9 May 2016

A case for environmental desires

Camelia writes:*

In the 1930s two leading thinkers – Lionel Robbins in economy and Talcott Parsons in sociology – wanted to bring peace between their disciplines, which at that time were trying to ferociously incorporate one another. Parsons proposed a grand division of labor: the economists should keep going on the relationship between means and ends, whereas sociologists should investigate the matter of the ends themselves. But here’s the catch: he argued that institutions, as an embodiment of what each society deems valuable, should be dealt with by sociologists, not economists [pdf]. It took it economics 80 years to recover from this bad deal (though to what extent this deal was bad for the economists it is debatable), and today’s institutionalism is an attempt to bring back the serious concern of economists with values.

Environmental desires are not flickering preferences about whether to visit the seaside or the mountains over the spring break: they are values, beliefs, deep seated insights about the worth of nature and how this worth relates to other values in our life.

For instance, is the Earth a ‘dominion’ for us humans to use, in order to fulfill the wish of God? Guth et al. shows that the answer to this question – yes, if you are religious, conservative person with eschatological beliefs – influences your attitudes on environmental policies!

Environmental desires are not easy to spell out, even less to transform into monetary value. Moreover, libertarian economists say they are not necessary to spell out, as long the system of incentives is built to promote the right environmental outcome.

The environmental outcomes look promising, at least in the developed world: we recycle more, we pollute less, we see the word ‘sustainable’ in every new policy document, etc. The theory of the environmental Kuznets curve [pdf] suggests that the trend reflects something akin to an economic law: after the initial drop in environment quality caused by economic development, the population in a country reaps more and more benefits, satisfy their material needs and eventually starts asking for cleaner environments. Thus we shouldn’t worry too much about our environmental desires: they are there, ready to take the spotlight after we achieve sufficient economic development.

I can think of a reason why this would not be the case: the valuation of nature can change over time in the opposite direction because we lose exposure to nature. For instance, Adevi and Grahn (2011) show in a very interesting piece how adults are attracted to the landscape features they were exposed to as children. Thus people who spent some childhood summers in a farm will value higher the green lands. What about those who grew up in a tall building with no tree in sight – an increasing proportion of people in developing countries, where urbanization is very speedy – reaping the benefits of economic development? Will they value nature enough to ask for a better treatment of the environment, or will they be content with a more and more artificialized landscape?

And remember, Kuznetz was wrong before.

Bottom Line Environmental desires, like other values, should not be left for investigation only to sociologists. They should be taken seriously by economists, as in the long run they are of primary importance for environmental policy-making.

* Please comment on these posts from my environmental economics students, to help them with unclear analysis, alternative perspectives, better data, etc.


Wacondah said...

good piece, intriguing and scary at the same time!

David Zetland said...

I read the Velthuis paper, and it does not really, to me, say that economists "got a bad deal" out of a peer-divorce from sociology. First, sociology was a new field that needed to distinguish itself from economics (thus taking the group as a unit of observation and influence rather than the individual). Second, economists *wanted* to dump institutions as they became more "scientistic" (pretending that math/physics/engineering could model human behavior; biology is seen as a better analogy now).

It's ironic that sociologists complain about "economic imperialism" (economics adopting ideas and exploring topics "traditional" to other disciplines) when that article exactly states that economics and sociology should cooperate and merge more. It's happening already as economists take on sociological/anthropological/psychological topics.

The article was written in 1999, but I think its call for merger is well underway, as I research in these areas (p637):

1. Economic action is embedded in networks of social relationships.
2. Economic action is directed at the pursuit of both economic and non-economic goals.
3. Economic institution as resocially constructed"

So, I am not sure that your bottom line holds (at least for all economists), and *where* was Kuznets wrong? On inequality? He spoke of "market forces." Piketty's thesis rests on crony capitalism

Camelia Vasilov said...

The idea that the field of economics suffered from divorcing sociology does not come from Velthuis's paper, but from countless LUC readings and discussions emphasizing the misleading assumptions behind the neoclassical model. For instance, the assumption of the risk neutrality of economic actors that we discussed in our last Environmental Economics seminar was not just a simplification and a device for easier quantification - it was not empirically based, and later psychological research showed it was plain wrong! In the same vein, I can't be happy that economists dumped institutions for at least half a century in an attempt to simplify and quantify if that resulted in them being wrong so many times (again, countless examples of economists giving wrong advice based on their wrong models, particularly in international development).

I am not sure I have the same understanding of "economic imperialism". I see this phenomenon as economists applying their rational choice models on topics usually taken by sociology, anthropology and psychology, arriving at the same conclusions - because of course, you can fit your model to any data - and then claiming based on this achievement that the economic approach can losslessly replace these fields. I think economic imperialism runs contrary to the integration of actual insights from these fields and accepting limitations set out by these fields - mostly the areas of merger research 1 and 3.

For example, I just finished reading an antropological piece on "successful aging" (Lamb 2014). The author argues that aging well in North America means being independent, not reliant on family support, ignoring death and maintaining the same personality in old age as in young age - but this is not the case in other cultures. Aging well means in India receiving loving help from family members and using the opportunity of imminent death to reflect upon life in ways that might alter one's personality. Imperialist economics would just integrate these as preferences for that particular society, without questioning its own assumptions of methodological individualism and permanent preferences that clearly do not hold in this case.

Camelia Vasilov said...

As for Kuznets, he was wrong in using his very historically specific data - US federal income tax return between 1913 and 1948 - for drawing conclusions about general forces affecting inequality. As Kuznets's massive empirical effort shows, American inequality fell dramatically in this period. But was this because industrialization got to the point of allowing greater democratization and the rise of the welfare state (thus making poor folks richer through redistribution), or because America experienced two World Wars and a Great Depression in the same period (thus making rich folks poorer through the destruction of capital)? Kuznets and Piketty are not talking about different things - they are talking about the same thing, and they cannot be both right.

Granted, in his book Piketty recognizes that Kuznets did not want to take his findings so far as to make them a general law, and qualified them to a great extent - but in the early 50s American policy makers needed an optimism boost, so the Kuznets curve was quickly adopted as a gold standard in the economics of development (pages 14-15 in my pdf).

If the Kuznets curve holds in environmental economics - at least for certain phenomena - I couldn't be happier. Still, we need to be wary of applying it to all things environmental, and in my blog post I made a clumsy attempt to show that the environmental Kuznets curve might not hold for nature conservation because people would keep getting used to artificial landscapes, just like the inequality Kuznets curve does not hold because rich people just keep accumulating at a higher rate than the rate of economic growth.

Radical change in our beliefs about nature - our environmental desires - would hopefully play the role of the World Wars and the Great Depression for the EKC, but we cannot assume this change will automatically happen.

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