seen as economic problems. degradation, it locates

Degradation occurs, so goes the argument, when natural resources are undervalued. When natural resources are allocated in a way that does not 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

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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 first is 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. ***

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Natural Environment White Paper, the Natural Choice: Securing the Value of Nature. See Definition document and A 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

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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 of bias: 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.

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

possessors of monetisable affective states.

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 what is right, about the good or common good appropriate as judgements 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 the construction 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. people
3

Many of the things of constitutive

most

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have

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e.g., significant social relations and evaluative commitments including those constitutive of identity and social loyalties 5

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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 To illustrate this, commitment. A person who is willing to put a price on a friend simply has not understood what it means to be a friend. 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 of measuring 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 be removed from areas that matter most to people. some final observations. This leads me to

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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.

Perspectives range from those which are within hetrodox economics such as old institutional (e.g., Bromley), ecological and green economics, to those outwith economics such as Elinor Ostroms on the commons and Schumachers on business democratisation, Schweickarts economic democracy and the Building Global Democracy coalition. 7

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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