Or: Suspending the laws of ecological science
0 Introduction: Good values, good science, and the Natural Capital Project
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| Toontown: Still from the 1988 movie Who Framed Roger Rabbit |
The "Natural Capital Project" – the working out of nature's economic value – is a place that is free from the laws of real ecological science. It is also a place that suspends basic principles of justice and other fundamental requirements for any acceptable theory of value. It is a place in which the usual beneficiaries of economic valuation thrive. But is ominous and dangerous to real natural systems, and ultimately, to people, too.
It is a matter of grave concern that many fine scientists, motivated by the urge to save nature, have joined the rush to the Natural Capital Project. In fact, its most public and distinguished proponents are extremely talented scientists. These people, most of whom have a deep respect for nature and wish to halt its accelerating destruction, are unable to resist the allure of natural capitalism, which derives from the power of "bottom line" reasoning to influence and justify policy. On first encounter, I also found it exciting, even revelatory.
But the proponents of natural capitalism, like myself at first, may not have considered, or may not be equipped to consider whether this project really makes sense as a legitimate value proposition. Whether it makes sense as a legitimate theory of natural value. Whether it make moral sense. Whether we could really live with what it implies. Whether it even makes scientific sense.
Scientific sense. Good scientists are greatly concerned that their science be represented correctly to inform social deliberation. There have been too many recent cases of the intentional warping of science to suit preconceived political ends. I will argue that it is a distorted or cartoon version of science that supports natural capitalism. I don't think that the scientific community that supports natural capitalism realizes how that support subverts the real science that they hold dear.
At bottom, the Natural Capital Project is an hypothesis or claim about natural value. Of course, it is not entirely, or even mostly, an empirical claim. But I think that in one important sense familiar to scientists, it should be regarded as would a scientific hypothesis or claim – as something that merits the most vigorous and rigorous scrutiny.
There's a lot at stake. Nature is being destroyed at an almost incomprehensible pace. Many of our monetary and intellectual resources to try to slow, stop, or reverse the destruction are invested in the Natural Capital Project. Surely, we would not wish for that project to be a path that not only fails to slow the devastation, but actually accelerates and even guarantees it. That, I believe, is the direction where natural capitalism leads.
I am here concerned with assumptions and presuppositions that are rarely, if ever, thoughtfully discussed in the scientific and economic literature. The issues of value and good science are complex and merit some extended discussion. Here are major signposts to help the reader navigate it:
1) Why economic value is completely inappropriate as a general theory of value.
2) A socio-psychological speculation on the striking paradox that economic reasoning is embraced as a way to preserve nature despite the fact that it has been the principal driving force behind its devastation.
3) The role of science and scientists in the economic valuation of nature.
4) The dangers of playing this role.
5) A brief digression describing the very different (and, I think, irrelevant) problem set that economists define for themselves.
6) How the "science" that scientists present to describe units of natural economic value is a cartoon version of the real science that they do.
7) Chess value: An analogy for natural capital.
8) A postscript: How to see through some transparently bad defenses of natural capitalism.
1 Economics and a cartoon theory of value
Economics is evaluation based on unvarnished, unchallenged human self-interest. Not just any kind of self-interest. Rather, it is specifically the kind of self-interest that we express in the marketplace by giving up something we prefer less (often, part of our paycheck) for something we prefer more (a thing we like). The universe of economic value is the universe of value-in-trade, which projects the subjective preferences of the traders, each trying to gain her own marketplace advantage.
It is startling, or it should be startling, that economists speak of this kind of value as "human welfare". But in the world of economics, "human welfare" is just another term for "economic value". Economic value is realized by acquiring as much as possible of what we think we want. Omitted is any consideration of whether or not that really does result in well-being. Or a good life. Or whether it properly considers the rights and interests of other persons. (Which some would say is part of living the good life.) Everyone is expected to look after her own rights and interests. And to satisfy them to as great a degree as possible. Independent of the consequences for others – which the economic calculus is prepared to include in its cumulative calculations.
Some players in the market game have nothing or almost nothing to give up for trade. They are therefore willing to take almost anything from those of greater means with a lot to gain in a trade. But the perfectness of a "perfect" market transaction has nothing to do with fairness.
That this may be acceptable value framework even in the marketplace is not, or should not be a foregone conclusion. But economists go further – much further. Perhaps duped by their own, ill-considered use of the term "human welfare" (scare quotes mandatory), or perhaps over-impressed with their virtuosic facility in computing economic value, they carry their notion of value well outside the domain of the marketplace. They boldly present the concept of economic value as a general theory of value. Or at least, the theory of value to use in public discourse. Often, its most flagrant failing – its radical subjectivity (the third of economic valuation's four problems discussed below) – is flaunted to justify its use in the public domain. In this context, economists relabel the radical subjectivity of their moral universe as "moral neutrality".
It is painfully obvious that the economic conception of value is a non-starter for a general theory of value. It seems absurd to think that a market-based conception of human interactions could ground a theory of moral value, a theory of the good life, or a theory that accounts for normative standards in human relationships – both inter-human relationships and relationships with non-human nature. But exactly that thinking – that economic value is a viable conception of general value – has a stranglehold on the public imagination. It is ensconced in our political institutions. It has even taken hold in many if not most organizations that profess environmental advocacy. And it is the basis for natural capitalism.
Perhaps this is "just" thinking as though economic value is all the value there is. But we base some of our most critical decisions on the equivalence of value (unqualified) and economic value. These are decisions that, for example, determine who and how many people are to die from toxic pollution. They are undeniably laden with implications for morality and justice. So in practice "just" thinking as though value = economic value is no different from thinking that they are substantively equivalent.
The purchase of economic evaluative thinking on the public mind – and more to the point of this essay – on scientists is real and tenacious. So before proceeding, we would do well to briefly consider (just) four in a long list of crippling problems with this premise.
