The New Economy of Nature by Gretchen C. Daily and Katherine Ellison

“Instead, the water, born as rain and melted snow on mountaintops as far as 125 miles away from those who will ultimately drink it, is naturally cleansed as it makes its way downhill toward the reservoirs. Beneath the forest floor, soil and fine roots filter the water and hidden microorganisms break down contaminants. In the streams, plants absorb as much as half of the surplus nutrients running into the waterway, such as nitrogen from automobile emissions and fertilizer and manure used on nearby farms. In open stretches, wetlands continue the filtering as cattails and other plants voraciously take up nutrients while trapping sediment and heavy metals. After reaching the reservoirs, the water is further cleansed as it sits and waits. Dead algae, floating branches and leaves, and remaining particles of grit slowly sink to the bottom.”

“This natural process, supplemented by small doses of chlorine and fluoride at the end of the water’s journey, worked beautifully for most of the twentieth century. But then signs appeared of some mechanical failures. The trouble was relentless new development: roads, subdivisions, and second homes were popping up all over the watershed, most of which is privately owned. Failing septic systems were leaking raw sewage into streams. Farming and forestry were also taking a toll, with lawn chemicals, fertilizers, pesticides, and manure all being washed into the reservoirs at an unprecedented rate.”

“A major government body had acted as if an ecosystem - the watershed - were worth protecting in its natural state for the economic benefits it gives society. It had invested in its restoration as if it were in fact a precious piece of infrastructure.”

“. . . governments around the world . . . . were starting to calculate the costs of conserving watersheds and compare them with the costs of building mechanical plants. In a bold departure from business as usual, they were taking stock of their natural capital. In the process, they were learning how ecosystems - environments of interacting plants, animals, and microbes, from coastal tide pools to Loire Valley vineyards to expanses of Amazonian rainforest - can be seen as capital assets, supplying human beings with services that sustain and enhance our lives. These “ecosystem services” provide not only food and wine but also cleansing of the Earth’s air and water, protection from the elements, and refreshment and serenity for human spirits.”

“Historically, the labor of nature has been thought of mostly as free. And with the exception of a few specific goods, such as farm crops and timber, the use of nature’s services is startlingly unregulated. Despite our assiduous watch over other forms of capital - physical (homes, cars, factories), financial (cash, savings accounts, corporate stocks), and human (skills and knowledge) - we haven’t even taken measure of the ecosystem capital stocks that produce these most vital of labors. We lack a formal system of appraising or monitoring the value of natural assets, and we have few means of insuring them against damage or loss.”

“Even more striking is how rarely investments in ecosystem capital are rewarded economically. Typically, the property owners - whether individuals, corporations, governments, or other institutions - are not compensated for the services the natural assets on their land provide to society. With rare exception, owners of coastal wetlands are not paid for the abundance of seafood the wetlands nurture, nor are owners of tropical forests compensated for that ecosystem’s contribution to the pharmaceutical industry and climate stability. As a result, many crucial types of ecosystem capital are undergoing rapid degradation and depletion. Compounding the problem is that the importance of ecosystem services is often widely appreciated only upon their loss.”

“The source of this predicament is easy to comprehend. For most of humankind’s experience on Earth, ecosystem capital was available in sufficient abundance, and human activities were sufficiently limited, so that it was reasonable to think of ecosystem services as free. Yet today, nature everywhere is under siege. Each year the world loses some thirty million acres of tropical forest, an area slightly larger than Pennsylvania. At this rate, the last rainforest tree will bow out - dead on arrival at a sawmill or in a puff of smoke - around the middle of the twenty-first century. Biodiversity is being reduced to the lowest levels in human history. Homo sapiens has already wiped out one-quarter of all bird species, and an estimated eleven percent more are on the path to extinction, along with twenty-four percent of mammal and eleven percent of plant species. One-quarter of the world’s coral reefs have been destroyed, with many others undergoing serious decline. To top it off, we’re taking fish out of the sea for consumption faster than they can reproduce.”

“. . . economists have long been concerned with issues of resource scarcity and limits to human activities. That?fs why their field was dubbed “the dismal science”. Yet throughout the 1960s, ’70s, and ’80s, most economists clashed with ecologists. Economists accused ecologists of being alarmist about adverse human effects on Earth and of proposing costly and unnecessary measures of protection. Meanwhile, ecologists charged economists with promoting “growth” at any price and misusing partial indicators of well-being, such as the gross national product, that are blind to wear and tear on the planet.”

