Extending Capital to Nature, Reducing Nature to Capital
Extending Capital to Nature, Reducing Nature to Capital
The Biden administration has announced it is inaugurating a program to incorporate the value of natural resources and ecological services into national income accounts. The New York Times article reporting this development predictably portrays the response as divided between two camps: on the one side are environmentalists, who think this will lead to more informed decision-making, and on the other Republicans and business interests who fear it is just a stalking horse for more regulation.
For the record, here is one environmentalist (me) who thinks it’s a bad idea—not completely, but mostly.
Are the quality of our environment and the availability of natural resources crucial to our well-being? Certainly. Can these effects be captured by economic measurement? Mostly no. The monetary economy is, almost by definition, the realm of the fungible. Money is what allows us to have more of one thing at the cost of less of another, and then to change our minds and switch back to what we had before. Pizzas can be bought and sold for money. School buildings can built for money. So as a society we face a choice between different consumption categories, one that is reversible if attitudes shift.
What is fundamental about most natural resources is that they are not fungible. If you destroy an old growth forest and use the proceeds to construct a highway—not to mention a high-end housing development in Sun Valley—you can’t turn around and liquidate the road to get the forest back. And ecological services, critical as they are (they are often have literal life and death consequences), are not produced or consumed for money, which means they are outside the chain of exchange that generates the fungibility of the goods inside it. The monetary value attached to them by economists is strictly notional, and it matters that no one will actually pay for their provision or receive income from it.
The wiser approach is to have parallel accounts, many of them, and measure the impacts on our well-being in units meaningful to them. Let the fungible money economy be recorded as is, and keep close track of resource depletion, the loss of ecological services and pollution in easily understood metrics of their own. Reducing nature to measures of monetary gains and losses drains it of what makes it different and intrinsically valuable.
PS: I’ve written two books that develop this argument in different contexts, Markets and Mortality: Economics, Dangerous Work and the Value of Human Life (1996) and Alligators in the Arctic and How to Avoid Them: Science, Economics and the Challenge of Catastrophic Climate Change (2022).
Peter:
We lived in a small Oak and Hickory woods west of Ohara airport in Illinois. We had a cedar sided small home there on a quarter acre. Two car garage with a shin-buster garage door. I repaired the welded door arms with soft steel I brought home from work as the welds broke over time. Lifting the door then was like doing dead weight lifts. I was young then.
There are some things which can never be replaced and are meant to be cared for diligently. We had a Burr Oak on the property next to the garage which was an approximate 3 feet in diameter. I would believe it was in excess of 100 years old. Near the well head was a Shag Bark Hickory tree. Something to be admired and cared for from our small cedar sided house.
We often talk about the small home in the woods where we started out and our first Elkhound who would scare the neighbor if got to close to the fence. Simple beginnings.
There are things which once gone, take years to replace, and we by chance lived next to one of them.
I am happy to see you posted at Econospeak. I thought we might lose it due to Barkley’s passing. He will be missed.
Sounds like gambling against the house. I’ve never agreed with assigning potential value to unharvested resources, counting chickens. It’s someone else’s dictation.
I’ve known some old trees in my time … left ’em standing
Ten Bears
You kind of wonder what they have seen over the years. You can hear them groan as they move in the wind. Talking back . . .
This Biden plan sounds to be in the same vein as telling people to consider the “equity” in their home. Equity in one’s home is not the same as the value the home provides to one’s ability to live.
But it worked for Wall Street didn’t it.
Then again, we are living in the age where political parties are referred to as brands. Can we distort our reality any further?
Daniel
Arizona housing is expected to decrease by 25%. This was on the news today.