IEP 511: Environmental Decision Making

AWAYMAVE - The Distance Mode of MA in Values and the Environment at Lancaster University

Week 2 Monetary valuation of the environment and its critics

I. Monetary valuation of environmental goods

a. What is the source of our environmental problems?

Neoclassical economic theory - the absence of markets in environmental goods. Preferences for environmental goods are not revealed in market prices

b. What is the solution to environmental problems?

Neoclassical answer: To ensure preferences for environmental goods are revealed in market prices:
1. Bring environmental goods into actual markets though an extension of tradable property rights to environmental goods;
2. Construct prices for environmental goods by ascertaining what individuals would pay for them were there a market.

II. Markets as the problem

1. What is the source of our environmental problems?

Our environmental problems have their source not in a failure to apply market norms rigorously enough, but in the very expansion of market mechanisms and norms.

The source of environmental problems lies in the spread of markets.
Polanyi: The mobilisation of land and labour as commodities in the market place withdraws both from the constraints of ethical and social norms - the result is the destruction of the environment and the social dislocation of humans:

To allow the market mechanism to sole director of the fate of human beings and their natural environment…would result in the demolition of society... Robbed of the protective covering of cultural institutions, human beings would perish from the effects of social exposure; they would die as the victims of acute social dislocation through vice, perversion, crime and starvation. Nature would be reduced to its elements, neighbourhoods and landscapes defiled, rivers polluted...power to produce food and raw materials destroyed. (Polanyi, 1957a, p.73)

2. The expanding boundaries of markets:

1. Expansion in real geographical terms.

2. Expansion to new spheres - the introduction of markets mechanisms and norms into spheres of life that previously had been protected from markets.

• Direct: Items previously considered inappropriate for sale might become directly articles for sale on the market - the sale of bodily parts, blood, sexual services, reproductive capacities, votes, political office, the means of salvation and so on.
• Indirect: The norms, relations, attitudes and forms of evaluation typical of the market might be transferred to other spheres: e.g., while university education in the U.K. is not yet a commodity, there has been an increasing replication of the language and relations of the market - the treatment of students as consumers, the introduction of course contracts.

3. The expanding boundaries of markets: pricing the environment

The neoclassical project of attempting to cost all environmental goods in monetary terms is an instance of a larger expansion of market boundaries.

Direct: Extension of tradable property rights to environmental goods.

Indirect: The practice of monetary valuation for the purpose of cost-benefit analysis - an incursion of market based norms and modes of arriving at choices into spheres where they are inappropriate

Common response is to resist that expansion.

4. Resistance and protests

Pricing environmental goods

Letter from a tribal person in the Narmada Valley in western India, being displaced as a result of the Sardar Sarovar Dam, written to the Chief Minister of the state government.

‘You tell us to take compensation. What is the state compensating us for? For our land, for our fields, for the trees along our fields. But we don’t live only by this. Are you going to compensate us for our forest?…Or are you going to compensate us for our great river – for her fish, her water, for vegetables that grow along her banks, for the joy of living beside her? What is the price of this? …How are you compensating us for fields either – we didn’t buy this land; our forefathers cleared it and settled here. What price this land? Our gods, the support of those who are our kin – what price do you have for these? Our adivasi (tribal) life – what price do you put on it?’ (Brava Mahalia (1994) ‘Letter from a Tribal Village’ Lokayan Bulletin 11.2/3, Sept-Dec.)

5. Markets and the environment: problems with the solution

• constitutive incommensurability – that there are certain social relations and evaluative commitments that are constituted by a refusal to put a price on them
• property rights – monetary valuation makes assumptions about property rights that are contested
• equity ‘the poor sell cheap’, - in the cost benefit analysis used to justify the Narmada valley project, the ‘cost’ to the displaced was computed at two years family income multiplied by a factor of 1.5.
• the reason-blindness of market exchanges - the reasons for the valuation of environmental goods are absent.

III. Value pluralism and commensurability

1. Value-monism: Value monism is the claim that there is only one intrinsically valuable property or entity which is valuable in itself; other values are reducible to this value.

Utilitarianism: the ultimate single value will be pleasure
Kantianism: human dignity, the good will

2. Value pluralism: the view that there are a number of distinct intrinsically valuable properties, such as autonomy, knowledge, justice, equality, beauty, which are not reducible to each other nor to some other ultimate value such as pleasure.

3. Value commensurability: there exists a common measure of value through which different options or states of affair can be ordered.

4. Value monism and commensurability: An attraction of at least some forms of value-monism is that they offer the possibility of a single common measure of value e.g. Bentham – homogeneous units of pleasure.