First, the economic conception of value is extraordinarily narrow. To make the value of every thing the value of that thing considered as a commodity in a market transaction is to grotesqely truncate the value of things. (The use of the term "commodity" is not uniform. We here use it in the general sense of a relatively homogeneous "good" that can be a resource or a service. The homogeneity is sufficient to make interchangeable all goods of a kind.) It is doubtful that this conception of value would serve even for commodities, let along for other persons, social standards of conduct, or for nature. The old, beat-up, Sears Craftsman hammer that my father gave me as my first "grown-up" tool is worthless as a marketplace commodity – assimilated into the domain of a multitude of vastly superior pounding tools now available at Sears and elsewhere. Yet it was, and still is to me, priceless as a symbol of my father's recognition of my emerging adult competence and trustworthiness. A hammer is one thing, perhaps a minor one. But economic value is stretched well beyond its credible boundaries when used as the value of a human life, of human autonomy, of a constitution of a state, of an old-growth forest, of a wetland, of the public "good", or of our relations to future generations of persons. To name but a few. Is (as economic theory demands) one wetland (whether built by nature or constructed by conservation biologists) as good as the next? And only valuable in relation to the condominiums that we might otherwise develop on such valuable real estate? The notions of "mitigation banking" and "habitat banking" that natural capitalists tout as successful applications of their theory of value take advantage of that theory's support for building a fake wetland in a poor location for condos to substitute for the loss of a real wetland in a location that makes a lot of money for the developer. Economic value is thereby increased.
Second, it is surely naive to think that unrelenting preference satisfaction leads to greater overall value – let alone a better life – for all. The claim that it does is an empirical one. It may be true or it may be false. To believe it true is to ignore the overwhelmingly negative effect of placing all (considered) values in the strategic environment of the marketplace. I think that this becomes clear when we consider the world of market transactions as the strategic backdrop for all deliberation. This is the world in which every isolated actor looks out for her own interests. She tries to satisfy as many of her preferences as possible, with no obligation (or inclination) to consider any other interests – except insofar as they immediately effect hers. Critically, each actor acts with the understanding that this is how the other actors are playing the game, too.
The phrase "playing the game" is apt. This is the world of game theory that so intrigues economists. But as game theory shows, it is a world in which actors are notoriously denied the best opportunities for leading a good life. In the absence of the good and meaningful kinds of social relationships that may establish expectations for cooperation, an entire universe of opportunities is made completely inaccessible. As a result, each actor is confined to a set of choices in a universe where the value opportunities are severely constricted. In such a universe, an actor cannot possibly realize the best in life. The best of the remaining choices may be (and it seems, often is) poor, or even utterly vile. But in this kind of strategic world – one that excludes even the possibility of the truly best choices – the isolated individual actor must embrace the poor, or the utterly vile as the choice that serves her narrow interests. That is what she "prefers". As a result, that is what registers in economic inventory-taking. [A player in this economic game is known as "economic man".]
Third, the economic view of "human welfare" is so radically subjective that it seems to preclude any normative standard at all. It seems quite naive to unquestioningly assume that what any person prefers to acquire in a trade enhances her "welfare" and therefore enhances the total "welfare" of all. A raft of circumstances contribute to this. There is self-destructive behavior. There is grossly misplaced and misconstrued wants. There is the general difficulty of any person determining what is really in her best interest – especially when subjected to the psychological manipulations of modern marketing.
There is even less justification in supposing that total "welfare" is increased when any person satisfies her preferences. To suppose this is to embrace the unworthy interests of bad people and even monsters – tyrants, barbarians, serial rapists – along with worthy interests. They are all interests, and economic preference satisfaction has no possible way to differentiate them. The "moral neutrality" of economic value cannot and does not discriminate. It therefore cannot discount, let alone discard entirely the interest of moral barbarians.
Fourth, economic value is built on a foundation of thoroughgoing injustice. The marketplace is red in the pocketbook. The weak players – the poor and powerless – count for less because they have less to spend. Their very lives count for less in the economic calculus because they are willing to accept less remuneration for economic development that literally poisons them. They accept bad deals because they have few choices; and for the poorest, all of the deals are bad. The preferences of the rich are represented and considered more than those of the poor. And not just proportionally more, according to how much more rich they are. Because the rich are also powerful. And with that power comes a disproportionate control of social and political institutions, which consequently become levers for even greater consideration of their preferences. The end result is a wholesale violation of the equal consideration principle – perhaps the single most basic principle of justice.
As we have indicated, these are not the only problems. The list is quite long. But for our current purpose, they suffice to suggest that we should be alarmed at the use of economic reasoning to ascribe value in most contexts – including the context of complex natural systems. Taken out of its natural marketplace habitat, economic value is a frightening cartoon of a theory of value.
2 The paradox of using economics to defend nature
In his essay "Beyond Hope" (Orion, 2006), Derrick Jensen comments:
Most ... environmentalists are fighting desperately, using whatever tools they have – or rather whatever legal tools they have, which means whatever tools those in power grant them the right to use, which means whatever tools will be ultimately ineffective – to try to protect some piece of ground, to try to stop the manufacture or release of poisons, to try to stop civilized humans from tormenting some group of plants or animals. Sometimes they're reduced to trying to protect just one tree...Among other environmentalists, Jensen's passage describes well-intentioned natural capitalists, who have have latched onto the tool of economic reasoning.
2.1 Destroying the environment in the name of economic value
I have argued that, as a general theory of value, economic value is a cartoon.
But it is undeniably ensconced in the policy-making conventions of our social institutions – the institutions that wield power. From that leverage point, the theory of value as economic value is largely responsible for the kind of thinking and attitudes that underlie human activities that have destroyed earth's natural systems and are currently finishing the job. That is because, by traditional economic lights, natural systems are purely and simply fodder for the economic engine that increases economic value – satisfying the wants and desires of economic man.
It can be argued (and has been, elsewhere in this blog), that unless this economic concept of value is reined back into its proper and very restricted domain (of efficiently running a business), unless it is framed by a real, coherent general theory of the good life, it will continue to justify and fuel the economic engine that completes the destructive project that it unleashed in the first place. By all indications, it is doing just that. The devastation is, if anything accelerating. And economic evaluation is squarely behind it.
2.2 Saving the environment in the name of economic value (natural capitalism)
So it is an exquisitely painful irony that some economists have deployed their concept of economic value (aka "human welfare") to stop the devastation. At the very least, it seems odd to suggest that the solution to a problem is to perpetuate its cause. How can this possibly work?
