Why economists argue with ecologists (5): The Suzuki fallacy

I quit smoking when I was about 30 years old. It is an unhealthy habit, of course, but I also disliked the idea of being dependent on my stock of tobacco. One of the few things I miss about smoking, however, is the excuse to go outside during a break and have a fag and a chat with a few likeminded nicotinists. So occasionally I go outside with the addicts and have the chat without the fag.

I did this a while ago with an ecologist who started a long complaint about economists’ ignorance of the limits of our planet. Economists, he claimed, refer to environmental problems as ‘externalities’: they think the environment is external, i.e. irrelevant, to the economy. I tried to convince him how he misunderstood what externalities are, pointing to his sigarette. It may be his own choice to light a cigarette, or something between him and his dealer to buy a pack of cigarettes, but I also had to inhale his smoke. The damage that he thus inflicted on me was a negative externality: a cost that did not show up on his mental ‘balance sheet’. Perhaps, if he had to pay a tax for each of my lost lung cells he would have made a different choice. (You know what they say: nobody is purer than an ex-prostitute.)

I doubt whether I convinced him, but in any case his comment had me thinking. Where did he get this ludricous idea that the economic term ‘externality’ means ‘irrelevant’? After all, every introductory microeconomics book has a chapter on how externalities are a form of market failure. Then I saw this clip.

My toes still cringe when I watch this – it’s just too embarrassing. When he talks about ecosystem services:

All of the things that nature does for us, for nothing. Pollination, for example, or a forest that takes carbon dioxide out of the air and puts oxygen back in, or that holds the soil and prevent erosion.

That’s the point where I would have expected an explanation that these services are unpriced, and that we should make those services visible in the market place. For instance, by putting a price on them in public decisions, or by levying environmental taxes, or through paying the owners of the ecosystems for the services they provide. But somehow he got it into his head that

All those services that nature performs, economists call them “externalities”. And what that means is: “they got nothing to do with the economy. We don’t put a price on them, they are irrelevant.”

The speaker, David Suzuki, is a famous environmentalist. He should know his stuff, but he is making these statements without a single speck of irony, and apparently he has been doing this for years. Of course there is lots of nonsense spouted on the internet and you don’t have to react to everything, but people like my smoking ecologist listen to David Suzuki. I don’t mind criticism of economic theory, in fact I think a lot can be improved. The nice thing about interdisciplinary work is that you learn not just about the contents of other disciplines, but also their way of doing science. And this reflects back on your own discipline. But such cooperation is not helped if people start spreading this kind of prejudice and misunderstanding about one of the fields involved.

Mapping marine economics (1): A planet walks into a doctor’s office

Somewhere in the near future the wise men and women in Wageningen University’s tenure track Advisory Committee will decide whether I’m doing a good enough job to keep it. One of the things they may possibly ask is what my research will focus on in the coming, say, 15 years. So I’ve been thinking a lot lately about questions like “what on Earth am I doing?” and “where the Hell am I going?”

If you go to the doctor with a problem, the doctor will generally do four things. First, he will assess the seriousness of your problem. Second, he will try to identify the cause of your problem. Third, he will decide on the objective to be pursued by any therapy he may prescribe. Fourth, he will prescribe a therapy, which may be a pill, an operation, or something else. Economics of coastal and marine ecosystems is not much different:

  1. Economists assess how well or how badly coastal and marine ecosystems are doing, and how important they are to us. Should we worry about, say, disappearing mangrove forests? Who should be worried? (Ecologists hate these questions, but somebody has to ask them.) To answer these questions, economists try to put a price on ecosystem services, develop environmental indicators, or correct GDP for environmental degradation.
  2. Economists also investigate the fundamental reasons why we deplete, pollute, or overexploit ecosystems. If we all know how important fishery resources are to us, why are some stocks so terribly overfished? So economists develop theories of open access resources, of enforcement problems, corruption, and other forms of market failure or government failure.
  3. A lot of economic research is done to set the right policy objectives. How do we trade off the profits of a large-scale distant-water fishery against the interests of small-scale local fishers in a developing country? How do we trade off our own welfare against that of future generations? So economists have developed many applied optimisation models, and concepts such as Maximum Economic Yield.
  4. Lastly, economists also investigate how we can attain our policy objectives. Should we introduce restrictions on days-at-sea or Individual Transferable Quota to keep catches at an efficient level? Should we freely distribute fish quota, or auction them off? If we pay land owners not to cut a mangrove forest, will it really save that forest or will they simply cut another forest?

