Pavan Sukhdev

"We still have a lot to learn about the nature of value and the value of nature"

Of Markets and Failures

Way back in January 2009, in his inaugural address, President Obama waxed eloquent about his vision of harnessing  “the sun and the winds and the soil to fuel our cars and run our factories”. Achieving energy independence for the US through alternative fuel was indeed a noble goal, both for national security and for biospheric survival.  But of course, little was heard about that goal for the next several years, and when we did finally hear, the vision had morphed beyond recognition.

It was no longer about renewables, but about more fossil fuels. The unlikely hero was fracking natural gas, and investments poured in from those who would benefit the most: the oil & gas majors.

Break-even levels for fracking in the US had been estimated by the industry at around USD 75-80 per barrel of crude, and of course, oil prices since 2010 had been comfortably above USD 100 most of the time, so the oil & gas majors and their bankers eagerly placed their bets. Does this sound familiar?  Heard of the housing bubble?

Housing prices had been rising for most of the millennial decade when, in 2007, mortgage originators structured CDO’s which were tranched and rated by agency analysts based on modelled scenarios of further rising housing prices. The rest is history. For the same reason, US fracking is also history, not only because history repeats many lessons, but because it does not repeat price trends.

Saudi Arabia and OPEC’s overt strategy is to put big shale out of business, and their targets are clear: they are producing enough crude to keep prices below USD 75-80/bbl. They seem eminently comfortable with the idea of doing so because their production costs are closer to USD 5/bbl.

All of the above is reasonably clear and needs no genius to forecast. The bit that we don’t know is: how much money will the US other governments waste this time shoring up this economic failure because they now think that oil & gas companies are also “too big to fail”?

 Time and time again, governments when confronted with economic crisis caused by bad thinking and worse investment have thrown away the neo-classical economics textbook that they swear by, i.e., the one which tells us that markets are there to punish the mis-allocation of capital.  They instead throw public resources (read: your taxes and mine) at failed banks, failed insurance companies (eg: AIG), failed car companies (eg: General Motors), etc. Why not failed oil & gas companies? Well, so far, explorers and producers are well capitalized through decades of profitable high-margin operations based on low-cost drilling concessions, effective exploration, and high oil prices. Neither  of these features holds true anymore, so my guess is that the US and other governments will have to make a hard decision: earn the wrath of society by doing what they have always done, bailing out their friends in business, or they will have to admit that they got energy policy completely wrong.

The right energy vision for the “Anthropocene”, an era where we humans have become the dominant geological force pushing earth systems over their safe thresholds or planetary boundaries, was indeed that of Obama circa 2008-9.

The right energy strategy was investment in alternative fuels, not in more fossil fuels.

The right energy policy would have been to reduce and gradually eliminate the estimated USD 1 Trillion of price and production subsidies given to fossil fuels (the number rises to USD 2 Trillion if, like the IMF, you include emissions’ economic costs).

Instead, in terms of energy, we are entering 2015 with clouded vision, wrong strategy, confused policies and bad investments.

I have a simple request for Governments in 2015. Please DO NOT rescue those who have made bad economic decisions yet again, just allow them to fail. It will be good for the economy and jobs, and even better for our safe planetary existence.

January 5th, 2015 Posted by | Uncategorized | no comments

What we need in 2014: fewer leaders, more followers

Looking back on 2013, I wish I had been wrong on some forecasts (in these pages last year) which I got right, and right on some which I got wrong.

The devastation and anguish unleashed by Typhoon Haiyan in the Philippines makes me wish I had been wrong about the escalating human costs of governments’ prevarication. And I wish I had been right that widespread frustration with our dominant free-market capitalist model would lead to increasing protests, through the net and on the streets, making many more business leaders and politicians begin righting wrongs, if only for fear of losing profits and power.

Unfortunately, an Arab Spring of crony capitalism just did not happen. Despite many protests, neither the root cause of many of today’s biggest social and environmental problems (a defunct economic model built around a corporation without social purpose) nor the most likely solutions were named or nailed. Agitators remained uneducated, and the educated did not agitate.

