Environment & the World

Monday, February 19, 2007

Solar Boom?

Filed under: Economics, Energy, Oil — amirj @ 2:47 pm

Did you know that we’re in the middle of a solar economic boom of sorts? Even though this is a story that ought to interest and tickle environmentalists, it seems that the environmental community hasn’t accorded the topic nearly as much attention as the business community has. Indeed, this has been a business story with a heavy financial market angle, but is that all it should be?

So, what’s been happening? In the last two years numerous solar companies have begun to trade publicly on Wall Street, with a burst of solar initial public offerings in the past three months alone. If their growing market presence is notable, though, their market performance is even more so. Many of these solar companies’ stocks have soared. A look at a comparative chart of some of these stocks shows that their value has jumped up anywhere from 20% to 100% in the last three months alone. To get an idea of how impressive that is, compare those percentage gains to the single-digit interest rate that you earn in your savings account and then imagine what would have happened to your money had it been invested in those solar stocks. Furthermore, a look at the three major U.S. market index stocks (the Dow, Nasdaq, and S&P500) shows overall market gains of 2% – 4% over that same three month period, indicating that the solar stocks have truly been on fire.

Of course, this solar story is not without blemishes. There are some companies involved in the solar industry whose stocks have not done that well in the same period. A look at this chart reveals three such examples. Nevertheless, the number of solar stocks surging seems to outnumber the number of sluggish ones thus suggesting that a boom might be more of the rule and the sideways action or decline more of an exception. The other impressive angle to this story is that this recent boom took place when oil prices have been trading at relatively low prices compared to the summer highs near 80$/barrel. My impression has been that market leaders tend to favor alternative energy stocks when the price of oil spikes and brush it aside when the price of oil slides down to more tolerable levels–though that shortsighted trend might be decoupling.

What all this makes me wonder, then, is what should this story mean to the environmental community? To the environmental movement? The environmental community has focused on the dangers of climate change and with regard to energy, the need for governments to pass stronger pollution regulations and do much more to support alternative energy initiatives. The environmental community has, at times, also been willing to give pats on the back to corporations that show some kind of leadership in improving their energy efficiency and in supporting alternative energy. What the environmental community seems to shy away from is blatant attention to and support for the private sector companies that have made it their business to develop and sell the technologies that environmentalists want to see adopted on a larger scale.

It’s tough to pin-point the exact reason why the environmental community keeps its distance from the business sector. There are probably many reasons, some deeply ideological and value-based, others more plain. The thought of environmental non-profits cozying up to for-profit businesses seems like an unnatural fit, and perhaps might even be limited by tax laws(?). The lack of attention to industry trends might also have to do with the fact that environmentalists might feel let down by a corporate-dominated landscape which built a U.S. economy so heavily reliant on fossil fuels and so averse to environmental protection.

Times have changed, though. Green is more chic than it used to be and companies have started to discover that “going green” can pay off. To bring us back full circle, my question, then, is now that the  market seems to be sending us the right signals about solar power, what can we do to make sure that the market won’t let us down again? 

Friday, January 19, 2007

“Cancer Villages” in China

Filed under: China, Development, Economics, Environmental Justice — Cathy @ 10:01 am

The BBC recently ran an article about the so-called “cancer villages” in south China, the victims of China’s rapid industrialization and poor pollution controls.  The drinking and irrigation water for these villages in Guangdong Province are being polluted by mining waste upstream.  In the village of Shangba, scientists have found high levels of poisonous heavy metals in the water.  According to the article, “250 people from the village’s population of 3,000 have died of cancer since 1987, although statistics in China are often unreliable.”  In the broader picture, “some 320 million people drink polluted water every day” in China.

This is but one manifestation of the incredible gap between rich and poor in China (and in most other developing nations).  The gap in per capita income between urban and rural residents in China increased by more than a factor of 6 between 1990 and 2003, according to the UNDP (http://www.undp.org.cn/downloads/nhdr2005/06chapter2.pdf).  Living in Beijing, I might as well be in a completely different country.  Of course Beijing has its own share of serious environmental and public health problems, notably its air pollution, but these problems are much more similar (albeit more extreme) to those that would be faced in urban areas in developed nations.  With most of the external costs of China’s mining and heavy industries borne by the rural areas, it is no wonder that urbanization is occurring so rapidly in China. 