In future posts I’ll share my thoughts on each of these four issues.

Stuff I do: Pacific tuna

Chances are you’ve thrown one of these on your barbecue this summer:

 Tuna is massively important for many Pacific island nations. Kiribati, a country whose land mass is only 0.02% of its total area (the rest is sea), gets about 30% of its GDP from tuna fishing. Not that the I-Kiribati (people from Kiribati, that is) catch much of that themselves: most of it is caught by fishers from other countries, like Japan, Spain, and the United States, who pay Kiribati for the right to fish in its national waters.

Actually, to just call it “tuna” is misleading, because there are several species of it. If you have ever had a tuna sandwich you will probably have eaten skipjack tuna. It is the cheapest, least tasty, but also the most abundant tuna species: the IUCN is not particularly concerned about it, and the FAO assesses we can catch some more of it without depleting its stock (pdf). The species in the pack in the picture, yellowfin, is doing less well: the IUCN labels the species “near threatened”, and the FAO argues against catch increases of this species. Other species are doing worse or much worse than that: bigeye tuna, for instance, is labelled “vulnerable” 1.

Save the apples, don’t eat pears
So we should all eat skipjack instead instead of yellowfin and bigeye, right? If only life were that simple. Yellowfin and bigeye are often caught as so-called bycatch of skipjack tuna. Many fishers use Fish Aggregating Devices (FADs) that attract all kinds of fish, starting from small fry all the way up the food chain to several species of tuna. When this includes a school of tuna, fishers draw a purse seine net around the FAD and haul in their bounty. Fishing this way, you are likely to catch a lot of skipjack, yellowfin and bigeye at once, where the yellowfin and bigeye you catch is probably still young and difficult to separate from the adult skipjack. And hence yellowfin and bigeye often end up in a tuna sandwich at a young age where they could have had a glorious career as sushi or tuna steak.

Therefore, the FAO recommends not to increase skipjack catches: not because it is concerned about skipjack stocks, but because catching more skipjack will likely have a negative impact on stocks of yellowfin and bigeye. So perhaps to preserve yellowfin and bigeye stocks, the last thing one should do is buy skipjack tuna.

Governments have used all kinds of different policy instruments to manage fisheries, such as days-at-sea restrictions, or individual transferable quota, or a variety of gear regulations. Such instruments, however, are not everywhere as easy to implement, and governments are in a difficult situation themselves. It is often difficult to observe how much fishers have caught. Moreover, if Kiribati limits its tuna catch in order to preserve tuna stocks for the future, fishers gladly move on to the next Pacific Island Nation to fish there. Perhaps retailers, NGOs, and consumers should step in? We could reward fishers who fish more selectively with some certification scheme: guilt-ridden consumers may be willing to pay some extra for guilt-free tuna. But what if that simply increases demand for fish, and thereby fishing pressure?

Note the neat batik BESTTuna shirts – courtesy of our Bogor partners

Last week I was in Bogor, Indonesia, to discuss this problem with colleagues from Wageningen University and other institutes. We were at the kick-off of BESTTuna, a project of Wageningen University together with many other organisations, including Bogor Agricultural University, University of the South Pacific, University of the Philippines, University of California, Santa Barbara, WWF, and Anova Seafood. The objective of BESTTuna is to look deeper into the management problem with skipjack, yellowfin, and bigeye tuna, considering the different countries involved, the different fishing techniques, the companies involved, NGOs, fishers, and so on. Should Indonesia introduce individual tradable quota? Will MSC certification give fishers an incentive to fish sustainably or will it only enhance fishing pressure as green consumers can start eating tuna with a seemingly clear conscience? How can we make sure that Pacific Island Nations cooperate to manage their tuna stocks sustainably? It’s a complex, but therefore also fascinating problem – and it’s one of those problems you’re reminded of every time you enter the supermarket.

One of the most depressing cases of tuna overfishing is the southern Pacific bluefin tuna. It is currently at no more than about 15% of its 1973 stock. Bluefin, however, is quite a different story than the species I describe in this post.