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Archive for August, 2012

George Monbiot’s latest rant against pricing nature is mis-informed to the extent of being counter-productive to environmental protection. His lack of understanding is compounded by his prejudices against economics.

The opening quote by Rousseau is attractive and a view I sympathise with – we are borrowing the planet from future generations. But Monbiot’s interpretation of it is that all property rights are wrong. He’s forgetting they are the basis of the incredibly prosperous society he benefits from living in.

The view that “nature is being valued and commodified so that it can be exchanged for cash” could be more sensibly given as “nature is being valued and commodified so it isn’t ignored and trashed, but instead people are charged for using it, which means they won’t waste it”.

A fundamental misconception is that this valuation/ commodification is akin to ‘privatisation’. It isn’t, privatisation means a change from public ownership (by the government) to private ownership. Trying to identify how valuable something is doesn’t mean you want to change who owns it.

The article then contains a series of other inaccurate statements, such as:

  • Characterising the “rain and the hills and the rivers” as ecosystem services. They are not. Ecosystem services are the processes that take place in these environments and benefit us all (or not if we destroy our hills with overgrazing because we didn’t value all of their services).
  • Suggesting that biodiversity offsets could be used to compensate for damage to ‘a rare meadow’: offsets, as currently proposed in the UK, would not weaken existing protections because ‘rare meadows’ are designated habitats (SSSIs) which can be classified as ‘not offsetable’.
  • Suggesting that a landscape’s “intrinsic value has already been calculated”: this is an oxymoron. As an environmental economist I recognise that nature has intrinsic value, and furthermore that this is a moral value, not one based on human preferences or measured by money (what environmental economics aims to value based on human preferences is change – the extra benefit provided by protecting the environment and the extra cost of destruction).

The environmental movement needs passionate and articulate leaders, like George Monbiot can be. But leaders need to have their facts straight; if not they will undermine the very cause they are trying to promote.

Like George, I am suspicious of the motivations of the city, and yes, these powerful economic forces, with nature valued at zero, have brought about its destruction. If we abandon the market economy, we need an alternative: can’t think of one? Neither can I. So my suggestion is that we redirect this powerful human force, the market economy, towards saving nature.

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A quick post, but it was too good to pass up!

On Wednesday we heard the news of the 8 women (4 doubles pairs) in Olympics badminton who have been disqualified from the women’s doubles competition, for “not using one’s best efforts to win”.

It turns out that all teams had already gotten into the quarter-finals but were attempting to lose their match so that they could manipulate the draw for the semi-finals. This is an example of ‘perverse incentives’ – defined as an incentive that has an unintended and undesirable result. In this case, because of the way the organisers had arranged the group stage, in a round-robin format rather than a knock-out format, the format together with how the previous matches had played out had created the perverse incentive of a better outcome for both teams with a loss.

More information on the situation can be found here.

In environmental economics, an example of a case of possible perverse incentives occurred when the European Commission introduced the EU-wide carbon-trading programme. In an allocation method called ‘grandfathering’, EU industries were allocated free CO2 permits based on their historical emissions to minimise any competitiveness loss against non EU companies not included in the scheme (and to help gain acceptance from industry), regardless of the efficiency of their process under the EU Emissions Trading Scheme (EU ETS).  This could lead to an unintended outcome where companies who emit high amounts of carbon produce excessive carbon (through producing excessive output or running plants beyond their efficient life-time), in an effort to increase future allocations of CO2 permits so that they may sell these and make money off them [1].

For more reading on perverse incentives in sport, this webpage has a couple of interesting cases in football. I particularly enjoyed reading the second one about the 1994 Shell Caribbean Cup!

[1] Sato, M., Grubb, M., Kust, J. Chan, K. Korppoo, A. and Ceppi, P. 2007. Differentiation and dynamics of competitiveness impacts from the EU ETS.

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