China has a long way to go to solve such problems.  Despite the Chinese government’s goal of a “harmonious society” it is failing at implementing regulations regarding mine safety and environmental controls, and it is also failing at improving energy efficiency of heavy industries.  Corruption is a serious problem in improving mine safety and pollution controls; because many local officials own stock in the coal mines, they tend to look the other way when mines try to cut costs.  The government is aware of this problem and is working to punish corrupt local officials; as of the end of 2005, it was estimated that “some 3200 of the estimated 4578 officials who had shares in coal mines(totaling some … US$80.5 million) had retracted these stakes” (http://www.worldwatch.org/node/58).  Despite this, China still faces the larger problem of having a rapidly growing economy based in large part on the inefficient use of coal.  This month it was revealed that China failed to meet its stated goal in the 11th Five Year Plan to reduce energy intensity by 4% in 2006; instead, energy intensity continued to increase.  (http://www.spiegel.de/international/0,1518,459155,00.html)    Without a more concerted effort to control pollution and regulate industry (perhaps even at the expense of economic growth!) I don’t see any possibility for the rural and urban areas to form a “harmonious society.”

Saturday, January 13, 2007

Lingering questions about Chp. 2

Filed under: Economics, Reading Group, Transportation — kwolfgan @ 5:51 pm

After all that, I have a few lingering questions (some of them rhetorical, some very serious) about Chapter 2:

1. How will price and availability of hypercars compare to old clunkers like my 1989 Isuzu Trooper?
2. If and when we scrap the old clunkers, what happens to the parts if hypercar materials aren’t remotely related to the old components?
3. Where does carbon fiber come from, anyway?
4. If the transition to hypercars and more integrated communities could happen without new taxes, new standards, or a significant increase in oil prices (26), what exactly is standing in the way of transitioning now? And how can we get around it?

Natural Capitalism, Chp. 2: Karen’s comments

Filed under: Economics, Reading Group, Transportation — kwolfgan @ 5:47 pm

My dad went down to the local Honda dealership a few weeks ago and told the sales associate that he wanted to be first in line for an FCX hydrogen fuel cell car. The Honda sales associate didn’t know what my dad was talking about, so he called in the sales manager; the sales manager said that the FCX wouldn’t roll out till 2008, and even then the vehicles will only be available for lease—they won’t be in full production till 2018. But Dad reiterated his request, and at this point is planning to lease the first publicly available burgundy FCX in the Portland area. I don’t know whether or when that will come to pass, but I do know that my dad is doing his part (through subsequent e-mails to the sales manager and anticipated weekly visits to the dealership) to increase consumer demand for fuel cell cars.

Now, my dad is by no means an environmentalist—for example, he is still not convinced that global warming is a problem. He figures that as soon as he gets his FCX, someone will complain that he is making too much water, and that creates clouds and rain, and that changes weather patterns and causes the sea levels to rise, and that’s bad. Dad got the idea to pre-order a Honda FCX from a listserv he belongs to about innovations in fuel cell technology; the e-mail indicated that the arrangement for the fuel cells used in the Honda concept car had recently been turned around (horizontal → vertical) and that had made the vehicles much more efficient and taken them one step closer to commercial viability. But despite likely ideological differences, Dad heartily agrees with H & the Ls: for years, without ever having read Natural Capitalism, he has been saying that regulatory mandates are not driving innovation (22), and if the U.S. government really wanted to end dependence on foreign oil and make this country the leader in clean energy technology, they would put up a cash prize for the first group of people to design a commercially viable clean car.