And so, as we enter 2014, this corporate capitalist model is still driving the world economy in the wrong direction, worsening environmental risks and increasing ecological scarcities. The single largest sustainability challenge of our time is this: today’s corporation, the main agent of today’s economy, generating two-thirds of global GDP and jobs, needs to be redesigned. Without corporate redesign, we are unlikely to see any progress towards a “green economy”.

The good news is that corporate redesign has begun. As I outlined in 2013, corporate leaders are demonstrating new pathways and solutions. Unfortunately, these leaders and their supply chains account for perhaps no more than 5% of the world economy, and their leadership practices largely remain the subject of erudite global conferences, but not models for urgent micro-policy reform.

In 2014, what we need is not more sustainability leadership but more sustainability followership. And to ensure the leaders have followers, we need urgent reforms in performance reporting, advertising, leverage, and taxation, with entire business sectors moving in unison. They will have to overcome many challenges on the way: the primacy of profits, cut-throat competition, first-mover disadvantage, and corporate egos.

Today’s economic structure actually makes this challenge easier than it sounds, because almost all business sectors – from aerospace to agriculture to apparels and proceeding down the alphabet – have no more than ten or twenty global multinationals who control 80% or 90% of each market. Their success will depend on how well they work together as a global sector and how well they partner with governments and civil society.

One new global partnership of this kind is the Tropical Forest Alliance, TFA-2020. It was catalysed by the Consumer Goods Forum, supported by many governments and NGOs, and launched in June this year in Jakarta by Indonesia’s president Susilo Bambang Yudhoyono and Unilever Chairman Paul Polman. Their goal: to end tropical deforestation due to four major global agri-commodity sectors (palm oil, pulp and paper, beef and soya) by 2020.

As 2014 begins, I forecast that TFA-2020 and many other such business-sector-wide initiatives will be formed, and will begin making a difference. Am I an optimist? Yes, because, as Winston Churchill said, “it does not seem too much use being anything else.”

January 7th, 2014 Posted by | Uncategorized | one comment

Mock advert exploiting women reveals disturbing corporate culture

A few days into the JWT/Ford ‘ScamAd’ scandal (an offensive mock advertisement for the Ford ‘Figo’ submitted for a prestigious local industry award, showing a Silvio Berlusconi look-alike leering at three scantily clad women bound and gagged in his ‘Figo’ car boot) the damage control machineries of both agency and advertiser have swung into action. The incident will soon be smothered out of sight. But there will remain fundamental and disturbing questions that need to be asked and answered.

Questions such as: why has the advertising profession repeatedly exploited women – objectifying them to sell products, manipulating them to buy products? What kind of corporate culture prevailed at WPP’s Indian arm, JWT, that allowed such an offensive idea to not just be created, but appreciated enough to be submitted for an industry award?

Sexual images and innuendo are so widely used in advertising that such exploitation is more norm than exception. Societal values and sensitivities, and sometimes censorship, usually keep such advertising from becoming borderline pornography. However, these constraints did not stop JWT India from designing a doubly offensive advertisement.

Firstly, it exploited a tawdry sex scandal involving Italy’s ex-prime minister Berlusconi. Secondly, it did so in a country reeling from the shock of a gruesome and fatal gang-rape of a 23 year old woman which brought citizens onto the streets in protest against the apathy and incompetence of its authorities. For JWT India to select such an advert, even a mock-up, for an industry award shows a serious failure of corporate culture, an utter lack of respect for women and a total lack of sensitivity for the society in which they do business.

JWT India CEO, Colvyn Harris, morally responsible for his company’s culture seemed conspicuous by his absence as the scandal unfolded. Two senior creative staff who reportedly approved and submitted the advertisements for the Abby award were sacked.