5. Trading-off values: Does value-pluralism entail incommensurability? Not necessarily. Value-commensurability is compatible with at least some forms of pluralism if one assumes that different values can be traded-off with each other.

What is it to say that values can be traded-off against each other? The answer runs something as follows. There are a variety of ultimate values, but we can compare those values and say that a loss in one dimension of value is equal to a gain in another. In cases where different values conflict, one has a trade-off schedule that says that a loss of so much in one value is compensated for by a gain of so much in another. What we need is a universal currency for that trade, some measuring rod which we can use to measure the different rates at which losses and gains in different dimensions of value evidence themselves and then put them on a common scale.

Money as the scale: One economic view - the universal currency for trading values is actual monetary currency. Money offers a universal measuring rod for trading between different dimensions of value that is used in the market place. On this view, money is not an ultimate value in itself, nor is it a measure of some other value like pleasure. Rather it is simply a metric which we can use to put on a common scale the relative importance of different values. Thus consider the following observation by Pearce et.al. on the use of physical descriptions of environmental goods as against monetary valuations:

Physical accounts are useful in answering ecological questions of interest and in linking environment to economy...However, physical accounts are limited because they lack a common unit of measurement and it is not possible to gauge their importance relative to each other and non-environmental goods and services (Pearce et.al., Blueprint for a Green Economy, p.115).

The Pearce report assumes that to make a rational non-arbitrary choice between options there must exist 'some common unit of measurement' through which the relative importance of different goods can be ascertained. Money provides that unit of measurement and cost-benefit analysis the method of using that unit in decision making: "CBA is the only [approach] which explicitly makes the effort to compare like with like using a single measuring rod of benefits and costs, money" (Pearce et.al., 1989, p.57).

IV. Constitutive incommensurability (Raz, The Morality of Freedom)

Early willingness to pay survey (Herodotus)

When Darius was king of the Persian empire, he summoned the Greeks who were at his court and asked them how much money it would take for them to eat the corpses of their fathers. They responded they would not do it for any price. Afterwards, Darius summoned some Indians called Kallatiai who do eat their parents and asked in the presence of the Greeks...for what price they would agree to cremate their dead fathers. They cried out loudly and told him to keep still. Herodotus Histories 3.38

1. Price is not a neutral measuring device and acts of buying and selling are not like exercises in the use of a tape measure. Acts of exchange are social acts with social meanings.

2. Certain kinds of social relation and evaluative commitments are constituted by particular kinds of shared understanding which are such that they are incompatible with market relations.

• Social loyalties, for example, of kinship and a way of life, are constituted by a refusal to treat them as commodities that can be bought or sold. To accept a price is an act of betrayal, to offer a price is an act of bribery.
• Similarly ethical value-commitments are also characterised by a refusal to trade.

Protests to monetary valuation of environmental goods

Environments are expressive of social relations between generations. It embodies in particular places our relation to the past and future of communities to which we belong. – See the response to compensation outlined earlier

An environment matters because it expresses a particular set of relations to one's children, that would be betrayed if a price were accepted upon it.

"it's a totally disgusting idea, putting a price on nature. You can't put a price on the environment. You can't put a price on what you're going to leave for you children's children...It's a heritage. It's not an open cattle market." (Burgess et. al.)

Money is not a neutral measuring rod for comparing the losses and gains in different values. Values cannot all be caught within a monetary currency. Note this is an argument against monetary measures, not yet to measures in general.

V. What makes a choice rational?

1. Commensurability and rationality:

Instrumental rationality: a choice or action is instrumentally rational if it provides the best meant to achieve an end. One argument for commensurability – it helps ensure choices are instrumentally rational. A common measure of value to compare the costs and benefits of an action – choose that action which produces the greatest value.

2. Other accounts of rationality

Procedural/deliberative rationality

Procedural accounts of practical reason take an action to be rational if it is an outcome of rational deliberation.

• 'Behaviour is procedurally rational when it is the outcome of appropriate deliberation' (H. Simon, 'From Substantive to Procedural Rationality'.)
• 'Rational action is action for (what the agent takes to be) an undefeated reason. It is not necessarily action for a reason which defeats all others' (J. Raz, The Morality of Freedom, p.339.)

Expressive rationality
Expressive accounts characterise actions as rational where they satisfactorily express rational evaluations of objects and persons:
'Practical reason demands that one's actions adequately express one's rational attitudes towards the people and things one cares about.' E. Anderson Value in Ethics and Economics p.18.
Consider the constitutive incommensurabilities outlined above.

Questions

What kinds of goods, if any, are such that they ought not or cannot be traded in markets?
Why is this the case?
Are there similarities with environmental goods?

Please work up an example that answers to these three questions and send it to the discussion site, if someone else has already used the same example think of another or comment on and reinforce their version.