As H & the Ls point out, the technology necessary for a total transportation/societal revolution exists—and has existed for quite some time. Getting it on the market on any scale is a matter of time. But it’s also a matter of will: it is going to take a lot more time if the will (politically and among consumers) is perceived to be lacking. I am not aware that anyone else in my acquaintance has been as proactive as my father in terms of demonstrating from the consumer end that people do actually want innovation. I, for example, have hung onto my 1989 Isuzu Trooper through thousands of dollars of maintenance because I cannot afford a Honda hybrid and I feel like junking a car has its own set of environmental…issues. I have not visited a dealership. I have not been agitating for a cost-effective car alternative, just riding my bike and the bus a lot more, complaining all the while about the high price of public transit and TriMet’s ill-conceived expansion plans.

But big changes happen by way of seemingly small decisions. For instance, my experiences in public schools, alternative programs, and private (higher ed) classrooms suggests that when a commitment is made to the students—to fostering relationships, figuring out what they’re good at and developing their skills in those areas, and providing consistent encouragement—learners blossom. Even absent district- or school-wide support, teachers can make that kind of change happen: they can ensure that on the ground a healthy learning environment exists. It frustrates me—as a substitute paraeducator (classroom assistant for special ed kids) in the Portland Public Schools, as a tutor, as an instructor in an outdoor classroom—that not all teachers are able (for whatever reason(s)) to foster a classroom environment of this sort. But I know that it can be done. Maybe it happens in only a small percentage of classrooms, and maybe certain administrative structures are more conducive to making it happen than others; but even under conditions of severe budget shortfall, when more kids than any adult can keep track of are packed into a classroom, some teachers make it work. And what’s more, when those decisions are made, consciously or unconsciously, change moves outward and the school culture changes. It takes time, but it happens.

I use the above close-to-home examples to illustrate the importance of working for change on a small scale. H & the Ls are more policy-focused, as anyone thinking about these issues on a large scale has to be. But even people who aren’t thinking about these issues in the same way are starting to get it, and change things on their own scale. My dad has been telling neighbors and friends about the car he’s going to get; he’ll need to tell those able to buy into the hydrogen car market as soon as it exists to, in the meantime, make their own trips to Honda and do their part to push the fuel cell market forward in PDX. If teachers can make their classrooms work for kids without waiting for an entire district or school system to change, we can make our communities support alternatives without waiting for the federal government to change CAFE standards.

So, changes can happen on the small scale in spite of systemic stagnation. But at the same time more people making their classrooms work (so to speak) makes the district function better, the better a district functions, the better teachers can make their classrooms work. So, I should complement my persistent focus on the small-scale by saying that I do recognize the necessity of large-scale thought and action. I just want to make sure that everyone is doing everything they can, on every scale, to make something like H & the Ls’ vision a reality.

Thursday, January 4, 2007

Reading Group: Natural Capitalism, Ch. 1

In this first chapter, “The Next Industrial Revolution,” Hawken and the two Lovinses (H&L) give us a brief history and description of capitalism, point out its shortcomings, and from there sketch out their outline for a new industrial revolution to correct the situation.

Their description of capitalism and the problems that arise from it seem on the mark. In fact, much of it echoes the concerns we’ve already voiced in our threads about environmentalism and economics. Essentially, H&L argue that natural capital (meaning the resources and living systems that make life possible) is on the decline, and that the problem with the current capitalist paradigm is that it fails to value natural and human capital. Moreover, they outline several reasons why simply assigning a monetary value to natural and human capital is neither straightforward nor enough of a corrective measure. H&L hit a high note when they point out that the fallacy in contemporary and past economic theory assumes “that natural and human capital have little value compared to final output.” This assumption worked when labor was scarce and natural capital was abundant. They argue, however, that we now face the opposite scenario in which labor is abundant and natural capital is on the decline–we therefore need a new type of economic theory to effectively address these changing conditions.