The reasoning goes like this: Why are humans engaging in activities that are accelerating the destruction of nature? At bottom, there is really just a single answer. It is because we humans value most other things more than we value nature. For us, the value of intact natural systems falls so far below the value of what we believe we gain (the consumptive preferences that we satisfy) by destroying them – using them as fuel for the economic engine – that the destruction barely registers as a contravening consideration.
But what if we could show that, contrary to our initial assumptions, destroying nature actually destroys what we value? That is the Holy Grail of many who feel, some with great conviction, that nature has enormous value, and that its irrevocable destruction is an unspeakably enormous loss of that value for all humans now and forever.
If anything, this latter day Holy Grail is more elusive than the original. The conviction that there really is enormous value in intact natural systems seems suspended in space – with no visible support or suspending thread. It is frustratingly difficult to find a justifying foundation for nature's great value.
Casting about for the values that strongly influence modern attitudes and behavior, we inevitably stumble into the dominant evaluative force of modern society. The juggernaut that powers the decision engine of society and apparently even widely adopted by many individuals, is none other than economic value grounded in the calculus of human preferences.
From the economic viewpoint, the question:
What if we could show that, contrary to our initial assumptions, destroying nature actually destroys what we value?is transformed into
What if we could show that previously unbeknownst to us, our economic self-interests are damaged – that is, economic value is reduced – when we damage natural systems?So it is that we are led to ask if we might ascribe economic value to nature. Asking this question and trying to answer it – really, trying to answer it with a prejudice for ascribing as great an economic value as possible, to save as much of nature as possible – is the "Natural Capital Project" (http://naturalcapitalproject.org). Those who pursue this project call themselves "natural capitalists".
3 Where science and scientists come in
When economists go to compute the value of nature – the economic value as "natural capital" – they need to slice and dice natural systems into pieces amenable to economic accounting. An account of natural systems for economic accounting is one in which nature is modeled as a collection of commodities. Each commodity comprises multiple units – the pieces from the aforementioned slicing and dicing. And each unit is, or at least (for the purposes of economic computation) must be considered indistinguishable from the next. Then, the economic value of nature is revealed as the price units of these natural commodities command in a marketplace – real or imagined.
But how do we identify the "chunks" of natural systems – chunks of stuff (natural resources). Or chunks of services rendered? (Our economy is now largely a "services economy", a fact not lost on the natural capitalists.) When we stare at a forested mountain, a tropical jungle, a salt marsh, where do we draw the lines to define the chunks that we can trade? How do we identify the units of service –- sequestering carbon, filtering water – that it provides? There's a lot of stuff in there – leaves and soil and roots and insects and bigger animals and bacteria and lots more. And there are a lot stuff going on there – nitrogen being fixed, carbon being assimilated, water being circulated, temperatures being regulated, plants being pollinated, and lots, lots more.
This is where scientists come in. Eager to do their part to abate the accelerating destruction of nature, scientists oblige environmental economists by giving them chunked up, commoditized versions of nature – something as ready and fit to be traded as a microwave at your local Walmart. As I argue in the following sections, these are a grotesquely cartoonish versions of scientists' real understanding of nature. The end result, I think, is that wonderfully good scientists create cartoon versions of their work to prop up a cartoon theory of natural value.
4 Why scientists should not compromise their science
I need to emphasize that I believe that it is cartoon versions of their science, not their real science, that scientists feed into the economic calculus. My case is based on four deep and abiding concerns – concerns that I believe scientists in the natural capital program would share.
First, it seems highly likely that if the Natural Capital Project succeeds – in the sense of being accepted as the primary tool for assigning value to nature – then it will utterly fail in its objective of halting nature's devastation. In fact, it will succeed in justifying an ever more accelerating and ever more thorough devastation of nature, just as economic thinking has all along. The major (though not the only) reason for this has to do with technology. Whatever economic value we can find in nature – in terms of either resources supplied or "ecosystem services" rendered – will increasingly be supplantable and therefore, supplanted by cheaper and therefore economically more desirable (i.e., economically more valuable) technological surrogates.
Consider the classic and oft-cited case described by Rickets T.H., Daily, G.C., Ehrlich, P.R., and Michener, C.D., "Economic Value of Tropical Forest to Coffee Production", Proceedings of the National Academy of Science (PNAS), 101:34 (August 24, 2002), pp. 12579-12582. This study seemed to demonstrate that wild bees living on the periphery of a Costa Rican coffee farm contributed "pollination services" that substantially increased coffee production. Thus, it may have seemed, the best economic value of the forested periphery land was realized by leaving it forested, as a habitat for the bee polliinators.
But what if we found that we could domesticate these bees and keep them in hives? Or what if we found even more efficient, non-wild pollinators that did not need the forest habitat? What if a clever engineer invented a cheap super-pollinating device that could out-pollinate any bee now or ever, and by wide margin? What if the farmer determined that another crop, not requiring native pollinators, would be more profitable? Then the now-forested land would become more (economically) valuable for other uses – most likely, after the forest is cleared. The questions we posed were "what if" questions. But is there really any doubt that they are more legitimately "when" questions?
Unlike the "what if" questions, the "when" question is an empirical question. It has an empirical answer that we may legitimately decline to try to answer before the fact. That should not make us lose sight of the power of the "what if" questions which make it plain that a natural capitalist is committed to welcome any turn of events that frees the forest as a hostage chained to its economic value as a home for pollinating bees.
As a matter of fact, it really was a question of "when" for the bees. Soon after the study, the price of coffee dropped precipitously. The farm replaced its coffee plantings with pineapple which did not have the coffee plants' pollination needs. When that happened, natural capitalists should have lobbied to "develop" the forested land. Left standing and no longer providing the basis for any service, it had been transformed from a possible benefit into a definite opportunity cost. On natural capitalist principles, cutting down the forest for development is the right action – the action that increases "human welfare". Perhaps it's even the required action; it would be reprehensible to do otherwise. (See McCauley, D.J., "Selling out on nature", Nature, 443:7 (September 2006), pp. 27-28 (http://www.fsd.nl/naturevaluation/75062). See also the anemic responses to McCauley's commentary – some of which we cite below – in the same issue of Nature.)
