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Posts Tagged ‘economic valuation’

Lately, I can be found in my lunch hour to be taking a break from environmental economics and exploring the literature of the Beat Generation. In the last 8 weeks I have finished 8 books by Jack Kerouac, whose descriptions of solitude and self-discovery have left me contemplating my own relationship with tranquility and what exactly produces it. I now find myself on an uncertain road having just finished university, and I seek tranquility to help me come to terms with this fact, whilst also using it to fuel my own reading and writing hobbies.

The Campaign to Protect Rural England (CPRE) has created a national tranquility map, making it possible to assess the likelihood of finding tranquility in the UK. The CPRE’s tranquility map is made up of layers of information based on what people say adds to and detracts from finding tranquility. Surveys were used to determine what tranquility means to people, and the different factors which determine ‘tranquility’. For example, the top survey responses to defining tranquility include seeing a natural landscape, hearing birdsong (as we discovered at envecon 2013 this year) and seeing the sea.

The search for tranquility is why 49% of us visit the countryside, according to the same survey. In fact, many people in the UK pay hundreds and even thousands of pounds to escape on holiday and to find tranquility. I have enjoyed many holidays in Cornwall and would describe my experiences as tranquil and happy. In Cornwall I can find peace and quiet and I can see and smell the sea every day. I can’t find phone signal however, but this all adds to the flavour of finding tranquility in what is a beautiful part of the UK.

On the contrary, the CPRE’s tranquility map suggests that seeing towns, cities, airplanes and light pollution deters tranquility. This would suggest that investment in Green Infrastructure could be a waste of time as tranquility cannot be found in urban locations. I argue the opposite however. Since finishing my exams, three friends and I recently scaled Nunhead reservoir, an abandoned green space in Peckham which provides a view over London more beautiful than that from Primrose Hill. We sat to watch the sunset, seeing the city’s lights come on and followed airplane contrails for miles. It was one of the happiest feelings I have experienced and despite what the CPRE tranquility map suggests I had found tranquility in a place which according to the map should really detract from tranquility.

I argue that tranquility, however you imagine it and wherever you find it is an invaluable experience. It is a very personal moment and cannot simply be standardised or measured by the characteristics of the surrounding environment. It can be found and experienced anywhere. The value of tranquility is how it makes you feel and what it inspires you to do and think. Whilst desolation is a strong term to describe my current life phase, I found myself coming down from my education peak in Peckham smiling from ear to ear and happier than ever.

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Valuing the environment is a strange notion from a strange discipline isn’t it? Economists are already rather unlovable creatures and now they think they can tell you what the view of the park from your bedroom window is worth. The instinctive reaction to economic valuation of the environment is common and understandable and we’ve heard the phrase, “the price of whatever it is and the value of a something” so many times that the words seem to have lost all meaning. So it should be unsurprising that George Monbiot would call environmental economists involved in the National Ecosystem Assessment (NEA), “well meaning dolts” (we’ve heard worse).

But please, give us a couple of minutes to begin to argue in support of valuation. Although we weren’t directly involved in the NEA ourselves, we have been involved in economic valuation, which has been debated for at least 30 year and has an enormous literature. We aren’t confused by a world without numbers, we just think, well actually we can prove that the numbers help… A LOT!

Despite what Monbiot has implied, economists’ work is not about valuing nature in its entirety in absolute terms. We appreciate that this does not make sense – without nature we cannot exist! Valuation is about the relatively small changes in the environmental resources and the services they provide as a result of the decisions (investment, policy, consumption) made.

It is not economists who put values on the environment. We collect data about implicit and explicit valuations undertaken by individuals, businesses and governments every time they make a decision that will have impacts on the environment.  The warning that economic valuation will result in the swapping of nature for money ignores the fact that this is already inherent in many decisions. For example, destruction of the rainforest occurs largely to rear cattle and grow soybeans not because someone attempted to value the rainforest, but rather the opposite. It occurs because those who make such decisions take the monetary profits into account but ignore the just as real economic costs of deforestation. Economic valuation intends to correct this imbalance in decision-making.

In coming out in support of nuclear power Monbiot has implicitly carried out his own cost-benefit analysis – valuing the risks associated with nuclear power less than the risks associated with continued dependence on fossil fuels and the impact they have on our climate (these, however, are Monbiot’s own values; as environmental economists, we’d suggest he undertake an explicit cost benefit analysis which takes everybody’s values into account).

Environmental campaigning and ethical and moral arguments in favour of the protection of nature continue with or without economic valuation. But do governments and businesses listen? Policy decisions that have environmental impacts are more arbitrary when environmental valuations are excluded. Monbiot also states that, “The environment department rightly points out that businesses and politicians ignore the uncosted damage their decisions might inflict on the natural world and human welfare.” Experience shows that in this context there does not seem to be a better alternative, and Monbiot does not provide one either. Just one example of how economic valuation can be effective comes from our own work on the valuation of the ecosystem services provided by forests. This cost benefit analysis provided a case against the sell-off of the public forest estate.

Which is why it is sad and more than a little hypocritical of Monbiot to make assertions that “the business case… almost always comes out right” without presenting any evidence, aside from a hypothetical exercise in coal mining with no basis in reality. The Exxon Valdez oil spill in the late 1980s provides a famous example in which the business most certainly did not feel as if the valuation was on their side. The conservative estimate of the compensation with which Exxon should be charged was calculated at US$4.85 billion in the early 1990s. Net income in 1990 at Exxon Corporation, (then world’s biggest oil company), was $1.12 billion[1]. They have been fighting this judgement ever since.

In 2001 Sunstein (current Administrator of the White House Office of Information and Regulatory Affairs) stated that: “Assessments of costs and benefits have, for example, helped produce more stringent and rapid regulation of lead in gasoline, promoted more stringent regulation of lead in drinking water, led to stronger controls on air pollution at the Grand Canyon and the Navaho Generating Station, and produced a reformulated gasoline rule that promotes stronger controls on air pollutants.”[2]

There are lots of other issues far more complicated than those brought up by Monbiot. However, rather than being pure reductionist gobbledegook, environmental economics is an established field. We assure you that all of the problems you might be able to think of with what we do have been thought about long and hard and work continues to improve our practice. You may still have many objections to this issue but let us at least reassure you that we aren’t aliens. All (well most) of us would rather be outside than reading a spreadsheet, and we don’t think that numbers can describe the love we all have for the natural world. If you want to continue the conversation we would love to hear from you. Comments below, as always!

Angus, Nursie, Daisy and Betsy.

You can find another rebuttal of Monbiot’s piece by Professor Henry Overman of the LSE Spatial Economics Research Centre here.

References

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