H&L’s “natural capitalism” attempts to be just that. They propose a natural capitalism based on four main strategies: resource productivity, biomimicry, service and flow, and investing in natural capital. While these four categories bubble with exciting ideas, many of them come from the stock of ideas that have been floating around in the environmental movement for quite some time (or are they the originators of some?). Their main points are that the current industrial model is quite wasteful: according to H&L only 6% of material flows in the U.S. economy end up in final products (p. 14). Their solution, then? To increase our efficiency, to improve productivity, to waste fewer resources, to remove “vestigial subsidies” that promote inefficient processes, and to correct “deliberate distortions in the marketplace” that favor extracting virgin materials over recycling.

H&L also envision a new business model in which companies retain ownership of their products and instead of selling them, lease them to customers. Because companies would own their products, and therefore be responsible for repairs and disposal, H&L hope that this would inspire a new kind of corporate benevolence. They believe that it would then be in the company’s best interest to reduce the toxicity and improve the recyclability of their products. Furthermore, H&L argue that this would encourage companies to develop more efficient processes which also would create more jobs. (more…)

Monday, November 27, 2006

Clarification by Kai

Filed under: Economics — kwolfgan @ 1:59 am

I sent Kai Chan, author of the research cited in Amir’s original post, a note today about what I posted yesterday, and after reading it he sent back this insightful and on-point response. I publish it here because I think it points out some key tensions raised by this debate (and my contribution, specifically). Thank you, Kai!

Thanks very much for your kind comments and also for tipping me off about your exchange… Regarding that exchange, please recognize a few things:

(1) The media puts their own spin on stuff, and that is often at odds with the material itself. In particular here…we did *not* put a dollar value on ecosystem services, although that’s certainly how the media chose to spin it (anyone interested can check out the original study, as it’s publicly available. I actually doubt that they would have been as interested in the study if they couldn’t spin it that way! Yes, we attempted to value ecosystem services and we are in some cases using monetary values to help us do that, but we firmly resisted translating all the ecosystem services into a common metric like dollars. Instead, we set goals for each of the services and sought the most appropriate ways of meeting those goals through land conservation. We are concerned about the primacy of dollars, also, so our goals reflect not only the needs of current people but also equity and the needs of future people and biodiversity (see more below).

(2) There’s a sentence from your post that merits further discussion: “If the environment is appropriately valued, gross violations of the natural order—an order in which people have a role to play, which cannot be played by any other creatures—will cease to exist.” The truth of this statement depends on what you mean by “appropriately valued”. If you mean—as most people do—the internalization of all externalities so that prices of goods and services reflect the impacts of their production (etc.) on other goods and services, then appropriate valuation does not ensure no gross violations of the natural order. Such a perfect economy would only look out for those who can impact market prices, and that means currently existing human beings, with an emphasis on the wealthy ones. If you’re concerned about non-human organisms and future people and issues of equity, the perfect economy just doesn’t help all that much. So those who resist the internalization of externalities have good reason to do so: it may help some things (the interests of people now) but it almost certainly won’t make our use of the world sustainable, equitable, or ecologically benign.

Now, if you mean for “appropriate valuation” to include these other three concerns (distribution across (1) time and (2) species and (3) within current societies), then we’ve got a lot of work to do. That endeavour is the gist of my entire research program and my life! I have a lot more to say on the topic, but it’ll have to wait for another day. But let’s keep up this conversation!

One other thing: As you can see, I’m concerned about many of the same things as you and your friends (e.g., as they express in saying, “What if, for example, we find a more “cost effective way” to protect coastal towns than protecting coastal wetlands?”). I agree that there would likely be a loss to nature itself if we found a more cost-effective way to protect coastal towns and probably also to future generations. Your friends ask why then we should seek a value for nature, if we already know that it matters? The response is that sometimes the interests of current people will and should win out over these other interests. This is especially true when those people who stand to benefit are desperately poor. The only way that we can figure out when the interests of current people should take precedence over nature and future generations, and vice versa, is to appropriately characterize the values of nature.

Sunday, November 26, 2006

Is “Command and Control” Really so Bad?