Two further conditions exacerbate the downward spiral of natural economic value. For one thing, we often come to understand how an ecosystem really works only after it fails. Almost as often, that juncture is also when we come to understand the ecosystem's economic value – the services it was quietly providing without our being aware. Why does our knowledge so often have this retrospective (as opposed to predictive) quality? It is because ecosystems are so complex – there are so many interacting variables and factors – that even the most brilliant and clever ecologists never know them all. In their investigations, they cannot even control for all that they do know. But a point of failure provides an anchor from which clever scientists can play detective, and trace back through the serious of insults that led up to it. They can reconstruct how, one by one, each successive insult removed some incremental ability of the system to recover from the next insult. Finally comes the understanding of the final insult – the proximate cause of failure – as the one that acted on a system devoid of resilience. Applied to a system with no further ability to compensate or adjust, we understand how that final insult – in a single, dramatic quantum leap – pushed the system into its final state of low and degraded functioning. Alas, at that point, the ecosystem's value – economic or otherwise – has plummeted. There is little left to salvage. There is little left to love or to value.
The other exacerbating condition is a positive, sociological feedback that strongly reinforces the inexorable decline of natural capital. As natural systems vanish, they vanish from human consideration. They therefore vanish from human preferences to preserve them. But since these preferences are the ultimate basis of all economic value, their economic value vanishes, too. There is already strong and growing evidence of this positive feedback effect (http://www.world-science.net/othernews/080204_nature).
It is worth noting that a true natural capitalist – a true believer in the economic conception of natural value – should welcome this result. Viewed through an economic lens, it is good news indeed, because it means that little or nothing of (economic) value is lost with the loss of any part of the natural world that doesn't provide resources or services that (at least at the moment) cannot be provided inexpensively by human technology. The already-evident bottom line of economic reckoning will become ever more clear. "Human welfare" increases as we make use of now (otherwise) valueless places in nature. "Human welfare" will increase as we appropriate places that now have no place in human consideration – except as places for highways, housing developments, oil exploration, and shipping lanes. All of these things, after all, satisfy strong, deeply entrenched preferences.
The second element of my case is that, by presenting a cartoon version of their science for the purpose of economic analysis, and by putting their imprimatur on it, scientists sabotage critical public thinking on, and deliberation about nature's value. Firstly, they compromise the credibility of their own science. With scientific credibility already under assault from other (politically prejudiced) quarters, it seems grossly irresponsible for scientists to volunteer for an inside job. Secondly, they marginalize the vitally needed, messy, and complex real science by thrusting it into the shadow of its grossly oversimplified cartoon version. It is the credible and real science of natural systems – the science that depicts nature in its real, interconnected, gnarly, and admitted largely unknown complexity, and as part of an equally complex historical unfolding of geological, biological, and chemical systems – that is irreplaceable as the factual backdrop for a full, rich, and satisfying picture of natural value.
Third, even now, with technology in its current state (see the first point of this section), much of what scientists appear to value in natural systems is just not worth saving according to honestly done economic analyses. Economic valuation looks at the "marginal (economic) value" – the value of protecting the next commoditized unit – one more species (say the right whale) or one more hectare of habitat (say, old-growth temperate rainforest). As a matter of empirical fact, the marginal values of such "commodities" are often vanishingly small. It is just a bad (economic) deal to save the next right whale or the next hectare of old-growth rainforest. The probabilities of these natural entities having some economic in the future is so vanishingly small, that this kind of future-looking consideration adds essentially nothing to their net present economic value.
For a discussion of the rainforests, see Bulte, E., Van Kooten, G.C., "Economic Science, Endangered Species, and Biodiversity Loss", Conservation Biology, 14:1 (February 2000), pp. 113-119. As they point out, the enormous timber value of the trees and the superior carbon uptake of a plantation of young, fast-growing saplings that could replace the old-growth trees strongly militate against saving most of what remains of these ancient forests – on economic grounds.
For a discussion of right whales, consider the logic (and ignore the crudeness) of the imagined poster of "Those goddamn whales" (http://environmentalvalues.blogspot.com/2008/04/those-goddamn-whales.html). That character is the mouthpiece of the economist who understands that right whales (unlike the ancient forests) have essentially no economic value and that slowing down ships to avoid ramming them has a measurable economic cost. Therefore, "human welfare" is increased by continuing to sail ships at full throttle, no matter how many individual whales are injured or killed, and despite the significant contribution towards the species' extinction. To embrace natural capitalism is to enthusiastically embrace the extinction of the right whales, happy in the knowledge that it truly serves "human welfare".
The previous three points argue that economic valuation is impotent in preventing natural destruction. That might be an unhappy result for some of us. But if we were honest, we should embrace it as the honest moral truth about nature: It's just not worth much.
The fourth point gets back to value and the damage that economic valuation does to natural value. Natural capitalism teaches us that it is the right thing to let a developer build condos in a wetland in exchange for constructing an artificial one elsewhere. It teaches us that the forest around that Costa Rican coffee plantation did suddenly plummet in value when the farmer replaced the coffee with pineapple. It teaches us that we should enthusiastically embrace the extinction of the right whales – happy in the knowledge that their demise serves "human welfare" by permitting shippers to reduce their costs and therefore ours as consumers of the shipped goods. In short, I would say that any value that we place in nature is sabotaged by this economic conception of its value.
5 A digression: The problems within the economic field of view
Before proceeding with the main thread of the argument, I should acknowledge that at least some environmental economists sense the difficulty of identifying the valuable chunks in the first place. They see that there are an awful lot of chunks of stuff – not just in number, but in type. They aren't packaged in any neat or uniform way. Ecosystem services are particularly tricky to identify in a way that is directly linked to its economic benefit. Confusion about this can lead to double-counting. See, for example, Boyd, J., "The Nonmarket Benefits of Nature: What Should be Counted in Green GDP?", Resources for the Future (RFF) DP 06-24, May 2006.
By Boyd's lights, these difficulties are merely technical ones that are surmounted by careful estimation techniques on the one hand, and careful accounting on the other. Thus, we can estimate the distribution of timber densities in the forest, weigh certain services by their availability (proximity) to human settlements, or, as seems increasingly common, take a survey of previously published economic results (which seems a methodologically vexed approach). According to Boyd, we just have to be careful to tie an ecosystem service to its marketable benefit.
