Contribution to GTI Roundtable "Monetizing Nature"
I wholeheartedly agree with the many excellent points Barbara raises in her essay, including her overarching point that it is time to embrace the precautionary principle in making our policy decisions. Aligning public policy with that eminently sensible approach will be no small task, but if ever the time has been right, it is now.
Economics is a science of abstraction. All valuations and monetizations translate a range of values into a single value, typically dollars. In excluding a more complete and pluralistic set of values and engaging in a highly reductionist exercise even with respect to those values they purport to incorporate, economic valuations constrain our ability to make wise decisions. To be sure, in at least some instances, monetary valuations may serve as proxy indicators of relative significance, and even though the frame of reference is highly anthropocentric, such valuations may be somewhat useful in helping some people grasp more firmly some idea of the magnitude of some of the planet’s many problems.
But these valuations are imperfect information, compounded by incomplete data sets, questionable methodologies, exclusion of non-quantifiable values, and other inherent flaws. This is not, however, a problem unique to economic valuation. Society as a whole is operating under conditions of ignorance, making decisions (and failing to make decisions) based on incomplete information. As we all know, such is the way to ruin. We will not find a way out of this box so long as we are stuck within it, failing to see through it the greater systems in which our entire human endeavor is firmly embedded and interconnected.
Economists call this the problem of asymmetric information, and in its simplest form, it is a problem of unequal bargaining power. If one party to a transaction possesses superior information relevant to the deal, there is a high likelihood that the other party will make a less than optimal decision than she would if she possessed that information. Perhaps she would not make the deal, or perhaps she would but only under different terms. To frame this microeconomic issue in biophysical terms, suppose a producer markets a product but fails to disclose that it contains some highly carcinogenic toxin. Not only will the outcome(s) be market-distorting (sub-optimal because resources will be allocated to purchasing that product instead of a possibly healthier alternative), but they will be incredibly dangerous. Depending on how many units are sold, one would expect cancer rates to rise among consumers of that product. If, one way or another, this results in a potent toxin being introduced into waste streams, there will be potential ecological consequences as well. Transaction by transaction, asymmetric information has ripple effects.
Conditions of asymmetric information can be pervasive, and in the case of ecological impacts of economic activities, they are utterly systemic, leading to poor decisions in every sphere and stratum of society, including regulatory failure after regulatory failure. There is one assumption that many sustainability advocates share with the economists: that we have more perfect information conditions than are actually so. In other words, there are assumptions that information is available, either directly to confront a set of problems (perhaps a complex causal web affecting networked ecological systems), or indirectly to achieve monetary valuations to send price signals that it is hoped will serve as reasonable proxies for ecological values. This is not entirely true. There is of course a growing body of literature being generated by growing numbers of people working in the sciences, utilizing better and better technologies and modeling methodologies to understand existing and shifting states of ecological systems up to and including some planetary boundaries and the overall earth system itself. I am increasingly impressed as I learn about one or another effort to map and monitor the planet’s ecosystems, and hopefully the resources necessary to further this work will continue to grow.
But there is no parallel effort to capture all the relevant information concerning the ways economic actors impact ecological systems, and even less so with respect to the direct, indirect, and cumulative effects of those impacts on wider systems. Absent this information, we are looking only at one side of the equation, one part of the picture. I do not see how this makes sense from a systems perspective, by which I mean the self-organizing, self-regulating human social systems that are both generating these impacts and capable of exercising will, forethought, and restraint. There is a rapidly growing, voluminous outpouring of corporate sustainability reports, but they are of dubious quality and questionable utility. They are too often exercises in greenwashing, at best selective recitations of “progress” with little in the way of meaningful, facts-on-the-ground reporting of the kind of localized information Unmüßig points to in her essay. The problem is that rarely is there any underlying data, and pretty much never is the data adequate to understand much of, well, anything. Monetizations in this context only serve to obfuscate even more, increasing faux transparency to such extraordinarily high levels of opacity that it is difficult to understand even what the point is.
The root cause is the economist’s hubristic insistence that he and he alone has the capacity to translate biophysical facts into a language we can all understand. The economist’s language is helpful, but I do hold out hope that a sufficient percentage of the public and our policy makers are capable of understanding at least rudimentary levels of another, far more relevant language, which is that of science. If we could only liberate all of this information, there would at least be a very good shot that smart people the world around will be able to process all that data, develop bodies of information and knowledge bases, and start to pressure for better policy, and to convey the stories and teachings—and facts—that are to me the only way out of this box and into a transition to an authentically sustainable future.
Where there are conditions of asymmetric information, economists have a rather simple solution: the least-cost provider should supply the information. The problem is that polluters have zero incentive to share accurate and timely information about their pollution. That can be cured, and we can start with one of the lightest possible forms of regulation: mandatory information disclosure. By forcing disclosure of biophysical impacts in biophysical terms, we can open a vast pipeline of continually flowing information useful to those working in the sciences, as well as policy makers, journalists, NGOs, consumers, investors, and anyone else interested in such things.
I do not reject wholesale the valuation exercise (though I do reject commodification), but I think it needs to be made a bit more honest, framed in a way that more accurately and clearly contextualizes and discloses the limitations of those approaches, tempered by real facts and real data, which ought to be the centerpiece of the conversation. What we need to demand is more scientific literacy, ecological literacy, and ecological honesty about what we are doing to the planet and what we need to do to transition to a meaningfully sustainable sustainability. It seems only right to bring those actors whose operations, supply chains and products are most impairing the earth system into the conversation as ecological truth tellers. I think doing so will make possible many of the fantastic ideas and solutions advanced in discussions such as this.