New welfare indicators

Pedro Beça and Rui Santos think that GDP is not a sufficiently good indicator of welfare and devise a new indicator that gives more weight to things they like, such as government-spending in education and health care, and subtracts things they dislike, such as divorce, drug and alcohol use, consumption inequality and the use of "natural" resources.

If I were to construct a new welfare index I would give more weight to nature hiking and bird-watching, playing tennis, badminton and football, and indie music, and would subtract spending in quads and off-road motorcycles, hunting, wind farms, airport security, and folk music.

The currency of the intrinsic and existence values of biodiversity is money

William M. Adams and Kent H. Redford ask what would be the currency for the quantification of the intrinsic and existence values of biodiversity. The answer is money.

The debate about ecosystem services and biological conservation is about humans making decisions. Making decisions means making sacrifices. If we decide to plant a piece of land with eucalyptus to sequester carbon, we are giving up the opportunity to, for example, plant corn for food, or restore a forest for biodiversity. If we instead opt for some of the latter actions we are giving up the opportunity to sequester more carbon.

What are we willing to sacrifice in order to preserve the intrinsic and existence values of a species or an ecosystem? The set of things, such as alternative uses of land, human effort or human-made capital, that we are willing to sacrifice is the relevant measure of the intrinsic and existence values of biodiversity or nature. We can quantify this set of things using money.

Some values are easy to estimate. Prices reflect the value of things when costs and benefits accrue only to the people engaging in voluntary market transactions. As market prices are public, the information on values is readily available. Prices do not capture the true value of things when there are externalities. Thus, prices do not reflect the true value of nature because nature is valuable to many other people besides those directly engaged in markets for natural products. People make sacrifices for the sake of preserving nature and it is straightforward to quantify those sacrifices in terms of money. However, free-riding problems and other transaction costs discourage people from making as many sacrifices as nature is worth of.

So, the problem of quantifying the intrinsic and existence values of natural objects is not the lack of currency. The problem is that we can not accurately estimate the difference between what people actually pay for nature and what we would pay if all the relevant transactions were free from coordination friction. In the absence of explicit markets for intrinsic and existence values, the challenge is to analyze aspects of human behavior that give us clues about how much we really value nature. This information will help us to make better decisions.

Obama's business as usual

Three years ago, shortly before Obama announced his candidacy to president of the U.S., I wrote down my three global scenarios for the future of humanity. I was inspired by the similarly ambitious but more lavishly funded and less humorous efforts of the Millennium Ecosystem Assessment and the Global Scenario Group. My two more likely scenarios were the Business as Usual and the Business as Usual.

Yes, both had the same name. In one of them the ruling politicians employed the sustainability rhetoric, at least initially. Otherwise it was just like the other.

Ecosystem services and conservation biologists - the means and the end

William M. Adams and Kent H. Redford, on one side, and Matt Skroch and Laura López-Hoffman, on the other, publicly disagree on the effects of applying the concept of ecosystem services to biological conservation. But when you read their papers it is evident that while they disagree on the means - how to account for the true value of biodiversity and ecosystems - they agree on the end. And the end is not to advance human welfare:

There is much we agree on. They [Skroch and López-Hoffman] close with a sentence that could have been the abstract for our [Redford and Adams] editorial: "it is now our responsibility to ensure that these new tools are used in ways that we intended; namely, to protect the diversity of life on Earth."

Global warming and political pollution

Robert H. Frank correctly argues in The New York Times that "because of the wide variety of activities involved and the large number of people affected, there is no practical way to negotiate private solutions" to the problem of greenhouse gases and global warming. He concludes:

In the case of global warming, markets fail because we don’t take into account the costs that our carbon dioxide emissions impose on others. The least intrusive way to have us weigh those costs is by taxing emissions, or by requiring tradable emissions permits. Either step would move us closer to [...] the outcome we’d see if there were perfect information and no obstacles to free exchange.

Unfortunately, Frank does not discuss that politics fails because we don't take into account the costs that our opinions and votes impose on others; that because of the wide variety of activities involved and the large number of people affected, there is no practical way to negotiate perfect taxes or tradable permits; and that imperfectly-designed taxes or tradable permits can move us even further from the ideal outcome.