Economists are also concerned that much of the "stuff" from natural systems and perhaps most of their services don't actually enter into the marketplace in the way required by economic theory. This is very inconvenient for a theory that is focused entirely on market value – or rather, value as expressed in the context of a market transaction. Even when natural "goods" do enter into transactions, there are often "externalities" (costs or benefits that don't accrue to the parties in the transaction) that skew the actual market price (aka "economic value").
Confronted with this dilemma, one might think that it wise to take a step back to ask if the value of every "thing" – a natural system or a human life, for example – can be conceived in terms of value-in-a-transaction. Not economists. They have a facile solution for their apparent predicament: If there are no real prices in a real market, invent them. The prices. And the market.
The reader with no economic training may think that this defies common sense. I'm afraid that it does; but it is nonetheless how economic valuation is done. For goods that are not traded at all, "shadow prices" are substituted for the market prices that would exist were there a real market for them. How, you may ask, do we find these prices, if there is no real market? By economists' lights this is "tricky" but "just" another technical difficulty – one easily surmounted by clever estimation techniques, value proxies (for example, hedonic pricing), preference (for example, contingent evaluation) surveys, and various theoretical constructs that, so far as I can tell, are supported (if at all) by thin analogies and armchair speculation about hypothetical situations. The ultimate estimation technique that professional economists use is the survey of previously offered and unsupported estimation techniques.
These are the problems in economists' field of view. They are the launching pad for taking off into the stratosphere of economic equilibrium theory and flailing away at the "technical difficulties" in framing natural systems as natural capital. In the process, many Ph.D. candidates turn into Ph.D economists and many Ph.D. economists make many calculations of natural capital and publish those calculations in many economic (and scientific) journals.
It is extremely distressing to me that the most basic and vexed premises – the ones about natural value as natural capital – that fueled the launch in the first place are left far behind and untouched. A very few "environmentally enlightened" economists such as Jim Boyd mention them. But he and others that do quickly brush them aside and just forge ahead with the economics. Far more often, these premises are never even acknowledged.
6 Natural capitalism: Cartoon science for a world of cartoon value
I now get to the part of my argument that, I think, should especially concern scientists in their role as scientists. (In their role as moral agents like the rest of us, I hope that scientists will also reflect on the preceding discussion of the principles of economic value and the implications of using economic valuation to value nature.)
Why do wonderfully good scientists who produce wonderfully good science offer cartoons instead of real science to economists? The section on Where science and scientists come in hints at the answer.
The economic calculus works with commodities (in the sense that we prescribed at the outset) that comprise collections of discrete, atomic, largely static and non-interacting, and indistinguishable chunks of "stuff" (or services) that can be traded in a market and that are therefore viewed in the narrow timeframe of a market transaction. Unfortunately, natural systems are not anything like this.
No matter how brilliant the scientist, when she attempts to reduce an ecosystem to simple economic parameters, the ecosystem is no longer recognizable as the thing that it is. Gone are the complex guts of a natural system that makes it interesting to scientists. Gone are the myriad components and threads of myriad processes that intertwine and interact in every possible time frame – from seconds to years to millennia and beyond. Gone are the interconnections at every possible spatial frame – from direct contact to downstream to the other side of the planet. Gone are the impossible-to-predict chains of events that stem from even the seemingly smallest and least significant perturbation or insult, but that lead to major, irreversible changes.
What remains is an eviscerated depiction of nature. What remains, I think, is something like a Toontown version of science – a cartoon that makes economic calculations possible. Gone are the guts. Gone too are the significant, non-economic values that (unlike economic value) just might make nature worth saving.
Let's examine this more closely – first by way of a common example of environmental economics, and then by way of analogy.
6.1 An example: The economic value of a unit of forest
We have this very typical statement from an environmentally concerned economist:
The shadow price of an asset represents the change in welfare due to an incremental change in stock, and is the value we assign (or impute) to that resource. So for example, the shadow price of deforestation is how much worse off we are due to an incremental loss of forest, and the physical change is the forest area change between this year and last year. Our total welfare loss is the product of these two components, i.e. the unit cost of deforestation multiplied by the total area lost.We have already encountered the notion of a shadow price. We offer no further comment here, except to remind ourselves that when an economist says that these are not real market prices, this should not be misinterpreted to be even the slightest departure from the basic economic conception of value as conferred to something as an object of trade. Rather, with that phrase, economists are saying that, as an inconvenient matter of fact, there exists no perfectly functioning market (according to the precepts of neoclassical economics), for units (in this case) of a forest commodity. In the best of economic worlds, there could be. In any case, we can imagine such a world well enough to approximate the commodity's "true" price.
So what picture do scientists paint of a forest as a basis for economic evaluation?
First, it is a collection of homogeneous hectares – a very uninteresting jigsaw puzzle with identically sized and identically shaped (square, I would imagine) pieces. For as we have seen, the calculation of economic value presumes a market for a commodity – something with units that are (for market purposes) indistinguishable.
Second, to attach a value to each unit of the forest commodity, scientists find some goods (and bads) in each of these averaged hectares. And they find some services (and disservices) averaged over them all.
How many economic goods (or bads)? How many services (or disservices)? The list is typically short. Very short.
For a forest, the lion's share of the resource goods typically comes from the timber – the market value of the "harvest" from an average hectare. The lion's share of the service goods (again, for a forest) typically comes from its carbon-processing capability – the average that is recaptured from the troposphere and the incremental economic benefit of avoiding the need to deal with whatever climate havoc that bit of atmospheric carbon (as carbon dioxide) might have caused.
To be sure, other goods are mentioned from time to time. There's the "potential for the miracle cancer cure" gambit. But as previously mentioned, for any reasonable set of assumptions about likelihood, that value is typically miniscule compared to timber value. Modern society's technological prowess in synthesizing chemicals also rears its value-diminishing head.