Filed under: Economics — Cathy @ 4:19 pm

I had a few more thoughts to continue our little discussion on environmental economics.  Having thought more about this issue over the past couple weeks and having just read the excellent article by Jonathan Rowe that Amir recommended in an earlier post, I am increasingly struck by the bizarre assumptions underlying the market economy.  Some of these notions – that all people make decisions based on complete knowledge of all economic information, that they base all of their decisions solely on personal economic gain, and that there is perfect competition between all companies – are so contrary to everyday experience that one really wonders how our society bought into this concept so heavily in the first place.
 

Moreover, for my generation that has grown up in the last couple decades in the United States, it is too easy to forget that there was a time in very recent US history where the market was not a god, and where it was perfectly acceptable and even desirable for the government to intervene in the market.  Indeed, most of our landmark environmental laws – the Clean Air Act, the Clean Water Act, and the National Environmental Policy Act – were passed as a result of citizen pressure demanding government action.  The “command and control” approach to environmental and social policy embodied in these laws is still much more acceptable in Europe, although there are signs (such as the EU carbon emissions trading scheme) that they are moving more towards market approaches to environmental problems. 
 

I see nothing wrong, in principle, with using market instruments for environmental policy.  In some cases they work remarkably well and at much less cost than regulatory approaches – the classic case study being the sulfur dioxide emissions reductions from US power plants in the 1990s as a result of a sulfur emissions trading scheme.  But the danger is to assume that market instruments are therefore the best solution to any problem.  My fear is that this is becoming the fashionable attitude among some environmentalist circles.  As we have discussed in previous posts, perhaps attempts to treat environmental problems as economic externalities and to develop ways to integrate them into the current capitalistic system are serving to prop up the very system that caused many of these problems to begin with. 
 

Fundamentally I do not think that environmental protection needs to be justified on the grounds of economic efficiency.  Indeed, to do so would imply the environmental and economic variables deserve equal weight.  Yet given that the economy cannot exist without a reasonably healthy environment (and the environment would exist just fine without an economy!), I cannot accept this argument.  Although attempts to quantify the economic damage of climate change (e.g. the Stern report), for example, can serve a useful purpose, we should recognize that the sole goal of government is not to promote economic efficiency.  In social policy, redistribution of wealth through social security and other programs has generally been accepted even though it reduces economic efficiency, because it is seen as a higher goal of society to care for citizens who are less well-off.  Similarly, I would argue that environmental groups should be less afraid to abandon the arguments of economics and be more willing to advocate for government regulation on the grounds of morality and inter-generational equity.

Environmental Economics: An Armchair Response

Filed under: Economics — kwolfgan @ 2:33 am

After reading Cathy and Amir’s exchange on the subject of Economics x Environmentalism, I went to my bookshelf and pulled off some reference materials to help me think. Wendell Berry’s A Continuous Harmony: Essays Cultural and Agricultural (turned to the last essay, “Mayhem in Industrial Paradise”) and Nature’s Economy: A History of Ecological Ideas, ed. Donald Worster, are now sitting next to me on our new green recliner, keeping me company as I address this particularly thorny topic. I am in the thick of finishing up assignments for this term, so I intend for my response to be relevant for some other papers I’m needing to write.

 

First things first. Let us recall the beginning of this discussion: Amir’s citation of research done by Kai Chan, coincidentally a friend of mine from Princeton. I do not doubt in the slightest Kai’s good intentions, as he is one of the kindest and most honest—not to mention most thoroughly pragmatic—people of my acquaintance. I am inclined to recognize that pragmatism as a motivating factor in his research, and will try in the rest of this entry to make clear how assigning a dollar value to ecosystem services has great practical importance, despite the lingering distaste some (myself included, truth be told) feel at the mere suggestion of doing so.

 

I wonder, when we talk about putting a price tag on nature, whether we are nervous about the act of recognizing or assigning the value of ecosystem services, or whether we are really concerned about the pattern of putting price tags on everything that got us to where we are in the first place. My guess is that we are upset about the latter and worried that the former will be an extension of this trend instead of a way to move past it. This is totally legitimate, but brings us to an impasse: in theory, we dislike it, but we don’t know of a better valuation alternative that will bring about the results we hope for. My suggestion is to think about the dollar sign as a metaphor—one that, for better or for worse, makes sense to most people embroiled in the system(s) causing/exacerbating environmental problems.

