Yes, sometimes I agree with the critics of PES – but not always

Richard Conniff puts some question marks over PES in this piece. Most of it draws from an earlier article by Kent Redford in Conservation Biology, so let me go over the arguments laid out (rephrased in my own words – hoping I get it right) in this article. Be prepared: I actually agree with most of it, although I wholeheartedly disagree with some of it.

PES risks crowding out moral justifications for conservation
This is a risk. The risk is similar to the risk associated with social cost-benefit analysis, namely that the difference between monetised costs and benefits will become the only decision criterion so that non-economic arguments lose their voice in the political debate. This was the case when the USA (under Reagan) adopted its notorious Executive Order 12291, which stated that “Regulatory action shall not be undertaken unless the potential benefits to society for the regulation outweigh the potential costs to society.” No wonder this put a stop to a lot of environmental policy, the benefits of which are most difficult to quantify. So yes, we should keep reminding our students, including economics students, that money is not the only argument in public decisions.

Pro-PES conservationists wrongly believe that all ecosystem services are good
Let me add to that: they even believe ecosystem services are good enough, i.e. good enough to justify conservation. But ecosystem services might not be good enough, and in that sense pro-PES conservationists should be careful what they wish for. But there the article makes an interesting statement (and now I do quote):

Nevertheless, not all ecosystem processes sustain and fulfill human life. Processes such as fire, drought, disease, or flood work against this goal, yet they are vital for ecosystem function, structuring landscapes, and providing vital services and regulatory functions to nonhumans. There is a danger that an economically driven focus on those “services” that are valuable to humans in their nature, scope, and timing may lead to calls to “regulate” ecosystem services to times and in flows that match human needs.

I would like to see Mr Redford explain to Zimbabwean farmers why they should learn to live with themselves, their children, and their cattle getting sick or even dying from sleeping sickness. I’m sure tse tse flies are valuable for some reptile species I should have heard of, but in this case my sympathy is with Homo Sapiens.

Some services may be better provided by species with nasty side-effects
Of course you should take into account nasty side effects, and then the outcome may be that you should still, or should not, use that exotic turbo species to provide the service. Indeed, you may not know the side effects, so precaution is mostly warranted in such cases.

PES may become an incentive to engineer ecosystems towards service provision, which may have nasty side effects
See above. Engineering an ecosystem towards provision of a single service can indeed increase the ecosystem’s brittleness, like monoculture is efficient on the short term but very vulnerable to disease on the long term.

The methods currently used to establish monetary value are problematic
Tell me about it: the economic literature is rife with reasons why putting a price tag on nature can go wrong. But here is another interesting quote from the article:

Where markets do exist, the value of the services from different ecosystems will not reflect their diversity, but their desirability to human consumers.

Now we get to the hidden assumption made by a lot of biologists: ecosystem value = ecosystem diversity. This is a gap between biology and not just economics, but all of social science: social scientists argue that ‘value’ is, well, a value judgement – something that cannot be established objectively, period. Conservationists like to say we should preserve nature because it has ‘intrinsic value’, but what they should really be saying is that they think, or feel, or find that nature has intrinsic value. I hate to say this, but nature having intrinsic value is not a fact; it’s an opinion. A very valid opinion, but there are many others in this whole conservation debate and the way it is being pushed by conservationists smacks of a dictatorial sort of self-righteousness.

PES can have terrible repercussions for (mostly poor) locals
Absolutely. One of the driving forces of deforestation is that nobody knows who owns the forest: is it the state, is it the logging company, or is it the native tribe living in it? Assign any of these three the property rights over the forest and this new rightful owner has the right to exclude all the others. And he will do so, especially when there is money to made! The new allocation may be efficient according to our economics textbooks but it may come at the price of unimaginable social disruption in the lives of local communities.

Property rights may not be able to deal with climate impacts
The argument is like this: if you assign property rights over some species to some owner, this owner may have a strong incentive to stop the species from wandering off when its climate zone starts shifting. Of course, in a well-working market, this owner would be better off buying land elsewhere to let his species neatly follow the change in climate zones, blah blah blah. But land markets are notorious for their institutional problems. Land use regulations, spatial externalities, transaction costs, and all kinds of other problems will throw sand in the machine. This is an interesting issue I hadn’t thought of before. It reflects an interaction between institutional-economic problems and ecological dynamics I might want to look deeper into.