Advertising history is rife with campaigns that have manipulated women. As early as the 1920s, the American Tobacco Company’s campaign for its cigarette Lucky Strike (“Reach for a Lucky Instead of a Sweet”) exploited emerging ideals of women’s liberation as well as anxieties about body image. The campaign’s posters showed before and after images of women who had dropped prevailing taboos about smoking, achieving a statement of independence anda slimmer figure. Over four decades later, in 1968, Phillip Morris’ campaign for Virginia Slims specifically targeted women (“You’ve come a long way, baby”) in the face of impending US legislation that would soon ban all TV and radio advertising for cigarettes.

Infant formula milk was sold for decades on the medically false premise that it was “better than mothers’ milk.” Impoverished mothers in west and central Africa were misled to stop breast-feeding, buy formula they could ill afford, often dilute it using dirty water and causing more babies to die. Why have advertising agencies thought it acceptable to exploit women’s emotions, ranging from body insecurities to the most visceral of emotions, that of a mother for her child?

There seem to be two very fundamental issues at the heart of this controversy that need to be recognised and dealt with.

Firstly, the idea that advertising is and should be ethically neutral. Advertising doyen David Ogilvy once said that “Advertising reflects the mores of society, but does not influence them.” Really? The advertising world ought to admit that its very purpose is to influence how consumers think and feel.

Secondly, advertising is a business. Like any other business, it has a duty of care and responsibility and an implicit ‘social license to operate.’ Instilling the right corporate culture which respects that licence is a key responsibility for any CEO. Advertising CEOs are no exception.

In my recent book I describe how a new species of corporation – ‘Corporation 2020′ – is needed for tomorrow’s sustainable economy. One that builds values into its business model, targets positive impacts on third-parties and society, and reduces or eliminates negative impacts. Such corporations are still too few, I could not count a single Corporation 2020 amongst the titans of today’s media and advertising world. I hope that changes sooner rather than later.

April 3rd, 2013 Posted by | Uncategorized | no comments

Will 2013 bring a new, sustainable world?

They were right, the world has ended. The world as we knew it came to an end more or less when the Mayan calendar ran out, on winter solstice, 2012.

The old world that died in 2012 had a stable climate, cheap commodities, governments managing change, high growth in output and consumption, and corporations driving economies and serving societies all deeply infused with a blind belief in free markets.

The new world that begins now, in 2013, will be defined by frightening climate instability, commodity and food prices ratcheting skywards, impotent governments reduced to spectators in their own countries, continuing recession, and corporations either being hounded as common criminals or laurelled as champions of virtuous change. An internet-enabled anarchy of the wronged will pull entire countries along unplanned roller-coaster rides through a Disneyland world of commotion and crises. Briefly, here is why I think so.

Breaching the limits of the world’s ecosystems

Our world is rapidly approaching planetary boundaries – across climate, biodiversity, nitrogen, phosphorous, ocean acidification, freshwater scarcity, inter alia. Economies worldwide are still headed in the wrong direction – towards resource exhaustion, social disparities, and persistent poverty. What we need is change at the speed of light, driven by bold leaders. What we have is change at the speed of change, hesitantly nudged by cautious governments. Too little, too late, such prevarication will spill into natural disasters. We saw some as 2012 ended – we shall see more as the earth’s ecosystems do what all systems in equilibrium try their best to do: stay in equilibrium, until they simply cannot. Until what we call “resilience” is replaced by “thresholds” being breached, planetary boundaries being crossed.

Breached thresholds will lead ecosystems into new states of equilibrium, which may not be any good for human life, society, or economy.

The vulnerable will suffer most

Increasing climate disruptions will cause higher price volatility in agricommodities, due to crop failures and crop losses. The world is over-invested in intensive agriculture, and due to a corresponding lack of investment to improve yields and resilience for smallholder farming, the poor will actually suffer the most from these supply disruptions and price shocks.

Bold leadership

In the absence of political leadership, others will provide bold leadership, such as corporations, who are the lion’s share of today’s economy, GDP and jobs.Some have already shown real leadership in 2012, such as by measuring anddisclosing their externalities (Puma), or lengthening their investor and analyst horizons by stopping quarterly reports (Unilever). Many more will follow these trendsetters in 2013.

