Do we put a price on Nature, including the ecosystem, or not?
from Edward Fullbrook
Two articles in today’s Guardian point to a major dilemma facing economics and every economist. Do we put a price on Nature, including the ecosystem, or not? One of the Guardian articles leaks an unpublished UN report which estimates that the world’s 3,000 biggest companies cause $2.2tr of environmental damage a year and if made to pay for it would lose one-third of their profits. More than half of this total is attributed to emissions of greenhouse gases. The same article anticipates the release of another UN report this summer which also will attempt to put a price on global environmental damage. The idea behind these reports is that the guilty companies might be made to “pay” for the damage they do.
The other Guradian article is by Andrew Simms of the New Economics Foundation. He argues that “Putting a price on nature becomes meaningless if we treat the ecosystems upon which we depend as mere commodities with a price for trading.” Like our profession’s recent romance with “financial innovation”, Simms sees this new enthusiasm as an economist’s fool’s-gold, but one that potentially is infinitely more damaging. He writes:
Yet in exercises like this, we quickly hit the paradox of environmental economics. By putting a price on nature, hopefully it makes it less likely that we will treat the world, and its natural resources, as if it were a business in liquidation. Yet there is a point when it becomes meaningless to treat the ecosystems upon which we depend as mere commodities with a price for trading. For example, what price would you put on the additional tonne of carbon which, when burned, triggers irreversible, catastrophic climate change? Who would have the right to even consider selling off the climate upon which civilisation depends? The avoidance of such damage is literally priceless.
This dilemma between wanting to make polluters pay and avoiding the ultimate category mistake urgently needs to be discussed. We must also learn not to tie ourselves in nonsensical knots when using side-by-side the terms “value”, “price” and “measurement”.