
The $100 million pond - robg
http://www.boston.com/bostonglobe/ideas/articles/2011/04/10/the_100_million_pond/?page=full
======
uvdiv
Economics is the study of decision-making in the presence of scarcity.
Scarcity exists. Tradeoffs exist. The tradeoff between money and natural
environments exists, and making choices _by definition_ involves making
comparative value judgments. It's willful ignorance to deny this.

 _"The utilitarianism also troubles some environmentalists: What happens when
the filtration plant becomes cheaper than conservation easements?"_

Or in less loaded language (and generalizing the monetary cost to encompass
all ethical and aesthetic utility functions): what happens if building a
filtration plant _is a better choice_ than conserving a watershed? Is this
thought unspeakable? If that is _never_ a better choice, than
environmentalists having nothing to worry about; and if it _could be_ a better
choice, than refusing to consider it is irrational and destructive.

This is the unpleasant reality: there is a tradeoff between environmental
protection and human labor. When conservation is monetarily the more costly
choice, conservation means people are forced to spend more labor to obtain the
same resource. A more expensive water supply means more hours of work expended
to pay utility bills. You make comparative value judgments here whether you
acknowledge it or not: to make an ethical proclamation saying environments are
"priceless" is to simultaneously value human labor as worthless.

~~~
rayiner
> what happens if building a filtration plant is a better choice than
> conserving a watershed? Is this thought unspeakable? If that is never a
> better choice, than environmentalists having nothing to worry about; and if
> it could be a better choice, than refusing to consider it is irrational and
> destructive.

In any case, the worry of environmentalists is far in the future. Today, we
generally make our economic decisions by pricing the ecological value of the
environment at $0.

Say a developer wants to buy forested land for $10m and create a housing
complex worth $30m. We consider that an economically beneficial transaction,
resulting in $20m in net benefit.

But that's not the actual calculus. What if the forest is providing $50m in
ecological services? Carbon sequestration, groundwater purification,
prevention of soil erosion, etc.

Our error results from treating the $10m price of the forest as the actual
cost of constructing the housing complex. That is, of course, not true. The
$10m is simply the value of one slice of property rights: the right to
exclusive possession of the land. It's not the net value of the land.

When the developer comes in and builds that housing complex, it does so not
because it's economically efficient overall, but because it is advantageous to
the developer. It yields $20m in net benefit for the developer, even though it
costs society as a whole $30m.

Environmentalism, in my opinion, fails in not couching its arguments in this
manner. People aren't sympathetic to arguments that a $30m housing complex
should be stopped in order to preserve the beauty of the forest. They are
likely much more sympathetic to the simple fact that in return for that
developer profiting $20m from the destruction of the forest, the surrounding
community will have to spend $50m in air and water purification, wastewater
treatment, erosion control, etc.

------
bobds
Put a price tag on nature? I am not liking this idea.

~~~
eru
Our actions often put an implicit price tag on nature. Rejecting the idea
often just leads to a lower implicit price tag.

One anecdote, I heard from a co-worker [0]: There was a elementary school that
had some asbestos in its walls. A consultant did some maths and presented his
report, starting with "Suppose the live of a child is worth 40,000 Pounds" and
went on to conclude that the replacement would probably avoid enough future
deaths / illnesses to justify their rather great costs.

The council that received the report rejected it outright, "We can't put a
price tag on children." In the end they never replaced the walls.

Moral of the story, the consultant shouldn't have started with the price tag,
but just concluded: If you don't do the replacements, you are valuing our
children's lives at less than x thousand GBP. And you wouldn't put such a low
value on them, would you?

[0] I can ask him for the source, if you are interested.

~~~
AngryParsley
In first-world countries, most calculations value human lives in the millions
of dollars. A bit less for infants and elderly, a bit more for young adults.

<http://squid314.livejournal.com/260949.html> explains the math pretty well:

 _Contrary to popular belief, you can put a dollar value on human life. That
dollar value is $5.8 million. Denying this leads to terrible consequences. Let
me explain._

We can do the same sort of thing with the environment. Of course, people get
outraged if you frame it the wrong way, since they don't like trading "sacred
values" for secular ones.
([http://faculty.haas.berkeley.edu/tetlock/Vita/Philip%20Tetlo...](http://faculty.haas.berkeley.edu/tetlock/Vita/Philip%20Tetlock/Phil%20Tetlock/2001-2003/2003%20Thinking%20the%20unthinkable....pdf))

~~~
eru
Thanks. That was an interesting link.