An end to crony capitalism

At the same time, adherents of the old model of corporation – profit-fixated, externality-churning, disconnected from social purpose – will find the going tougher. Public patience with being exploited by the freedoms of freemarket capitalism is running thin. Public outrage at investment banking excesses has not died even four years after the global financial crisis. ”Corporate externalities” is no longer an obscure term hidden at the end of economics textbooks, but a common phrase in news media.

Corporations that habitually free-lunched off global and national governance weaknesses and cheap natural resources will realise that their free lunch is nearly over; mainly because the “crony” governments of their crony-capitalist alliances are either emaciated, or bankrupt, or cannot toe the line of corporate profitability any longer in the face of scientific evidence and citizen activism.Indeed, from the first Arab Spring uprising to a campaign of moral outrage in Britain over corporate tax avoidance, which immediately yielded millions from Starbucks, the internet-enabled anarchy of the wronged has become the vehicle of successful change.

Many years ago, Arundhati Roy, author of The God of Small Things said: “Another world is not only possible, she is on her way. On a quiet day, I can hear her breathing.”

Winter solstice, 2012, was a quiet day. The earth’s magnetic field did not flip. Planes did not fall out of the sky. A nuclear holocaust was not launched. A giant meteorite did not slam into earth.

But if you had listened for a quieter strain, you would have heard her. A new world had begun.

January 5th, 2013 Posted by | Uncategorized | no comments

Biodiversity COP-11 : View from a Distance

I’ve been a week at Hyderabad, attending CBD COP-11, the bi-annual conference of parties to the UN Convention on Biological Diversity. Over 170 of the 193 signatories to the Convention worked away feverishly at Hyderabad till early Saturday morning, negotiating an outcome document as heavy as they always are. My recent work as chair of the High-level Panel on estimating the financing required to meet the 20 targets agreed at the previous COP at Nagoya, in Aichi Prefecture, Japan, two years ago, was among the inputs to their process.

As I came away from Hyderabad, with COP-11 discussions leading to a doubling of international commitments to biodiversity, from US$ 6 billion to US$ 12 billion out to 2015, I wondered if I should be pleased or disappointed? Our report on financing the Aichi Targets had not made things any easier for the negotiators: our estimates of what was needed truly to achieve the 20 Aichi Targets were an order of magnitude higher than existing baselines as well as commitments made.

Would this increase in billions make a difference when financing needs are in tens and hundreds of billions? Biodiversity is the living fabric of this planet, its ecosystems, species and genes. Conserving biodiversity includes reducing forest losses and restoring forest cover (Aichi Targets #5 and #14) to increase soil fertility, prevent droughts, mitigate flood damage, arrest the ingress of desertification, and provide better livelihoods for the world’s 1.3 billion small farmers. Increasing marine protected areas (part of Aichi Target#11) means increasing the stocks of fish in the sea, which provide the main source of animal protein for over a billion in the developing world. Controlling pollution (Aichi Target #8) will not just reduce biodiversity loss, it will improve human health, freshwater, agriculture, fisheries.. the list goes on. These Aichi Targets are a large part of Sustainable Development for the world – no wonder that their financing is not small change.

The results of COP-11 discussions were not disappointing in themselves, but it was sad that the wider goals of sustainable development for which they are essential were not receiving more urgent and widespread attention. Meanwhile, the need for transitioning to a ‘green economy’ to deliver these goals grows more palpable and urgent every year. The ‘silos’ in which we all operate are part of the problem. Desertification and Climate Change fall under separate UN Conventions (all born on the same day in Rio, 1992) even though they are inextricably linked to the maintenance and restoration of ecosystems, the large-scale layer of biodiversity.

But it is difficult to see anything in perspective if one is immersed in it, so I am lucky that I had to fly from Hyderabad to Bhutan just after COP-11, to attend a conference of Tiger Range countries, organzied by the World Bank’s Global Tiger Initiative.

