Last week the World Wildlife Fund (WWF) released its semi-annual Living Planet report, where the Director-General of WWF described ecological devastation as an “ecological credit crunch,” in a move clearly designed to stimulate action via the “uh-oh storm’s a-comin’” reflex.  The report discusses the health of the world’s ecological systems and the footprints of various nations by various measures (carbon, water, take of resources, etc). Unsurprisingly, the United States and China lead as the nations with the greatest footprint, but the consumption of the U.S. is rather more concerning, what with having far fewer people and all.

Here is the basis for describing the crisis thusly: traditional economic theory holds that “scarcity” doesn’t occur in the environment. It makes sense, since modern economic thought has occurred in the United States, where for most of our history there was no sense of a shortage of land or resources. Obviously this is not the case as, for example, we are now scrambling to end oil dependency on other nations because we used up our own oil in less than 150 years. But the sense that there is no lack or limit to the environment persists, because at this point we are rich enough to tap resources elsewhere.

Yet now nations that hold these resources are getting richer, and not only are they able to consume more due to more income, they want to consume just like we do. This is our own fault: U.S. economic thinking has influenced not only foreign policy goals (e.g. make their economies like ours) but international lending institutions, who measure “progress” by the consumer economy that we are.

Throughout all this, the value of the environment is hidden. Ecosystems provide goods which we are familiar with (such as food, timber, and so forth), but they also provide services that we regard as “free” (such as clean air) and so we don’t take them into cost considerations. They are not within the market, you see, and so they are irrelevant to economics, if not unimportant.

Scientists of various stripes have been nervous about this for years, but there has been relatively little response from economists to place a dollar value on the environment until very recently. There are two primary movements for this. One is environmental economics, which uses economic tools and skills to address environmental problems but does not challenge the essential assumptions of traditional theory (e.g. more consumption is always better than less, the economy can grow the way it is now and the environment will be okay.) The other is ecological economics, which uses tools also but argues that the way we look at the relationship between the environment and the economy is fundamentally flawed. At this point, the field says, there is a definite and measurable trade-off between economic growth and environmental health. And in the end, no one depends on functioning markets to survive quite like we depend on the environment to supply water, air, food, and shelter. So, the reasoning goes, giving up extensive economic growth (read: expansion, like the Louisiana Purchase) will ensure our survival. We should instead encourage intensive economic growth (read: building upon the resources we have, like developing property in already urban areas instead of growing out.)

Economists have already responded to WWF’s dire warning. The methods they use are rough estimates at best – remember, using economic tools to value non-market things is a touch-and-go business at times – but they are better than not valuing what we have until it is gone.

This entry was posted on Friday, November 7th, 2008 at 11:42 am and is filed under Science & Technology. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.