Dollars and Jens
Friday, February 16, 2007
A fellow named John Whitehead over at Environmental Economics quotes from an L.A. Times article:
Environmentalists and investment bankers are working together to put a price tag on nature. The new 'greens' think that human beings are ready to start paying for Mother Nature's services—and that calculating their financial worth will save the planet.


If ecosystems that do a great deal for people are to be recognized as of great monetary value, "ecosystem services" will have to become a household phrase.

Despite the snooze-inducing moniker, ecosystem services have occasionally appeared on the public-consciousness radar. ... The next visibility boost for ecosystem services came in 1997, when a team of scientists led by Robert Costanza, then with the University of Maryland, published a study in Nature that estimated the value of all the ecosystems and natural capital on the planet. The very rough figure: $33 trillion a year.
He notes
In the past we've written about how this methodology isn't based on sound economics because the resulting value of the ecosystem service is greater than income...
You're encouraged to look it over.

I just posted my own comment, which I'll reproduce here in full:
Prices, in neoclassical economics, are essentially derivatives. They are marginal values. When you start to get to economy-sized numbers, aggregating total costs becomes epistemologically sketchy. (I would assert that even talking about the federal debt is a bit meaningless, but that's not low-hanging fruit for my point, so you should probably just ignore this parenthetical.)

In any case, some meaning can be attached to a large-scale number if we have a way of comparing one thing to another. It's no longer actually a derivative; we're acknowledging a finite change, and some nonlinearity. It's still an affine space, though; if we're going to talk about the "benefit" provided by the environment, we have to be comparing it to a benchmark of some kind. "Smouldering cinder" seems a popular benchmark, but, unless there are some gung-ho smouldering-cinder—advocates out there, I'm not sure it's a meaningful one. If we're looking to trade off "big hunk of change in environmental condition" versus "big change in man-made lucre", we can construct numbers based on differences between alternatives that are actually on the table (or, at least, we can try). If we're trying to use price to do something else meaningful -- something that isn't "make a desperate plea for attention" -- we may actually have to try to understand the question we're trying to answer, and look for an answer that's appropriate to the question.

Big values do not raise the environmental consciousness so much as they lower credibility. The reason $33 trillion per year intuitively seems bogus is because it is.

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