Commodifying nature

Here's a picture of a beautiful place in Thailand (thanks, Google image search). Nice, right? What if I asked you to tell me how nice you think this vista is, in dollars? Is it a hundred-dollar-vista? a five-dollar-vista? How much would you think it would be worth to not have it contaminated by a small quantity of animal waste from a nearby farm? What about a large quantity? What if I had to cut all the trees down to build farm to feed hungry people? Would it be worth it?

This is the major problem that environmental economics has to deal with. The price of some ecosystem services (things that ecosystems do for free just by existing) can be pretty easily quantified. For example, a forested watershed will naturally filter out pollutants and prevent a water supply from being contaminated. We could calculate the value of this ecosystem service by finding out how much it would cost to put in a water treatment plant to eliminate pollutants in the place of the forest. You can know the price of things that are bought and sold on the market, like water treatment equipment, but the price for a nice view - that is more difficult. But we all agree that it has value to individuals and to society as a whole. Most people would be "willing to pay" something for that nice view. There are a couple of ways that economists use to try to quantify this "willingness to pay." They all have their flaws. Let's highlight a couple.

Travel Cost Method
This is a way of getting at the "use value"of something like a natural area that people like to visit. Basically you get an economics grad student to hang out at the site and pull people aside to take a survey about how much it cost them to get to the site. The survey might ask questions about how far they traveled, if they took a plane or drove, how much money they make, how much time they had to take off work, and how much they saved up to make this trip. This is a pretty direct way to get at how much someone would be willing to pay to be able to use the site, visit the site, see the site. Problem is, not every site or environmental resource is something that someone might visit. For example, the site could be hella remote, only enjoyed by penguins and polar bears. Or the site could be nothing particular to look at, just the home of some key endangered species.

Hedonic Pricing Method
This method compares prices of similar items with or without some environmental benefit attached to see how much extra people are willing to pay for the environmental benefit. For example, to figure out the value of a park you might see how much a three-bedroom house goes for next to the park compared to one that's a few blocks away from the park or in another neighborhood. This is problematic because no three-bedroom houses are exactly alike except for the neighborhood so there are a lot of statistics needed to try to isolate the variable you're interested in. Also, it has the same problems as the travel cost method as it is most easily used to define the value of a site that is close to human habitation and used for recreation purposes.

Contingent Value Method
This method is the simplest in theory. It consists of basically asking people - how much are you willing to pay for this environmental thing? Typically you ask them about how much they would be willing to pay to enter an area, or how much extra taxes they'd be willing to pay to see that area protected. You can frame the questions a million different ways, which could introduce some bias into the valuation. Also, there's a strategic bias in this method because the money that people would be willing to pay is hypothetical money. So if, for example, you were really poor but also a real tree-hugger (hey, maybe you live in a tree!) and someone asked you how much you hypothetically would be willing to pay to see a forested area protected, you'd say "All the money I have" or "a million-gillion!" Even though the reality is, you wouldn't ever be able to pay that much. Despite this bias, the contingent value method is kind of the only way to get a sense of the "non-use" value of an environmental resource. A "non-use" value is one that you give something just for existing, even if you never use it or visit it. For example, let's say that the sonar equipment from ships is making it too noisy for orcas to hear each other singing. This is making it difficult for orcas to navigate and to reproduce, decreasing their numbers. No-one really hunts orcas for meat anymore and very few people have the opportunity to see orcas, especially if you live in a land-locked state like Missouri. But, how much extra would you be willing to pay for your "chicken of the sea" to make commercial vessels reduce their use of sonar so that orcas could thrive? How much is it worth just to know that orcas will continue to exist?

All of these methods have a little bit of a flaw in that they are all based on either the public's behavior or the public's stated preferences. There are some unpopular environmental resources out there that have a really important role in balancing ecosystems. Wolves are a good example. Without these predators, deer and other herbivores's populations increase, causing overgrazing and biodiversity loss. This has multiple effects, some of which could directly impact humans, like increased tick-borne disease. But if you asked the average person how much they'd pay to have wolves roaming their woods, they would probably tell you how much they'd pay to have the wolves removed from their land.

Environmental economics

"It is one thing to advocate doing the 'right' thing; it is another thing to advocate doing the 'right' thing regardless of the cost of doing so." 

Michael Harris of University of Melbourne in 

"Environmental Economics"(1996) The Australian Economic Review. 29 (4): 449- 465. 

The quote above helped frame the discussion of environmental economics for me. Most people want to do the right thing by the earth. In fact, here's some statistics to back that up. (Thanks Statista!)

Over half of the people surveyed in every age group said they agreed that yes, they felt a little guilty when they did something unfriendly to the environment. When you look at how that translates into consumer preferences, it appears that globally, the percent of consumers who are willing to pay extra for environmentally friendly products has increased and is now over 60%.

But not everyone can do the right thing at all costs.

Example: I'd love to be able to purchase meat and eggs from a farm that practices sustainable, humane animal husbandry. But alas, I must go to Aldi (if I link to you from my blog and talk about how much I like you, will you give me free food, Aldi?) and buy what I can afford.