“. . . . efforts to forge a new discipline integrating ecology and economics . . . . An early participant in this movement was Stanford professor and Nobel laureate Kenneth Arrow, who for decades has been disturbed by the way economics dismisses “externalities” . . . .”

“We must stop viewing the environment as an amenity, a luxury the poor can’t afford.” Quite the contrary, Dasgupta is convinced that the local environment is often the greatest asset for poor families because they have few alternatives for income if it fails. The rich, by contrast, have a global reach for all sorts of ecosystem goods and services, as revealed by their dinner tables laden with fresh fruit, fish, spring water, and flowers from all over the planet. Ultimately, though, the rich are also vulnerable to faltering ecosystem services and the social instability that can arise as a result.”

“Important as they clearly are to rich and poor alike, ecosystem services typically carry little or no formally recognized economic value. As Columbia University economist Geoffrey Heal points out, economics is concerned more with prices than with values or importance. “The price of a good” - say, a loaf of bread or a car or a piece of jewelry - “does not reflect its importance in any overall social or philosophical sense,” says Heal. “Very unimportant goods can be valued more highly by the market - have higher prices - than very important goods.”

“Why do diamonds command a much higher price than water, when water is obviously so much more key to human survival? The answer, proposed by Englishman Alfred Marshall, is now common knowledge: price is set by supply and demand. In the case of water, Heal explains, the supply (at least in Marshall’s England) “was so large as to exceed the amount that could possibly be demanded at any price. Consequently the price was zero; water was free. Now, of course, the demand for water has increased greatly as a result of population growth and rising prosperity, while the supply has remained roughly constant, so that water is no longer free.” Diamonds, by contrast, started out scarce: the desire for ownership always exceeded their supply. Their market price was thus high - set by rich people competing for the few diamonds available.”

“Although we’ve engineered a financial system so sophisticated as to include market values for feng shui masters and interest-rate derivatives, we’ve not yet managed to establish them for such vital and everyday services as water purification and flood protection.”

“Next, we need to change the rules of the game so as to produce new incentives for environmental protection, geared to both society’s long-term well-being and individuals’ self-interest. One way to do this is with taxes and subsidies targeting major environmental externalities, a strategy widely employed in Europe. A tax on consumption of fossil fuels, for instance, makes users of a shared resource - in this case, the sky, being used as a dumping ground - reduce their consumption and the damage it causes. It also makes higher-priced alternative energy sources (with lower environmental costs) more financially attractive. Consumption taxes such as this can be offset by reductions in income tax rates”

“Another tactic, sometimes more politically feasible, is to establish ownership of ecosystem assets and services. This can avert the famous “tragedy of the commons” that often occurs when there is open access to a natural resource. It happens because each individual has more to gain by, say, launching another fishing boat than to lose by depleting the fishery. But when ownership rights to nature’s goods and services are assigned, the new owners - be they private citizens, communities, corporations, interest groups, or governments - face unshared risk of those rights diminishing in value. Thus, as explained by economist and Nobel laureate Ronald Coase, they are motivated to fight for the asset?fs protection.”

“Efforts are underway to establish such rights and develop international markets for the purchase and sale of this forest ecosystem service, which in turn would establish a “market value”, or price.”

“Without prices being set, nature becomes like an all-you-can-eat buffet - and I don’t know anyone who doesn’t overeat at a buffet,” says Richard Sandor, an environmentally minded financial innovator based in Chicago.”

“One thing is clear: private enterprise cannot substitute for governments, particularly in view of the increasing risk of climate change, a global problem requiring global cooperation if it’s not to override all other environmental and economic worries in a matter of decades. Government regulation may be called for to kick-start and supervise the profound economic transformation needed to ward off this and other environmental threats. Yet this transformation can be speeded with the use of market mechanisms and other financial incentives, tactics that have been glaringly underemployed.”

“Whether they appeal to us or not, experiments in finding market values for such essential gifts of nature as clean water and fresh air are well underway. The great unanswered question in all of this is whether the drive for profits, which has done so much harm to the planet, can finally be harnessed to save it.”

Read the full article at Orion Magazine

Keywords : nature, commons, earth’s life-support systems, man, partnership, cooperation, capitalism, self-interest, profit maximization, globalization, ecosocial crisis, ecosocionomics, global governance
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