You drive along the breathtaking Paro river valley from the airport to Thimphu, Bhutan’s capital. All along, you are greeted by legions of fluttering prayer-flags dancing out their hymns to the drumbeat of a bracing mountain wind. Far below, the crystal waters of the Paro sparkle in rhytmic company, flashing clear Himalayan sunlight. And carpets of red chillies, carefully laid out to dry on the low sloping tin roofs of Bhutanese homes, soak in this bright hot sun.

Biodiversity – the living fabric of the planet – is everywhere around you, abundant, healthy. People love it and respect it. This is the kind of world that those 20 Aichi Targets seek to achieve.

And yet, there are no billions being raised to finance this biodiversity conservation. It is engrained in the culture and history of the land. Their constitution commits 60% of Bhutan to forest cover. Their Agriculture and Forests minister, speaking at the conference says “there can be no justice unless other living beings have equal rights of existence on this planet”. We often hear of rights-based approaches to biodiversity conservation, but for the people of Bhutan, this is not just dreamy talk, it is their reality.

October 22nd, 2012 Posted by | Uncategorized | one comment

Out of Africa : The “Gaborone Declaration” and its Implications for Rio+20

Which environmental economist said: “We need to take stock and attach value to our natural resources and ecosystems such that we may include their value in planning and decision making processes as well as in our national accounts and balance sheets.” ?

The answer is, none. That was President Ian Khama of Botswana, speaking at a Summit for Sustainability in Africa, hosted in his capital city, Gaborone, by his Government and Conservation International, 24th- 25th May. Other participants at this meeting included the heads of state of Liberia, Namibia, and Mozambique and the vice president of Tanzania.

Botswana is the size of France, but it has just 2.2 million people. It is Africa’s largest beef exporter. It also has a huge population of 150,000 wild elephants , and is a growing eco-tourism destination. The summit held here in Gaborone was remarkable for four reasons : because of who participated, when it was held, what was committed and why.

Who participated ? Ten African nations who are all interested in progressing a ‘Green Economy’ transition in their respective countries, whilst others in G-77 still think ‘Green Economy’ is a devious Western capitalist plot to hold back development.

When was it held? Less than a month before ‘Rio+20’, so that the ‘Gaborone Declaration’ can feed into the discourse at Rio+20, and actually deliver a serious outcome at Rio+20 – so long as other nations endorse it .

So what exactly was agreed ? The signatories agreed to develop ecosystem accounting in order to adjust national accounts (System of National Accounts, SNA) as well as Corporate Performance for the invisible impacts that government policies and business activity have on natural capital. They also agreed to annual reporting of progress on these fronts.

Why did they commit this ? Because, they all see natural capital is as their biggest “asset for development” (in the words of President Khama) and believe that its economic invisibility has been a reason for its neglect and sub-optimal management, and they clearly want this to stop. This is also what the G8+5 project TEEB ( see www.teebweb.org ) has been saying in its series of reports at COP-9 and COP-10 of CBD.

Another participant at this ‘Summit for Sustainability in Africa’ summarized the challenge thus : “Natural capital – our ecosystems, biodiversity, and natural resources – underpins economies, societies and individual well-being. The values of its myriad benefits are, however, often overlooked or poorly understood. They are rarely taken fully into account through economic signals in markets, or in day to day decisions by business and citizens, nor indeed reflected adequately in the accounts of society”.

This participant was not an environmental economist either. It happens to be President Ellen Johnson Sirleaf of Liberia.

May 31st, 2012 Posted by | Uncategorized | one comment

Thoughts from a Beach : The Private Sector and Rio+20

Fortune’s “Brainstorm Green” meeting, at a sunny beach resort in California this week, could not have been better timed. It is exactly two months to Rio+20. So much intellectual energy was present here, so many great ideas, that the question begs to be asked : will those 193 government delegations at Rio+20, gathering in Rio in June to debate ‘Green Economy’ and global environmental governance deliver even a fraction of this energy, this thinking ?

