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3. Disputes on Value Standards

The Greek distinction (as in Aristotle’s Politica) between oikonomia (the art of material provisioning of the household) and chrematistics (the study of the formation of market prices, in order to make money) seems irrelevant today. In our world, material provisioning appears to be achieved mostly through market exchanges, and there is a fusion of chrematistics with oikonomia. However, many caring activities in families and in society and many of the services of nature (Waring 1988), remain outside the market. In ecological economics, the word ‘economics’ is used in a sense closer to oikonomia than to chrematistics. Ecological economics is not committed to a unique type of value expressed in a single numeraire (defined as the present value, in money terms, of costs and benefits, including, of course, monetarized externalities and environmental amenities).

The issue is not whether it is only the market place that can determine value, for economists have long debated other means of valuation; our concern is with the assumption that in any dialogue, all valuations or ‘numeraires’ should be reducible to a single one-dimension standard (Funtowicz and Ravetz 1994, 198).

Ecological economics encompasses money valuation, together with physical appraisals of the environmental impacts of the human economy measured in their own physical ‘numeraires.’

Nature provides resources for the production of commodities as well as environmental amenities. As shown by Gretchen Daily, R. de Groot, and others, more importantly, nature gives free, essential life-support services. These include the cycling of nutrients, the water cycle, soil formation, climate regulation, the conservation and evolution of biodiversity, concentration of minerals, the dispersal or assimilation of pollutants, diverse forms of useful energy, etc. Attempts have been made to assign money values to the annual flows of some environmental services, to compare them to GNP in monetary units of account. For instance, the cycling of nutrients (nitrogen, phosphorous) in some natural systems may be given a plausible money value by comparison with the costs of alternative human-made technologies. Could this same methodology (i.e., the cost of alternative technology) be applied consistently to the valuation of biodiversity in a kind of science fiction framework?

For biodiversity, money valuation has taken a completely different tack, namely the small sums exchanged in some ‘bioprospecting’ contracts, or fictitious, subjective money values in terms of ‘willingness to pay’ for conservation projects. One such is the so-called Contingent Valuation method favored by environmental economists (though not by most ecological economists). But how can we count the service that nature provides us by concentrating minerals which we disperse? (‘Exergy’ costs have been calculated by industrial ecologists, but the technology for creating mineral deposits does not exist). The figures obtained for the money values of environmental services provided free by nature are therefore inappropriate, although useful, in stimulating the debate on how to take nature into account.

Ecological economics rests on a foundation of ‘weak comparability of values’ (O’Neill 1993). For example, let us assume that a new large garbage dump must be built near a city, and one of three possible locations, A, B, C, will be sacrificed to this use. In our example, the three different locations are compared under three different types of value: value as habitat, value as landscape, and economic value. Location A is a most valuable, publicly owned wetland (valuable as habitat or ecosystem because of its richness of species) but a monotonous landscape, much visited by bird watchers and schools (and, as such, of some economic value according to the ‘travel cost method’). Location C produces much rent as industrial and urban land, and therefore ranks first in economic value, but ranks only third as an ecosystem or habitat, and comes second as landscape (because of its historical qualities). Location B is an old agricultural area of beautiful derelict orchards and ancient manor houses, which ranks first as landscape, but ranks only third as rent-producing, and second as ecosystem or habitat. Which location should be sacrificed and how is the issue to be decided? Should and could all values be reduced to a super-value, so as to achieve strong comparability, and even strong commensurability (cardinal measurement)? In the example, the economic values (in actual or fictitious markets) of all three locations have been taken into account, but there is no super-value (economic or otherwise, such as, for instance, net energy production, by which the wetland would presumably come out on top). Certainly, the present rankings could be reconsidered. Thus, the landscape value of A could be upgraded and its economic value (like that of B) could be increased by Contingent Valuation. Also, giving more weight to some criteria than to others, or ‘veto thresholds’ for some criteria such as the ‘endangered species’ provision in American legislation, or the introduction of more locations or more criteria, would help us to reach a decision. The point of the exercise is merely to show the meaning of ‘weak comparability of values.’ The decision-making process need not be irrational (by lottery, for instance).

In contrast to such a multicriteria approach (Munda 1995), in cost–benefit analysis the projects to be evaluated are all valued in the same numeraire.