 

It is true that the profit motive can drive people to do terrible things: patent indigenous people’s genes; strip-mine mountaintops completely off; build dams that create thousands of ecological refugees; do a shitty job of post-war “reconstruction”; destroy everything from entire species of organism to entire ways of life. When making money is the most important pursuit and highest goal, there arise serious problems. In the pursuit of wealth, though, we have trained ourselves to think in terms of money. My time currently has a dollar value when I work, which I sometimes have to do; the home that I have lovingly decorated could be assigned one for insurance purposes (if I could afford insurance). The $ is an indicator of value, however abstract. And value is what we should be concerned with. How we determine that value is another question entirely—one I trust Kai Chan to be thinking through.

 

So when we’re talking about price tags, the point should not necessarily be the price tag itself. Valuing ecosystem services in this way is a means to an end. If the environment is appropriately valued, gross violations of the natural order—an order in which people have a role to play, which cannot be played by any other creatures—will cease to exist. Perceiving (economic) value in “nature” does, indeed, entail a change of mindset, and a radical one, at that. If monetary value can be used as the metaphor to catalyze that transformation, in my view it should be, along with any other system of valuation that can make the immensity of the present situation at once fathomable and deeply significant.

 

Putting a price tag on nature can definitely be identified as a step in the wrong direction. But if putting a price tag on nature can lead to ecologically preferable activities and cause us to really consider what the environment is worth in non-monetary terms—if putting a $ in front of clean water, clean air, etc. enables people who might otherwise destroy in the name of profit to understand that their actions have negatively-valued effects beyond their wildest imaginations—it might be worth the discomfort: not as a be-all end-all solution, but as a piece in a dynamic puzzle, a step in the right direction.

Wednesday, November 22, 2006

More Thoughts on Environmentalism and Economics

Filed under: Economics — amirj @ 2:47 pm

In the last few weeks, we’ve developed a little discussion about the tension between environmentalism and economics and the role of the latter in modern-day decision making. In Cathy’s last post on the issue, she wondered whether any viable alternatives to environmental economics exist, writing,

“In the long term, maybe we don’t want to live in a world where environmental decisions and plans are made on the basis of this sort of analysis.  But what would that world look like and how would we get there?  I have no idea…  It seems unlikely to me that we will ever find anything better than a market-oriented economy, and if that is the case, we will always be plagued by this question of assigning dollar values to nature. ”

When I think about this unresolved problem, I often reach the same conclusion as Cathy. It’s not, however, one that I can readily embrace. Perhaps this is because I fear that to let market capitalism progressively cannibalize the decision-making process in every arena in this world would perpetuate a downward hegemonic spiral that got us to this point and would leave even the best-intentioned among us uncomfortably silent and inadvertently complicit in creating an odd new world order of corporate control, individual powerlessness, and environmental destruction.

However, taking a step back into the realm of idealism, I realize that this conclusion does not have to be inevitable. In fact, the main reason we probably imagine it to be so is because we are socialized into a market economy from birth. Thinking in these terms essentially becomes natural for us. All this is not to say that markets are evil or completely unnecessary. Indeed there are fucntions that markets can probably accomplish best, but that should not preclude us from determining when market-capitalism decision making reaches its limits and subsequently envisioning alternatives for other realms of decision making.

In the midst of thinking through these issues, I came across an essay by Jonathan Rowe on the blog onTheCommons.org. He writes about the famed economist Milton Friedman who recent passed away and reflects upon Friedman’s views and how they played out contemporary economics. Rowe’s cogent essay amounts to an undeniable indictment of the shortcomings of the market economics paradigm, which I would highly recommend reading in its entirety.

