20 Mar 2009

Ecosystem Services Sellout?

The ever-inquisitive DS asks:
Is it ethical to reduce our motivation for resource/wildness conservation to "ecosystem services"? Do spiritual and quality of life concerns deserve mention in policy, and is there anyway they can reasonably be useful in creating it? Or do we have to reduce everything into dollar signs because that's all large-scale deals can be made on? And supposing that we do.... do wild places become worthless as soon as we find a technology fix to replace their services?
First, I refer DS and others to the discussion on ecosystem services that we had a few weeks ago.

Second, I think we need to remember that the "science" in economics is devoted to understanding tradeoffs among different choices. Put differently, economists have nothing to say (or should say nothing) when a choice has "zero" cost in terms of forgone opportunities elsewhere. Thus, we do not need to worry about a pristine ecosystem when our activities have no impact on that ecosystem.

With water, for example, there was no need to consider the impact of withdrawals (or even pollution) when the impacts of these activities were overwhelmed by the natural process. When those activities DO start to have impacts, implicit and explicit tradeoffs are being made, and economists can help people decide the "right level" of tradeoffs.

Third, everyone has their own version of "worthwhile" spiritual and/or quality-of-life tradeoffs. Economics can help reconcile different beliefs by making it possible to aggregate/trade/arbitrage among those different beliefs, to produce the "optimal" result. Of course, economics is useless if there are no markets, rights, etc. to reconcile those beliefs.

Fourth, ecosystems in one place may go away if they are replaced by "ecosystem services" elsewhere, but I am VERY skeptical of claims that such displacement is either efficient or accurate. I am not a fan of replacing wetlands or old-growth forests with man-made wetlands or tree plantations for the same reason that I am not a fan of replacing a wholesome meal with a pill that has "all the same" macro and micro-nutrients.

Bottom Line: Ecosystem services can protect ecosystems by generating revenue, but they can also distract us from the "organic" (and unquantifiable) benefits that ecosystems provide to humans and other lifeforms.


  1. The idea of ecosystem services does not exclude other values. Ecosystem services are a way of accounting for SOME of the values that ecosystems provide. Other values, such as natural heritage values, are considered in other ways.

    There is valid concerns about putting a value on ecosystem services (which appear in the literature), but quantification of ecosystem services can be useful and positive.

  2. I agree that we should quantify as many ecosystem services as possible, if we're going to treat water allocation as an economic system and hope for an efficient and politically-legitimate result.

    One of the things that farmers really struggle with is that their use of water is considered a "low value" use in the public debate - as compared to, say, urban or industrial use - but that the environment gets a "free pass" in justifying itself in economic terms because, hey, it's "more important" on some other level, like aesthetic, spiritual, moral, or whatever.

    Environmental water should pay its own way, where possible, because that's where it gets legitimacy, in the form of voluntary transactions. Yes, there are other values that you can't price out - spiritual, for example, a very highly slippery value identified above - but those values then have to be defended in a less voluntary policy process, not backed by dollars, and they are subject to competing notions of what "spiritual" is.

    For example, I am one who does in fact believe that the environment has spiritual values. Farming, maybe a little less, but yes there is still a spriritual (or at least aesthetic) value to farmland. Cities probably do poorest in a "spiritual" or "aesthetic" value syste, but wait - who cares, they get to compete for water with their dollars!

    Bottom line is that you sow the seeds for political conflict when you allow cities to take water with their dollars, and the environment to take water with its moral superiority. Farmers are end of the losing stick both ways, and that does not seem fair.

    That makes me think of something. Let's say the "value" curve slopes downward from urban to ag to the environment as a matter of descending "dollar" demand. Let's say the "aesthetic" curve slopes upward from urban to ag to the environment as a matter of ascending "non-dollar" demand. Could it be - could it BE - that a "total utility" curve which blends the two forms of demand actually shows an optimal water allocation to farming as opposed to the environment (aesthetically pleasing but typically unable to pay for itself) and cities (able to outcompete any other use in dollar terms, but very low in aesthetic or spiritual value)?

  3. My gut reaction is that Nature has nothing to do with our infernal money system. But then I just finished watching Zeitgeist. David, this is a little off topic, but would you give us a professorial description and explanation of the Federal Reserve and Federal Income Tax. We are suspicious that the Zeitgeist producers were under the spell of the John Birch Society, but I would like an experts input on these...

  4. Four Mound, in fact Nature is central to, and at the mercy of, our infernal money system. I think our host would agree that it is the single most important input into our economy, yet the people who get to use and profit from that input are not paying full cost. Otherwise known as "free riding", and it's the ultimate source of environmental degradation.

    I don't want this to be an apology for the environmental use of water on a "free" basis. I'm a little conflicted about the first paragraph I just wrote about. I also feel that if we're going to true up water markets to eliminate excess demand, we need to true those markets up all the way around, for all uses of water - cities, farms, instream, whatever.

    Do those two concepts work against each other? Is the environment just another source of water demand, like a city or a farm (as I have argued), or is it instead an asset that can be run down or maintained, as we choose, like a bank account?

  5. Estimating costs and benefits for externalities can be a bitch. The CPUC and the California utilities have spent decades and millions of dollars arguing over how to project the cost of avoided energy when trying to put a value on energy efficiency programs and find prices for the environmental benefits of saving energy versus burning fossil fuels to make the same energy as that being saved. They're still debating as far as I know.

  6. @CF -- Your idea of an aggregate demand curve (money and non-money demand, by sector) is appealing and intuitive. In fact, I am going to make a whole post about it that riffs off a new survey result (http://www.env-econ.net/2009/03/economic-growth-vs-environmental-protection.html) that will allow readers to play with their own notions of what's right and wrong...(yes, I am using the loaded words...)

    @FMF -- I am not a big fan of the conspiracy folks. I read this (http://en.wikipedia.org/wiki/Zeitgeist,_the_Movie) to get a feel for the film. I *agree* about religion (in general), Pearl Harbor and the Gulf of Tonkin. I agree that Bush et al. knew about a 9/11 attack, but -- like Pearl Harbor -- they let it happen (instead of making it happen/controlled demolition) so that they could invade Iraq. I agree with Perkins (Zeitgeist: Addendum) that a corporatocracy controls a LOT of gov't and $4 but WITHOUT a plot. I do NOT agree that the Fed (or other banks) are manipulating society, etc. The FACT that the Fed mismanaged money (keeping rates too low for dotcom bubble AND after) is NOT a sign of conspiracy, but merely political pressure to serve the corporate money interests. In that sense, I am MUCH more worried about Bush than Greenspan.

    Now -- back to water?

  7. Thanks for the link David. And it is reassuring to hear that you got the exact same impression we did. It just shows how images and voice over can be manipulated to brainwash the eager to be brainwashed. Sort of like California water managers refusing to price water according to supply and demand, having been brainwashed into believing the old tried and true methods are working...


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