"Environmentally very enlightened" economists often tip their hats to "aesthetic cost" of a clear-cut hectare. Recreational costs of such a forest use are dutifully cited, too. But these costs are again tiny – and diminishing with our increasing disinclination go there or to find one of these increasingly rare places. Economists rarely take into account the opportunity cost of not replacing relatively unpopular and boring forest hectarage with a far more popular Disney theme park. But by their own precepts, they should.
There are the birds, and sometimes, as in a previously mentioned example, the (pollinating) bees. But the birds only make biologists and bird-watchers happy; there are so few of them (and sadly, also the birds, which have been disproportionately affected by the current great wave of extinction) that their preferences barely register. And the bees? We've already noted how their contribution to value can (and in the cited famous case did) vanish literally overnight.
Almost never are the economic bads mentioned. For many forests (such as old-growth temperate forests), the services they perform by sequestering carbon are negative, not positive in value. The trees represent not a benefit, but rather the opportunity cost of not replacing them with vigorously growing plantation monocultures that sequester carbon at far higher rates.
We are left with a picture of the forest as a collection of generic hectares – units of stock on the shelves of a natural Walmart. Each unit of stock yields a certain amount of timber and provides a poor to rather bad service in snatching carbon out of the air. Its unit (marginal) value is what such a unit commands in a market transaction.
6.2 The forest as science really sees it
How does this picture of an anonymous unit of forest fit with our best science? How does it fit with ecology? Or with systems theory?
It doesn't. I think that it doesn't even come close. There's barely anything that is scientifically recognizable. How does it miss the mark? It's hard to know where to begin, and even harder to know where to end, in answering that question. At least, we begin.
What do scientists really see when they look at a forest? Nothing like an homogeneous commodity with two or three value-determining characteristics. Instead they see that:
-> The effect on the community (species) structure of an ecosystem depends critically on which patch of forest is destroyed. For example, island biogeography demonstrates that eliminating the population island that is the principle recolonizing source for satellite patches subject to periodic, but perhaps infrequent disturbance (e.g. drought) could wipe out all populations in the region. In a tropical forest, where distances between individual trees of the same species may be great, a single tree may be a population island for species-specific insects.
-> The effect on community structure also may critically depend on whether "harvesting" leaves one large area intact, or whether it leaves a patchwork of many small fragments, or whether the entire area was uniformly "thinned".
-> Trees removed near a stream or lake will have a different effect on erosion, leaf litter, habitat for insects, the amount of unfiltered, sediment-laden runoff, and the consequent vitality of fish and aquatic invertebrate populations. Any of these changes could be utterly transforming.
-> The relative ability of different organisms to act and react to different kinds of changes comes into play. The success of some species to adjust and the failure of others to do so could easily lead to dramatic changes in trophic interactions. Any reduction in forest area will have a greater adverse impact on large predators that require larger territories. Trees removed from a mountaintop "island" will have a far greater effect on land-bound organisms compared to birds.
-> The decline of some species could make the forest more susceptible to alien invasions that would be a strong positive feedback for a further decline of native species.
-> The removal of trees may have relatively hard-to-calibrate effects, such as the the greater sensible heat and higher local temperatures that result from the decreased albedo in a way that hinges on small details in the pattern of tree removal.
And then there are the cascading effects that ecological science cannot predict – including ones that directly impinge on human lives. Any of these scenarios are possible, but our total ignorance of them or their likelihood make them impossible to evaluate:
-> The demise of large predators leads to an explosion of smaller, disease-carrying animals. The people who are encouraged to move into the cleared spaces have increased contact with these animals. A parasite is given the opportunity to infect human hosts. A new and devastating human disease is born.
-> Humans now in close proximity to the forest bring their livestock, and with them parasites that, for the first time, infect the native forest creatures. Or they build the inevitable roads, perhaps using asphalt, that further changes the characteristics of soil drainage, leaches toxins, and causes shifts in wind patterns, and consequently temperature and humidity. The forest dies, giving way to grasslands.
-> With the decrease in albedo and increase in heat comes more fire and the "need" to clear more forest to reduce its risk. With this positive feedback, the cutting down of the forest accelerates until almost none is left.
These intertwining and interacting complexities can be viewed through an additional lens – that of complex systems analysis. From that discipline we know that complex systems may appear to continue to function – at least for a time – after component parts are compromised. The role of the compromised component is discovered only when a disturbance or combination of disturbances makes its role apparent. Economic calculations never take into account the large temporal and spatial dimensions needed to observe and understand this. Thus, logging and even clear-cutting may go on for decades without any apparent problem (except aesthetic). Then, for example, a bark beetle infestation may destroy the entire forest – perhaps, as it turns out, because along with the trees went the nesting sites for the birds that fed on the beetle.
6.3 The economic view of one forest
In some cases, actions taken on economic grounds preempt any need to wait or to worry about the subtleties, gross uncertainties, and impossibly entangled causal webs of real ecological science.
It is worth mentioning such a case – also noteworthy because in it, timber is (or was) not the dominant economic value of the forest. In Madagascar, a rare coastal tropical forest was just an obstacle to realizing the far greater economic value of another resource. As an economist would say, the forest was an "opportunity cost" because it hindered the extraction of the vastly more (economically) valuable ilmenite.
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| Increasing the economic value of Madagascar's coastal forest land. |
Ilmenite is the mineral source for titanium dioxide. Its economic value in Madagascar derives from the use of titanium dioxide as a white pigment, in the discontinuation of lead-based white pigments, and in the exhaustion of the Australian and South African sources of ilmenite. In this case, the trees were just collateral cost for the economic benefit of coloring things white – quite literally, the "good" of white-washing.
This case illustrates how our collective desires (preferences) for white house paint, white plastics, white toothpaste, and white-tinted cosmetics represent an economic value that far exceeds that of a rare kind of coastal tropical forest that is home to some of the rarest creatures on the planet. Whiteness in our life has more value than the precarious marine ecosystems that adjoin the ilmenite mine. It has more value than the ways of living and livelihood of the people who were uprooted to make way for the mine, a new port, and a network of roads. It is an economic benefit so great that it offsets the spread of HIV/aids
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| Lemur catta (Ring-tailed lemurs) |
Certainly, the mining company executives of Rio Tinto are being richly rewarded. In economic terms, the benefit far exeeds the cost of the total devastation of the local land and culture. It evidently also more than compensates for the fact that ultimately, after the mining is over and done in just a few decades (according to Rio Tinto's own projections), there will be no local economy at all. That has been accounted for in the net present value of the mining operations.