One on the house: paying people not to do nasty stuff
I didn’t find the argument in the article, nor in Conniff’s piece, but it is a problem: a lot of PES is actually paying people not to be nasty. For instance, Conniff gives an example of Vittel-Nestlé paying farmers to not pollute the environment. But pollution is a negative externality: it is a cost imposed by farmers on Vittel. Paying farmers to stop polluting may solve Vittel’s problems on the short term, but it still artificially boosts the farming sector to a size bigger than optimal. The whole world might be better off with farmers doing their business in places where they do less damage, but this solution will actually draw farmers to this area: they get paid not to pollute, what more do you want?

PES is a neoliberal sellout of our democracy to big business
Of course I save the best for last: it is the remark made by the man I would love to see in a cage fight with James Delingpole. Of course I am talking about George Monbiot:

When governments and PES proponents talk about employing marketplace solutions instead of traditional regulatory approaches, [Monbiot] says, “what they are really talking about is shrinking democracy, shrinking public involvement in decision making, shrinking transparency and accountability. By handing it over to the market you are in effect handing it over to corporations and the very rich,” and to “a very plutocratic” decision-making process.

There you have it: more market inevitably means less democracy. Of course, everybody knows you can only have a fully functional democracy under socialism, isn’t it?

Why economists argue with ecologists (3): consequences versus deontology

A fundamental difference between economists and ecologists is that economists tend to approach environmental pollution as an allocative issue, whereas ecologists tend to approach it as a moral issue. Or, more accurately, economists take a consequentialist approach whereas ecologists tend to be more deontologist.

There are many examples to illustrate this, but none is as sharp as the debate on emissions trading. It used to be no more than a smart idea to limit pollution in an efficient manner, but it has evolved into a political minefield where the Left sees it as a sell-out to Wall Street, whereas the Right sees it as a communist takeover of the economy. The idea is simple: we limit emissions to, say, 100 units, and so we distribute 100 units of emission rights among polluters. Want to pollute more? Then buy rights from another polluter, who will then have to take additional emission reduction measures. You bet he will only agree to that transaction if you pay him more for his right to pollute than it costs him to reduce his pollution by one additional unit. Moreover, you will only agree if the price you pay for the right is lower than it benefits you to increase your pollution. In other words, you can have a voluntary transaction that makes both parties better off without further damaging the environment. This is a way of achieving what economists call allocative efficiency: we shuffle around resources and other inputs to achieve the maximum output at minimum costs, where costs include environmental damage as well as wages and all. An economist would say: we have the same environmental quality, but we increase welfare – what’s not to like?

A lot, an ecologist would say. Besides issues with regard to enforcement, windfall profits, etc., an ecologist would also have objections of a moral nature. Here are a few of the objections I’ve heard from students and researchers:

  • How can you give somebody a right to pollute? Nobody should have any right to pollute the environment.
  • Under such schemes companies can just pay some money and go about their dirty business. They should give a good example to others.
  • It’s immoral to commodify the environment.
  • Tradable emission permits are a modern version of medieval indulgences.

I can think of a lot of misguided objections to emissions trading, but these objections are not among them. They are moral objections that are valid within a given moral framework, which may not be my moral framework, but a valid one nonetheless. You hear similar arguments in the debate on economic valuation of the environment, biotechnology, and to some extent Payments for Ecosystem Services (wait until you propose hunting as a source of conservation funding). In all of these examples economists stress the allocative issue: “look, we clean up the environment right? That’s what you want, right? So why not make sure that we do this efficiently through emissions trading / cost-benefit analysis / GMOs / hunting concessions?” On the other hand, ecologists tend to stress the moral side of the issue: “rights to pollute / pricing nature / genetic modification / hunting is plain wrong and we shouldn’t do it.”

Beneath the economist’s allocative approach lies the philosophy of utilitarianism. In a nutshell, utilitarians argue that an action is morally right whenever it maximizes the sum of all happiness. This also means that utilitarians judge an action purely by its consequences, whereas other moral philosophies (also called deontological ethics) judge the action itself.

In other words, economists take a consequentialist approach to environmental problems, whereas ecologists tend to be more on the deontological side. Note that the moral objections to emissions trading listed above focus on the trading itself rather than its consequences. The economist’s reply will always point to the consequences.

Maybe it is due to my economics training, but I’m more on the consequentialist/utilitarian side. The deontological argument can become self-defeating, for instance when opposition to hunting leads to habitat degradation. If we have to choose between an ailing population of an endangered species without hunting and a thriving population that pays for its own conservation through hunting, I’d choose hunting anytime.