Putting a Price on Mom

by Carolyn Chase


usinessmen believe that if we stop or control growth we will ruin the economy, make jobs hard to get and otherwise destroy our civilization and quality of life.

Environmentalists believe that if we don't stop or control growth we will ruin the economy, make jobs hard to get and otherwise destroy our civilization and quality of life.

Scientists know - and more and more are speaking out publicly - that we are seeing the impacts of mankind's growth in consumption and pollution on the global level.

Sounds like it time to unlink economic growth from enviromental destruction.

If our main cultural political slogan is "It's the economy, stupid," it's imperative for us to resolve the profound clash between economics and ecology. This is not just a matter of greekish scientific academic terminology. It's a matter of how our world is shaped and built.

Draw a circle. That represents the economy as viewed by current neoclassical economics -- an isolated system which we view, study, measure and attempt to manipulate -- as if it was independent of any context. Now draw another circle - around and enclosing the first circle. That is the view of ecological economics - and more importantly, aligned with the real world. The economy really is a sub-system of the natural, ecological systems supporting it and, for that matter, everything else. At every fundamental level, the ecology, or life support systems, of natural ecosystems are the foundations of everything we are and do.

Herman Daly, a professor of ecological economics at the University of Maryland, has collaborated with other scientists in a book, "An Introduction to Ecological Economics," where they report on studies that foresee the impacts of mankind rapidly expanding the impacts of the inner circle of the economy and bulging against the outer circle of ecosystems which cannot grow to accommodate them.

The authors state, "the human economy uses -- directly or indirectly -- about forty percent of the net primary product of terrestrial photosynthesis today." A doubling of the world's population - something likely in less than fifty years - means that the human economy, as currently measured and defined, will be using eighty percent, and very shortly thereafter: one hundred percent. But ecosystems are likely to break down long before that and we are seeing many global signs that mankind is able - and in fact racing toward - out-competing all other forms of nature that we do not ourselves profit from.

"It is interesting that such a huge issue should be at stake in a simple picture," Daly wrote in his 1996 book, "Beyond Growth." "Once you draw the boundary of the environment around the economy, you have said that the economy (as currently conceived) cannot expand forever ... at some point quantitative growth must give way to qualitative development as the path of progress."

Will our global impacts can be brought into alignment with nature by design? Or will we wait for nature's corrections, or God's, or any of the more heinous forms of human reactions? The point of the book is that we must incorporate ecological concerns into our economic equations and they lay the groundwork for the steps required to bring the circles back into balance.

This requires an evolution beyond the current regime of regulatory attempts - which are clumsy, time consuming, expensive, and seldom satisfying - to incentive-based systems.

Pricing is the key way we send signals throughout the capitalist system, so we need to get the prices right on commodities and impacts to nature. Right now, too many of them are set at zero, or infinity and therefore the price signals are not only sending incorrect signals, they are sending signals that incentivize bad behavior.

In attempts to help send the right signals to markets and power brokers, Daly and others have started to get serious about attempting to estimate the market value of nature's ecosystem services. They hope that by taking an economic approach they can reveal the fundamental values and importance in a way that will translate into changes in the global economic relationship with nature.

In a study published in "Nature," the British equivalent of American's premier science publication "Science," researchers estimated the current economic value of 17 services provided by 16 types of ecosystems including forests, deserts, grasslands, open ocean and coastal habitats. Their rough grand total was $33 trillion.

When you start to account for those services instead of assuming that they are free, the way you look at the world starts to change too. Most importantly, the decisions that follow will make more sense for the environment and the economy working together.

This approach has led to some successes by allowing project proponents to begin to make economic comparatives that make more environmental sense. For instance, the City of New York could come to the conclusion that is was more cost effective to buy or otherwise conserve the watershed lands providing their drinking water than to pay for ongoing and increasingly expensive post-pollution treatment.

Biologist David Pimental from Cornell has reported that the cultural and recreational uses of nature are even more valuable than the life-support functions. He estimated the value of over-the-counter, plant-based drugs at $84 billion annually and eco-tourism at $500 billion. So there are plenty of economic justifications, in addition to other values.

This type of evaluation is not only incomplete, but is still considered immoral by many because it views the entire world through the lenses of utility, as if there really was no more value to a whale than the price of its meat. Should everything in nature be a commodity? Should everything have it's price? Clearly, many things cannot survive that kind of treatment. But those things that are commodities and must be regenerated e.g. water, food, minerals, forests, fish. Their nurseries and necessary "waste sinks" - must be protected by incorporating their values into the prices. The best, if not the only way to really protect them in a competitive, capitalist world, is to make sure the prices are right. A green majority may want a cleaner environment. But it won't pay for it unless it is embedded and reflected in our pricing systems.

"An Introduction to Ecological Economics" ends with a section on green policy initiatives including:

Ecological tax reform to move us from a system that taxes "goods" like income and labor to one that taxes "bads" like health damages, ecological damages and consumption of nonrenewable resources."

and: ecological tariffs to maintain fair competition between countries that honor environmental standards (hence raising the price of goods) and countries that do not (thereby exploiting the environment to keep prices low).

While the social and political implications of shifting paradigms from growth to sustainability are formidable, quantitative or material growth will eventually yield to a regime of sustainable practices - by design or by crisis. There is no question that the former would be preferable to the latter.