By Jennifer Power
Earlier this month, I had the chance to interview Jim Pittman and Maya Kocian of Earth Economics, a Tacoma-based non-profit research and advocacy organization. We sat down together while the two were at Bioneers 2008 to present on Earth Economics' most recent report, A New View of the Puget Sound Economy: The Economic Value of Nature’s Services in the Puget Sound Basin. Their workshop was titled, Our Trillion Dollar Asset: The Economic Value of Nature's Services in the Puget Sound Basin.
Several months ago, we posted about Earth Economics' report analyzing the economic values of resources here in the Puget Sound region. The organization found that people who live here enjoy significant benefit from the surrounding environment that goes beyond what you see in a land or real estate report. Among those benefits: better health, reliable clean drinking water, a variety of food resources and more.
Putting a price on resources normally thought of as "priceless" draws some raised eyebrows, but it also provides a solid base of comparison that helps us understand what we're getting or giving up in the big picture when we agree to new development, drilling, designation of a protected national forest, etc. I was happy to have the chance to discuss the process of environmental economics more in-depth with Kocian and Pittman. A transcript follows:
Jennifer Power:How is the process of assigning value to environmental resources different from commodification?
Jim Pittman:Our report on the $1 trillion value of natural capital in Puget Sound uses dollars as a unit of measurement. We use dollars as a unit for estimating the value of things because it is a commonly understood metric for value. This can be confusing, because when people see a dollar sign it is easy to assume a discussion is about price. There is so much more to economic value than what we see in market prices.
Healthy, intact natural ecosystems provide services, yet most of the actual land producing these services is already owned. In some sense these natural assets have already been “commodified,” so to speak, in the real estate market. The question we ask in ecological economics is about how public and private landowners can best manage the value nature holds beyond the scope of current markets. We also acknowledge that some things are absolutely priceless: climate stability, the ozone layer, medicinal species, cultural diversity—that these things are priceless certainly doesn’t mean they are valueless.
Power:What other problems are solved with these new economic valuation methods? And what did you mention in your presentation about a "discount rate?"
Maya Kocian: Discount rates are used in economics to reduce the value from long-term asset management. When calculating the present value of investments in our natural capital assets, we should only be using a zero percent discount rate to recognize the long-term value. Healthy ecosystems do not decrease in value over time--they actually increase in value. In contrast, the moment you buy a computer or a car – these are examples of built capital - the value starts to go down right away because it’s not a living system.
Also, our report is a snapshot view of the Puget Sound’s natural infrastructure. The problem with this is that it doesn’t incorporate the dynamic flows of ecosystems. In reality, ecosystem processes and functions go through constant change. These dynamic changes can be slow at times, then pass an unknown threshold and speed up. We are pioneering some new information technology tools to explore these things, specifically the Artificial Intelligence for Ecosystem Services (ARIES) Project Consortium with the Gund Institute EcoInformatics Collaboratory and Conservation International.
1. What are some other areas that are unexplored in traditional economics?
MK: The social justice side of ecological economics needs more attention, especially in the U.S. There’s an ecological economist in Spain called Joan Martinez-Alier who is doing great work on the social justice front of ecological economics, while in the U.S. there is more of a focus on environmental aspects of ecological economics.
JP: The sustainability movement as a whole in the U.S. seems to do that too—focus on environmental issues more than social aspects of sustainability. Social issues of justice, equity and economic inequality are the big issues that are interconnected with and inseparable from environmental issues, as was so clear in the wake of Hurricane Katrina.
MK: So, this brings us back to the four principles of ecological economics that I talked about in our presentation: scale, justice, efficiency and good governance. These include the connections between environmental, social, economic issues and decision-making.
JP: This last part is very important: what is the appropriate decision-making process in any given situation? In public and private life today we are seeing a rapidly changing world in which we must apply new approaches to collaborative decision-making. Ecological economists use these new methods to fill in the gaps left by dollar valuation.
Power:What are some other new tools from the environmental economics field?
Kocian:One example of a different measurement tool is the Genuine Progress Indicator that was developed to better represent environmental and social issues. For these things the Gross Domestic Product is not a measurement of progress, it’s a measurement of growth. These days, we’re realizing there’s such a thing as uneconomic growth. If we want to measure progress we have to learn how to subtract in our accounting of social and environmental costs.
Pittman:That’s a good one. Outside the U.S. a similar approach is known as the Index of Sustainable Economic Welfare (ISEW). An easy example to differentiate between these new tools and the GDP would be that the new approaches subtract negative economic costs from car accidents, disease or pollution. The GDP sees any social or environmental costs or damages as positive economic growth, the GPI and ISEW view it as a minus.
Kocian:Another example is divorce. Costs for two households and all the lawyer’s fees are all a plus in the GDP calculation.
Pittman:Oil spills too – a plus on the GDP but not on the GPI. Clearly one is more accurate.
Kocian:A next step in applying ecological economics to the Puget Sound or the current economic crisis, aside from continued work on valuing ecosystem services, would be to use these tools. Our founder and Executive Director, David Batker, is also working with leading ecological economists around the world on a new Earth-scale economic framework as a new, green economic alternative to the World Bank, International Monetary Fund and other global economic policy institutions created at the Bretton Woods Conference at the end of WWII. Clearly the world needs a new model for understanding the science of economics and we provide a part of this picture, a part that includes consideration of social and environmental issues.
Jennifer Power has been a happy resident of Seattle since 2002 and hopes she never has to leave. She writes about her life in Seattle's Capitol Hill neighborhood at Life on the Hill and Other Stories.