We all know planetary boundaries are being approached or breached across several critical axes – including GHG emissions, nitrogen, biodiversity. Significant changes are urgently needed in the way we deal with earth’s resources.
Inter-governmental efforts so far have failed miserably. Founded at the first Rio summit, UNFCCC has failed to get governments to arrest GHG emissions. Its unequal twin UNCBD has been unable to get governments to slow down the rate of loss of biodiversity. These failures point to the need to recognize the vital role of the private sector in determining economic direction and hence resource use globally. The corporate world has to be brought to the table as responsible stewards of shared planetary resources, and not as value-neutral, self-interested exploiters of common wealth.

The private sector today produces almost everything we consume, generating 60% of global GDP and employment. Their advertising drives all consumer demand. Their production feeds this demand, and drives economic growth. Their growing profits and assets are the main magnets for global investment. We have become a ‘corporate’ world in more ways than one. Yet these are the good side of today’s corporation – there are also the bad. Corporate externalities, the unaccounted costs to society of “business as usual”, are an estimated US$ 4 Trillion, or 7% of GDP, every year.

Corporate lobbying often influences national policies to the detriment of the public good. Advertising often converts human insecurities into consumer demand. And excessive demand has already made our ecological footprint exceed the planet’s bio-capacity by 35%. We are now consuming nature’s capital, not its interest.

There is leadership for change (we saw great examples from CEO’s at the Fortune meeting) but it is too little, too late. I believe the “rules of the game” must be changed so that corporations are able to compete on the basis of innovation, resource conservation, and satisfaction of stakeholder demands – and not on the basis of who can best influence government regulations, avoid taxes, obtain subsidies. CSR will never suffice to lead us to tomorrow’s “Green Economy”: we need a new Corporate model .Corporations that discover, measure, and manage down their negative externalities. Corporations that work in a business environment free of perverse subsidies, and work for stakeholders, not just shareholders.

However, that new model will not just happen, it needs to be fed by investment, it needs a level playing field, and it needs new regulation in place. That means eliminating a trillion dollars per year of perverse subsidies for fossil fuels & unsustainable agriculture & fisheries. It means investing in a green economy. And it means making it mandatory to disclose corporate externalities. But who is to eliminate subsidies, seed investments, change corporate reporting ? Why, it is those same 193 governments who will meet at Rio+20 in two months! So, I do hope that the only thing in common between these two meetings will not just be two beautiful, sunny beaches.

April 21st, 2012 Posted by | Uncategorized | 5 comments

Pavan Sukhdev : Put a value on nature!

Every day, we use materials from the earth without thinking, for free. But what if we had to pay for their true value: would it make us more careful about what we use and what we waste? Think of Pavan Sukhdev as nature’s banker — assessing the value of the Earth’s assets. Eye-opening charts will make you think differently about the cost of air, water, trees ..

December 19th, 2011 Posted by | Uncategorized | 3 comments

Debating the Value of Nature in ‘The Economist’

This is in essence a debate about valuation, in particular, about how people should value nature. Whether we call it “wildness” as Thoreau did, “untouched wilderness” as this motion does, “wild nature” as do some nature valuation experts, or the more prosaic “ecosystems and biodiversity” is perhaps less important than addressing what the institution of valuation means and does.

Following Douglass North, if we see institutions as “rules of the road” in an economy (laws, taxation, market regulations, as well as informal norms such as habits, conventions and ideologies), then valuation is another important human institution. Valuation can help us rethink our relationship with nature, alerting us to the consequences of our choices and behaviours. Valuation raises fundamental questions such as what influences our relationship with nature? How does nature shape social and personal identities? What are the social and environmental consequences of different ways of relating to and using nature? Such questions are a form of self-reflection. Indeed, valuation is a tool for self-reflection, and can be an important feedback mechanism for a society that has increasingly distanced itself from the natural world from which it derives identity, culture and vital resources.

