Environmental economics radio moos

In the past week, our small area of expertise has received  some BBC Radio 4 coverage. Firstly Start the Week in which Tony Juniper’s new book ‘What has Nature Ever Done For Us?’ was discussed (broadly about environmental valuation). Secondly on the Today programme (from 1.24 onwards) there was a small discussion on biodiversity offsetting.

I thought these programmes were enjoyable, especially the discussion of communicating nature’s attributes through both valuation and art on Start the Week. But to experts (ahem) such as the cows of the pasture, these programmes can be frustrating.  We can become irritated with the line of questioning or the assumption we are blind to potential pitfalls in markets or valuation. We believe that environmental economics has a place in conservation policy and communication, and we don’t want our ideas to lead to a ‘nature NASDAQ’ (cow-pyright).

But for whatever reason, environmental valuation and environmental markets can make people anxious. We can’t deny this reaction. Therefore I think we will be frustrated by environmental economics coverage for a while yet. It takes time to build a wide support base and to win round those with philosophical and practical objections to our approach. But hey, at least we are on the radio!

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…A book is worth MORE than the paper it’s printed on…

As we await the next budget – and the cuts in public spending it will involve, we were listening to the BBC Radio 4 Today programme (that was last Tuesday but the pasture is rather busy these days and hence the delayed posting)…

A consultancy company seems to have gotten there before the government and made some recommendations on how there could be huge savings in public spending just by increasing the efficiency of public services.

The idea of ‘efficiency’ is central to economics. We have unlimited needs and wants and limited (at least in comparison) resources. In order to meet as many of our needs and wants we have to allocate our resources to their most efficient uses – to get more bang for our buck as they say in the US…the more you can do per £, the more efficient you are.

It then follows that an efficiency rule should apply to public sector service provision. We should invest in services which generate more benefit than others. This is all good but how it should be used in practice depends on how we define ‘service’ and ‘benefit’.

An example the authors of the report have given is public libraries. In an interview in the above mentioned programme, one of the authors said

“public libraries are very important in the national psyche. But they are not very much used and are very expensive to run. So very often the cost of borrowing a book is more than the cost of just buying the book, giving it to the person and saying ‘don’t bother bringing it back’”

The cost of borrowing may very well be more than the cost of purchase. But comparison of costs alone is a partial analysis and can (and often does) lead to wrong conclusions about policy (e.g. should at least some public libraries close or be given over to volunteers to run – which in some areas may mean closure anyway)…

While the benefit of purchasing of a book can be said to be close enough to the cost of purchasing that book, the same cannot be said of borrowing it from a library. There are many benefits of a library:

–          Those associated with using libraries (call this ‘direct use value’):

• Visiting libraries to borrow books / CDs / DVDs etc.

–          Those associated with using libraries for other reasons than borrowing (call this ‘indirect use value’):

• Visiting libraries as community centres to meet neighbours and friends and others which helps build the community spirit or social capital (including learning social responsibility like looking after the books and returning them back on time etc);
• Visiting libraries for the ‘library ambience’ to do work and study;
• Visiting libraries for the exhibitions and other activities they provide etc.

–          Those that are not associated with any type of use of libraries (call this ‘non-use value’):

• Benefits that arise due to knowing that there is a library in the community that we may want to visit in the future (this is also called ‘option value’)
• Knowing that there are others who visit the library (altruistic value)
• Knowing that the library will be available for future generations (bequest value)
• Simply knowing that there is a library in the community (existence value).

Cost of purchasing or providing a service can be a proxy (and a very weak one) for direct use value. All other benefits that are provided by libraries are not captured by the cost of providing those benefits and are NOT delivered by purchasing the books and giving them away.

So before reaching conclusions like the above about libraries that imply closure, we must make sure we have accounted for all these difficult to measure but equally real benefits.  This is precisely the kind of work that keeps this pasture busy…

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