Rowe’s argument concerning Friedman’s beliefs is extremely relevant to our discussion. There’s tons of great stuff about the myth of the “rational” individual who only makes the best choices, economists’ appropriation of scientific objectivity and their abrogation of value-judgments, and the economics narrative that perpetuates a false notion that The Market fulfills “demands,” by producing “goods, services, and wealth”–never “disservices and illth.”

According to Rowe, Friedman argued there was no role for the concept of “need” in economics. Rowe’s treatment of this subject merits quoting at length because he sheds a bright light on alternatives to the market capitalism paradigm of economics. In particular, Rowe invites us to imagine what an economics of need would look like.

“If need is relevant to economics then clean air must be, and a healthy atmosphere. So too traditional Main Streets and the social interaction and cohesion they provide. Wal-Mart might provide more cash flow and GDP; but those Main Streets provide a benefit flow that Wal-Mart can’t.  The same can be said for an internet that is free of corporate enclosures, university research labs that are not beholden to corporate interest, a gene pool that no person or corporation owns.

If need matters then these must matter too because they meet real needs. That thought is truly threatening to those who think markets should be not just one thing but everything.  ‘Demand’ by definition channels the thought process into a market context.  Need by contrast opens up a wider realm of possibility.  This includes the possibility that the corporate market itself has been destroying the realm of productivity that meets needs that it – the market – can’t.

This realm – the commons — is not amenable to the conventional modes of economic measurement.  It does not work through the textbook ‘laws.’  Commons involve reciprocity, trust and social norms, rather than acquisitiveness and greed.  They provide stability and maturity to balance the market’s adolescent grasping; and they give expression to the ‘we’ side of human nature as opposed to the market’s relentless and solipsistic ‘me.'”

There you have it. A simple suggestion really–a society organized on reciprocity, trust, and social norms. Of course, this suggestion comes without complicated equations, and snazzy graphs, but perhaps that’s what’s so elegant about this proposal–that protecting our air, water, and land and providing for vital human needs requires no more than a different mindset.

This may seem like a wildly romantic notion to those entrenched in and deeply committed to upholding an economics of greed and endless capital accumulation. Moreover, the fact that much of our world is increasingly  becoming organized upon those principles does pose a challenge even to considering alternatives. But it should not lock us into thinking that translating common assets like clean air and water into commodities with a price tag is a way out of our 21st century conundrum–indeed it’s just a step back deeper into our problem.

Thursday, November 16, 2006

Alternatives to Environmental Economics?

Filed under: China, Economics — Cathy @ 2:01 pm

This post is a bit of a follow-on to some previous posts on environmental economics.  I generally agree with Amir’s previous post that the idea of assigning a dollar value to nature is not very meaningful because some things simply cannot be measured in money. Yes, there are plenty of assumptions that one can make and that are made, but ultimately things like the value of human and non-human life cannot be quantified.  Moreover, I also tend to agree that trying to assign a dollar value to such things perpetuates a rather narrow-minded worldview.

On the other hand, I am having trouble thinking of a viable alternative that would force people to pay attention in a similar way.  Having followed some of the fall-out from the Stern report (which I wrote about a couple weeks ago), I was impressed by how seriously it was taken by the business and investment communities in certain countries.  Granted, as mentioned above and in my previous post, quantifying the projected damage of various climate change scenarios
is a very uncertain business, but the ultimate conclusion that acting to stabilize carbon concentrations at a reasonable level would cost 1% of GDP while doing nothing would cost more like 10% is pretty powerful; even if 10% really means more like 5%-15%, the conclusion is
still the same.

In the long term, maybe we don’t want to live in a world where environmental decisions and plans are made on the basis of this sort of analysis.  But what would that world look like and how would we get there?  I have no idea. Living in China, I am not particularly inspired by their alternative.  Having a centrally planned economy is not exactly good for the environment unless the central planners have uncommon foresight.  (Which, given Chairman Mao’s ardent belief in dam building and in “growing grain everywhere”, he clearly did not).  It seems unlikely to me that we will ever find anything better than a market-oriented economy, and if that is the case, we will always be plagued by this question of assigning dollar values to nature.

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