In microeconomics there is strong comparability of values, and indeed strong commensurability when externalities are internalized into the price system. One example is in the definition of a Pigovian tax as the economic value of the externality at optimum pollution level. In macroeconomics, El Serafy’s practical proposals to ‘green’ the GNP (in Costanza 1991)—the results of which will depend on the chosen rate of interest—do not go beyond strong commensurability in money terms.

According to El Serafy, not all receipts from the sale of exhaustible resources (‘natural capital’) should be included in GNP. Only one part should be included, ‘true’ income, and the rest should be counted as ‘decapitalization’ or the ‘user cost’ of such ‘natural capital’ which should be invested at compound interest over the period until the resource is exhausted, so as to allow the country to live at the same standard of living even when running out of the resources. This proposal, based on the definition of ‘income’ by Hicks, and related to Hotelling’s rule in resource microeconomics, is based on a notion of ‘weak’ sustainability only. ‘Weak’ sustainability allows the substitution of manufactured capital for so-called ‘natural capital’—implying, therefore, a common unit of measurement, i.e., money value—while ‘strong’ sustainability refers to the maintenance of physical natural resources and services. This distinction was introduced by David Pearce and Kerry Turner, c. 1990.

The so-called ‘Environmental Kuznets Curve,’ an inverted U-curve, relates income and some environmental impacts (Bruyn and de Opschoor 1997). In urban situations, as incomes grow, sulfur dioxide emissions first increase and then decrease, while carbon dioxide emissions increase with incomes. If something improves and something deteriorates, one reaction from the conventional economist might be to put weights or prices on such effects, in pursuit of the commensurability of values. However, the uncertainty and complexity of such situations (sulfur dioxide may counteract the greenhouse effect, for instance), and the fact that the price of externalities would depend on the outcome of social conflict, implies that the economist’s accounts would be convincing only for the believers of the same school.

The pattern of use of environmental resources and services and the burdens of pollution depends on changing social structures and on power and income distribution. This leads to the field of political ecology originating in geography and anthropology, and which we define as the study of ‘ecological distribution conflicts.’ Economic growth leads to increased environmental impact and to increased conflicts (often outside the market sphere). Hence, for instance, the growth of the Environmental Justice movement in the United States. Examples abound of the failure of the price system to indicate such environmental impact, or (to use K. W. Kapp’s idea), examples abound of cost–shifting successes. Thus, attempts at using cost–benefit analysis of the increased greenhouse effect (as in reports of the Intergovernmental Panel on Climate Change) are not convincing because of the arbitrariness of the discount rate (Azar and Sterner 1996, see below), and also because many items are not easily measured in physical terms, much less easily valued in money terms.

Moreover, the very pattern of prices in the economy would be different to start with, without the free access to carbon sinks. Should restrictions then be imposed on the ‘ecological footprint’ of rich economies or on the ‘human appropriation of net primary production’ (see below)? If equal property rights on carbon sinks are bestowed on everybody, there might still be a tendency for the price of carbon emissions to be low, according to the principle ‘the poor sell cheap.’ Everybody, except slaves, is the owner of her or his own body and health; however, poor people sell their health cheaply when working for a wage in mines or plantations. The free use of sinks has been modeled in a neo-Ricardian framework by C. Perrings, Martin O’Connor, and others, showing how the pattern of prices in the economy would be different, assuming different outcomes for ecological distribution conflicts.

Some remarks are still needed on the discount rate. Economists explain discounting of the future by subjective ‘time-preference,’ or because economic growth per capita caused by today’s investments will make the marginal utility of consumption lower for our descendants than it is for us today. If discounting arises from the productivity of capital, and if such ‘productivity’ is a mixture of true increases in production and a lot of environmental destruction, then the discount factor should be the per capita rate of sustainable economic growth, minus the destruction of environmental resources and services. Now, in order to determine the present economic value of destruction caused by economic growth (such as loss of biodiversity, the filling up of carbon sinks, the production of radioactive waste and so on), we must not only put money figures on it (as discussed above), we need also a discount rate. Which is appropriate?

1. Origins

2. Scope

3. Disputes on Value Standards

4. Environmental Indexes of (Un)sustainability

5. The ‘Dematerialization’ of Consumption?

6. Carrying Capacity and Neo-Malthusianism

7. Final Remarks on Transdisciplinarity