Of course, that still leaves out the preferences of lemurs to continue their (various) species' existence. And as you can see, that really pisses them off.
6.4 A brief digression: An enigma about scientists
Again, we digress – this time, for a very brief observation. Concern about many of the science-defying problems that we have expressed are acknowledged by scientists that are the very bulwark of the Natural Capital Project. See, for example, Daily, G.C., Söderqvist, T., Aniyar, S., Arrow, K., Dasgupta, P., Ehrlich, P.R., Folke, C., Jansson, A., Jansson, B., Kautsky, N., Levin, S., Lubchenco, J., Mäler, K., Simpson, D., Styarrett, D., Tilman, D., and Walker, B., "The Value of Nature and the Nature of Value", Science, 289:5478 (21 July 2000), pp. 395-396 (http://cisac.stanford.edu/publications/value_of_nature_and_the_nature_of_value_the/).
These authors characterize their concerns as "limitations of the scope of valuation". But they somehow cannot bring themselves to follow their own strong and correct instinct to the conclusion (that should be more obvious to them as highly trained scientists than to the rest of us as mere reasoning citizens) that this "limitation of scope" dictates a limitation of the science used in valuation to cartoon versions of their own excellent science. Enigmatically, they just turn their back on their own work that demonstrates, for example, that "highly interdependent and seemingly small changes in one place cause large impacts on the overall system."
7 An analogy from chess
I'd like to offer an analogy for the cartoon quality of science-in-the-service of economics. It comes from the world of chess.
Consider a critical juncture in a match between grandmaster players. We assess the board positions of white and black. We do this by taking an inventory of the chess pieces (resources) and give each resource a conventional value (commodity price). Actually, chess players view a chess piece more as a "chess service" than a resource. A piece's conventional value reflects a generally agreed upon generalized capability or function that it performs. In the chess marketplace, trades (aka piece exchanges) might be judged in terms of these values.
For the board in our grandmaster match, the inventory might be:
White: 1 knight @$3/knight, 2 bishops @$3/bishop, 3 pawns @$1/pawn, 1 king @$???
Black: 1 bishop @$3/knight, 1 rook @$5/rook, 2 pawns @$1/pawn, king @$???
In this chess economics, we find that white is worth $12 – $2 more than black's $10.
Are we satisfied that we have properly valued the position? That white's chess welfare is better than black's?
No, of course not. This is a cartoon valuation of the chess position built on a cartoon description of it. The description does not capture the lion's share of what we need to know about chess reality in order to arrive at meaningful chess values. Only someone ignorant of or purposely ignoring the complexities chess "systems" could deny this. I would say that this would be as ignorant as valuing natural systems based on the numbers that come from similarly static, highly truncated, and narrowly selective inventories of goods and services that happen to satisfy current human preferences.
Does it matter that "we got the numbers right" in our chess evaluation? (We did.) Does it matter that "at least we have some numbers, even if they're not the only ones"? (Again, we did.)
The answers are, of course, "No" and "No, again." To think of the value of black's rook (as we have) without regard to how its position relates to every other black piece individually and in every possible grouping, to think of its value independent of its relationship with every white piece and every possible group of white pieces – is senseless. Absent information about where each individual piece is placed on the board, absent an understanding the myriad dynamic relationships that exist between each piece and every other – not just in the current position, but in every possible development of it – our static chess inventory has no meaning.
As a consequence, it is a meaningless basis for assessing chess value, or the value of white's position versus black's. Chess novices quickly come to realize that a single-minded focus on reducing their opponents' piece inventory rarely produces a winning position. They quickly find out about gambits. Any merely competent chess player can easily construct a board position that has the chess economics that we have specified for our grandmaster match, but in which black checkmates white in the next move.
So it is with natural systems. Insofar as we can neatly define "pieces" in nature – for example, the individual plants and animals in population ecology – they cannot be understood independent of a raft of dynamically evolving relationships with each other and with myriad non-biotic conditions and processes. Nor can we dismiss the fact that each individual is unique. We know that some individuals can play unique and pivotal roles in their ecosystem dynamics. One views individual organisms as commodities at a considerable scientific risk.
The major point of disanalogy is that much or even most of nature cannot be understood as neatly defined "chunks" that resemble pieces on a chess board. We can carve up a forest in any number of ways achieve an equal number of perspectives on how it works. This is part of the creative art of ecologists. But the ecologist understands that each of the myriad chunks in each of these frameworks is connected to the chunks in its own framework, as well as to the different-in-kind-and-in-spatial-and-temporal-size chunks in all other frameworks through webs (not lines) of interactions that are as varied as the interacting nodes (chunks).
Yet, we still have not exhausted all that matters, even in chess. It does not suffice to just consider the continually changing threads of interactions on the chess board starting from the specified position. That alone fails to provide the complete story in a real tournament between real people. The history of the game leading to the current position may be critically important. How much time remains on white's clock versus black's as a result of their previous struggles? Has white's piece superiority come at a high mental cost from parrying one clever and aggressive thrust after another from black? With less time left on white's clock, what mental resilience does that player have in reserve?
Again, so it is with natural systems. The history of insults to them counts. What the insults were. In what sequence they were inflicted. Ecologists know that. But it is not in any way reflected in the cartoons they draw for economists. The economic calculus demands the cartoon.
The economic calculus does compute what economists call "dynamic efficiency". But the "dynamic" part of that has to do with allocating resources in different periods of time. In the world view of natural capitalism, it does nothing to change the cartoon of nature as a stock of discrete chunks of essentially non-interacting stuff. All it says is that some chunks can be taken off the shelves of nature's warehouse now; other chunks can be taken off the shelves later.
Consider this other question couched in terms of our chess analogy. What are we to make of the king? What is its chess value? Is it infinite? It is part of the inventory; so it must have some value. Perhaps a chess player would say that its value is infinite. Perhaps, by saying this, she would mean that there is no game without the king. A checkmate ends the game. So it doesn't even make sense to ascribe a conventional point value to the king.