And a lot of people might say, well, that's all good, since that's free market economics for you! Producers who can maximize their output and minimize their costs (by raising animals CAFO-style) capture more of the market share because they can price their goods lower, and more consumers can afford those products and more people can have food to put on the table. A chicken in every pot! Benefits all around! If we were to require CAFOs to do more to minimize their water pollution, their costs would increase and their supply would necessarily decrease, causing the price of meat products to rise. People wouldn't buy meat as often, shifting demand from meat to other protein sources like beans. The meat producers would suffer, people in vulnerable rural communities would lose jobs, and the economy would suffer! All of these are definitely costs of requiring more pollution control on CAFOs. Which brings me to my final graph of the results of a survey of "affluent" Americans (read- filthy rich by teacher and librarian standards).

When these folks were asked if economy was more important than the environment, they were more or less evenly split. What this says to me is that a lot of respondents in this survey feel that both the economy and the environment have some importance. Of course, they're right! Is a business subjected to new environmental regulation-related costs going to increase their revenues, profits, dividends, salaries, hiring rates? Probably not. The economy will suffer and people will suffer as a result. That's a big deal. Those with a perspective favoring the environment, however, will counter that the human costs of pollution are at least as worrying as the economic costs of controlling that pollution - contamination of water supply, insect and disease outbreaks, collapse of fisheries, loss of recreation opportunities near polluted streams, soil erosion.

So what environmental economics tries to do is to quantify costs and benefits - both economic and environmental, in order to better inform our decision-making process. Is controlling pollution worth the cost?

Problem is, while something like a manure lagoon to control animal waste release has a price and therefore its costs can easily be quantified, the cost to the environment is not easily priced. This means to get an accurate picture of the environmental costs, the value of a clean stream or of a unmarred vista must somehow be quantified, "commodified" as it were. Some people aren't all that comfortable with this approach, because some natural things seem as if they should be "beyond price." Think about the majesty of the synchronous fireflies sparkling through the night in the Great Smoky Mountains. No price gun could ever touch it, so what's the point?

But, here Harris helps me to understand again: "...if we treat any part of nature as being 'beyond price', then we have implicitly assigned an infinite value to it. If infinite values are assigned to all of nature, none of it could ever be changed in any way."

So, we have to give that natural bounty some kind of value, somehow, if we are ever to accurately weigh the balance of costs and benefits of any proposed change. How do environmental economists do this difficult task? How about another post on that?

Back to the blog

"To every thing there is a season, and a time to every purpose under the heaven" Ecclesiastes 3:1

I've been preparing all sorts of changes to my AP Environmental Science (APES) class for next year. The subject matter makes it probably my favorite class to teach, but unfortunately, circumstances have not allowed me much time to make the class my own.

Allow me to explain. First, I met a guy. A really great guy - a cute librarian and word nerd! Then, I went on the job market and scored a great job in St. Louis at a great private school. As a result, I moved away from great guy to a new town and started a new teaching job with new preps, new coworkers, a new work culture, new everything. The amount of time I spent talking to him on the phone every night was easily enough time to revise an APES course, but alas, priorities! The great guy and I decided we ought to just go ahead and get married- in August, for a December wedding. Yes, December the same year! Wedding planning took over my life then, and then getting to the wedding date without imploding, then getting married, going on a honeymoon, moving my new hubby and our four cats, and then it was back to school for second semester. There was barely time to exhale, let alone make changes to my curriculum. We adjusted to married life just fine, squeezed into a tiny apartment in the city. Hubby got a job. Then we moved again. And again. During the second move my new science department was also moving into temporary spaces as we prepared for the construction of our resplendent new building opening this fall. Hubby got a new job. We bought a house. I worked for a year in a big-ass trailer temporary structure. We planned a vacation to Europe. We lost a cat and gained a new kitten. The active volcano of change in my life returned to spewing out a more manageable slow bubble of hot molten newness.

I ended the school year this June as exhausted as ever, and I immediately traveled to Cincinnati to attend the APES reading, a week-long festival of grading funded by the College Board®. There I read/graded 1504 responses to an essay question about indoor air pollution and talked to numerous other APES teachers. I joined the APES teachers Facebook group. My eyes were opened. My class was a St. Louis dumpster fire. Three years of just slightly tweaking what my predecessors had done was just not cutting it. To be clear, this has had nothing to do with my students' AP scores. They're very well-trained monkeys when it comes to standardized tests. They always score above average. Their scores are not the problem, it's how miserable my students and I feel throughout the year-long slog.

So I started over. I vacuumed out all the corners of my syllabus, leaving just a few select labs and the test dates arranged for the new school year. I've been refilling it slowly, this time with stuff that I really like, that I find valuable, that I know my students will enjoy more. One thing that really put a speed bump in my path was trying to "get" environmental economics. Every year I try to lead my students out onto a skinny diving board above an Olympic-sized swimming pool of information about economics and try to point out a few key things that they should know about. Inevitably, I get it wrong, slip off the grip tape, and end up drowning in a sea of questions that I can't answer about a subject that I hated in college. More on that in my next post!