Friday, March 27, 2009

Environmental economic soul searching

From the by now legendary environmental economic blogger John Whitehead a comment on the love and hate between environmentalists and environmental economists, posted on Energy Collective:

With limited resources, households, business firms and governments must make choices. If I have a fixed amount of money and I’m choosing between a monthly payment on a luxury sedan or a less expensive but more mundane sedan, I might forgo the big TV set and go with the higher payments on the luxury sedan. Part of the cost of the luxury sedan is the foregone benefit of the TV set. Economists see these so-called “opportunity costs” all over the place and we delight in our ability to do that. It is what makes us special … 

… but not so huggable. Finding these costs is what gets us into so much trouble with environmentalists. Environmentalists tend to see only the good, what economists call benefits, in environmental policies. Environmental economists see the good and the bad (i.e., the costs). Since environmental economists and environmentalists essentially agree on the good stuff (but, see below), the only thing left to discuss is the costs. We bring up the costs and environmentalists seem to go ballistic about how evil we are (even when we explicitly state that there are enormous benefits to certain environmental policies).

Yes, that does sound familiar. We are the people that often just have to open the cold showers.

Read the full article here.

1 comment:

Rory Williams said...

I am not an economist, but I hold the view that we should be looking at improved sustainability performance as an overarching objective, and environmental concerns are just a subset of that. By implication, there can be projects or actions that appear at first glance to be "good" because they preserve the environment, but using broader sustainability criteria the correct decision may not be so obvious. It's not just about the costs, either - it's about social, resource and other impacts.

On the related issue of choices, it's interesting to consider that an individual might claim, for example, to support the idea of fuel-efficient cars while driving a Hummer. This seems to be a contradiction, but I think it's related to the issue of comparative advantage: the person perceives some advantage over others (prestige, safety etc.) but if everyone was forced to drive a Prius, then this person would be happy to do so too. I think this is something that also needs to be considered in assessing the demand for a product or service, and in how we formulate policy and regulations for a more responsible management of Earth.

Perhaps that's obvious to an economist, but I was struck by it when I was reading an article recently. It's particularly interesting for me as a transport planner, since a lot of the objections I hear about people not wanting to walk or cycle are, I think, related to the comparative advantages in cars and how we plan our transport systems. The fact that people don't cycle much right now doesn't mean they won't if given the right conditions.