Economic theory does not brook this view. Economists deny that there is anything of infinite value. I believe that the real meaning of this claim is "there is nothing whose value is not, at bottom, economic value. Therefore, people who give this answer in a contingent evaluation study (a survey used to determine human preferences) are summarily dismissed. Economists do not hesitate to throw out data that do not fit their theory. That is something that should make a scientist squirm.
To make the rest of us squirm, an economist would likely suggest that the king's value is something like the value we are willing to pay to make a polluter refrain from pouring toxins into drinking water that will likely cut short our life. It is exactly analogous to the economic value of a human life – the notion that human value is directly tied to and limited by preferences for the goods that a polluter creates. This basic confusion about value in general, and human value in particular is central to the illusion (and delusion) that economic value represents human welfare, or can represent natural value.
8 Postscript: A field guide to economic protestations to the contrary
It is useful to anticipate at least one type of response from the proponents of natural capitalism. This is the claim that economic value theory can be fixed. Though it starts out as a hollow theory of general value, it is a worthy framework on which we can hang all kinds of value as a kind of retrofit. What about, "existence value"? And "aesthetic value"? And "cultural value"?
I will submit my position on this and leave the arguments for another paper. I believe that:
- One cannot, as an afterthought, retrofit a theory fundamentally designed to achieve market advantage, so as to transform it into a theory of general value or a general theory of the good.
- One cannot, as an afterthought, retrofit a theory whose strategic environment precludes some of the greatest and most basic of human goods, to usher those goods in through a back door.
- One cannot, as an afterthought, retrofit coherence into a theory of value whose fundamental principles cannot distinguish between what is desired and what is good.
- One cannot, as an afterthought, retrofit justice into a theory built on principles that are fundamentally unjust.
Here we have time for just two examples.
Example 1: Contemplating situations like the one in Madagascar, economists protest: "No, no. Our conception of value is not as narrow as you claim. Yes, we value natural systems on the basis of the "ecosystem services" provided. But we also gladly add to our calculations their 'cultural services'." (See, for example, Reid, W.V., "Nature: the many benefits of ecosystem services", Nature, 443 (October 2006), p. 749.)
"A cultural service". The surest field guide tip to the fact that we have not escaped the strong gravitational field of pure economic reasoning is that word. "Service". If you're an economist you'll not bat an eyelash. If you're not an economist, this will sound profoundly strange. Unnerving, even.
I would urge that you trust your instincts.
Ask yourself: "Are the symbols of your cultural heritage, which may include the burial places of your parents and theirs, or the traditional places for meeting, or the traditional ways of finding basic sustenance that tie your life to that of your ancestors and that you envision will tie yours to that of your descendants – do you conceive of these as things that you might sell in a market transaction?
Ask yourself: "Is the value of a culture the sum total of human preferences to sustain it, weighted by how strongly those preferences are backed by an ability to pay to satisfy them?" On that basis – the basis of economic valuation – poor subsistence cultures are nearly valueless. That, of course, is part of the economic justification for the disruption and destruction of such cultures in Madagascar and other places.
Example 2: Confronted with economically justifiable (and justified) devastation such as we have in Madagascar, where mining corporation executives are the biggest beneficiaries, natural capitalists often offer a certain non-sequitur. I call it the "take your eyes off the major beneficiaries of economic valuation and blame it on the poor" gambit. Here is a textbook example (from one response to Douglas McCauley's commentary, cited above):
The conservation debate cannot be reduced to a choice between protecting nature or making an extra million for a yacht or villa. If it were, then perhaps moral arguments alone would be enough to protect the environment. The reality is that poor people are deforesting vast areas of tropical forest for subsistence agriculture...On similar grounds, Kareiva and his colleagues would point out that the Madagascar mining operation offers steady employment for some people. In Kareiva's judgment, this must be a great benefit – an improvement for these people over their previous, more precarious subsistence way of life (at least until the mine closes in a few decades). After all, by agreeing to employment with Rio Tinto, they demonstrate their preference for this new way of life.
Marvier, M., Grant, J., and Kareiva, P., "Nature: poorest may see it as their economic rival", Nature, 443 (October 2006), pp. 749-750.
Or do they? Or are these poor people just selecting from a small set of bad choices – a set that they are powerless to help define? Are these people, in fact, fully autonomous actors in this kind of circumstance? The reader is referred to Lamblin, E.F., et. al., "The causes of land-use and land-cover change: moving beyond the myths", Global Environmental Change, 11 (2001), pp. 261-269, for a start in understanding the economic and sociological naivete of Kareiva's gambit.
9 A final caveat
It concerns a favorite natural capitalist syllogism, which goes:
P1: The alternative to economic value is intrinsic value.
P2: You cannot effectively justify the preservation of nature (or incidentally, of anything else) with intrinsic value.
C: Ergo, if you believe that nature has value, only economic value can properly represent it.
This syllogism seems to be overwhelmingly successful in suppressing the better instincts of those who have not succumbed to the numbing effect of economic training. That is odd, because both its premises are false.
P1 is false because it posits a false dichotomy. It may be that the natural world does have some kind of intrinsic (non-instrumental) value. But it may have many other kinds of value connected with the flourishing of people quite aside from any economic value. It is unfortunate that this possibility never enters public discourse.
It is not clear whether P2 is an empirical claim about whether and how people are persuaded, or the force of modern institutions (whether or not they are good), or a claim about correctness and cogency (because people may not be persuaded by convincing arguments).
Taking these possible interpretations in reverse order: If a claim about correctness and cogency, P2 falls – because it depends on the false presupposition (or conflation) that "effectively" means "effective economic argument". If a claim about the force of modern institutions, P2 does not address the possibility that these institutions may be ineffective in promoting true human flourishing, and perhaps even brutish. If an empirical claim about persuasive efficacy, then it seems that the right experiments have not been made to test P2: Economic arguments have dominated political discourse for decades now. But more important, it would be cynical to promote an economic argument for its persuasive effect on the polis, if we knew or felt deeply that it was incorrect or feeble or largely irrelevant.
This argument might make sense in Toontown. But not in the real world where, I hope, reason still has a chance to prevail.