Norms and conventions are part of every culture, and each culture may give a different answer to why and how we should value nature. Judaeo-Christian culture and beliefs see humans as inheritors of the Earth, owners or custodians of the wilds for their use. This underlies a utilitarian view of “valuation” as economic valuation, albeit in the broad sense of including both use values (such as consuming fisheries, wild foods, fuelwood, etc, and non-consumptive uses such as regulating water and soil quality, etc) as well as non-use values (such as the satisfaction of holding nature as a bequest for future generations or for its own sake). Intrinsic value is acknowledged, outside this utilitarian frame, as value independent of its usefulness. However, this view contrasts with naturist views, such as those of tribes in Amazonian rainforests. The rainforest defines who they are. It forms a communal home, a place of ceremony and worship, a source of livelihood, as well as a safety net for daily needs—food, water, fuel and shelter.

Another dimension of valuation is its socioeconomic context. Fuelwood from forests may be of little relevance to the average reader of The Economist, but to two-fifths of humanity it is cooking fuel. Ecosystem services may be quantified as a few invisible percentage points of national income in countries such as Brazil, India and Indonesia, but they comprise an estimated 45-90% of the household incomes of rural farmers and forest dwellers.

As this piece is meant to inform a debate, let me also comment on two interesting implications of the title of the motion being debated.

First, are there any “untouched wildernesses”? The world’s forests provide sustenance to over 1 billion people around the world—fuelwood, bush-foods and forest products—for which they stray into those wildernesses. Wetlands, coastlines and coral reefs are fished by locals everywhere. The high seas might have been the ultimate “untouched wilderness”, but they are instead our protein hunting grounds. Of late, they are even the final dumping grounds of plastic waste: the “Great Pacific Garbage Patch” in the North Pacific Ocean is over twice as large as Texas. And if we include indirect human impacts on “untouched wildernesses”, climate risks from anthropogenic emissions count among the largest threats to biodiversity.

Human intervention, whether intentional or not, whether for conservation or conversion, seems to be the destiny of wildernesses: they are all touched by human hand. The question is how are we touching wild nature? As planetary locusts or as planetary stewards? If we are behaving as locusts, might that be due to an error of valuation? Perhaps we are discounting future benefits and insurance against disasters too deeply as a society, compared with current utilities. Perhaps we are confusing social discount rates (which ought to determine societal choices for public assets) with market discount rates (which determine market prices for private assets). And if we are trying to be planetary stewards, what rules of engagement, restraint, valuation and discounting are we employing as we pursue this stewardship and make our choices and trade-offs? The key issues in either scenario revert to what this debate is about: valuing nature.

Second, in economics, is there any such thing as “value beyond resources and other utility”? So by the very framing of this motion, we are being invited to a debate beyond the remit of economics, straying into moral philosophy. This thought sits oddly with our times, but it is perhaps appropriate. After all, that venerable Scotsman who taught at Glasgow University, Adam Smith, was a professor of moral philosophy.

October 20th, 2011 Posted by | Uncategorized | 4 comments

What is Quality of Life? My answer to the World Policy Journal’s “Big Question”

Scarcely a day can pass when my happiness is not affected by family, friends, colleagues, work, leisure, traffic, pollution, weather, crime. We seek “well-being.” And so, at a personal level, we all do what we can to nurture our most cherished relationships, balance work with our personal lives to combine professional success and free time, avoid bad traffic conditions, choose to go out when it’s balmy, and live in clean, green, and safe areas.

We may also vote for politicians and purchase from corporations who make us believe their plans and products will increase our “well-being.” The problem is, they might not deliver. Indeed, well-being is hardly measured, and what is not measured cannot be managed.

Instead, modern society measures production, profits, savings, and wealth—all of which might contribute to well being, but are hardly equivalent. The environment is sometimes measured quantitatively—emissions, pollution levels—but then left to the mercy of uninformed economic trade-offs and policy choices. It is time for that to change. The economic invisibility of nature must end. Policymakers, administrators, and businesses must recognize the economic value of a clean environment and take that into account in their decision-making. Otherwise, we can forget about improving our “quality of life.”

June 19th, 2011 Posted by | Uncategorized | no comments