The musings of Mr Monkeysized


Putting a price on nature by monkeysized

The government’s new environment white paper does something that I would argue is at the root of dealing with pesky issues concerning nature – it puts a price on it. Here’s Caroline Spelman:

“This will create a radical shift on how we view our natural assets by incorporating the natural environment into economic planning and ensuring there are opportunities for businesses that are good for nature and good for a strong green economy. In the past we have undervalued what our natural environment gives us.”

The trouble with nature – as I almost expect myself to argue – is that it is hard for us to get our heads around because we are weak and feeble humans. Our blue-riband method for allocating resources most efficiently – the free market – often spits out little nasties called externalities, which mean costs and benefits that are not included in the market transaction itself. Pollution to those downstream of a factory that uses mercury, for instance, or the little smile on the angelic face of a cherub-faced child, the moment he sees his first herd of Highland Cattle that he hasn’t paid for himself.

Governments then struggle to deal with what is usually lumped into something called Public Goods. This includes obvious externalities such as defence, which is bloody hard to organise through markets (despite the valient attempt of those involved in such notable and efficient organisations as Executive Outcomes).

Nature, meanwhile, falls through a number of gaps, and – alas – often falls prey to strange cult-like organisations staffed by the naive, wide-eyed and well-intentioned, such as Friends of the Earth and Greenpeace. Their argument – often given by hairy armpitted female undergraduates as they munch on e-coli infected bean sprouts – is that Mother Nature should simply be respected and cherished and loved. Obviously their programmes are slightly more sophisticated than that (and many followers do shave their armpits), but I haven’t got time to go into them in depth just yet. Their unflinching undergraduate approach to this leaves very little left over in the margin to settle those key debates over how salvation actually happens in this complicated little world of ours. Who pays what? Who gives what up? Who decides?

It’s back to the market, but with a little bit of extra information. After all, who can quarrel with making a market more efficient, and finding a way to make the price affect real balances of cost and benefit? This is one of the key ideas behind the carbon tax, and carbon trading.

If the environment white paper succeeds in putting a valid price on nature, this is surely to the benefit of us all. We need to account for pollination, tree windbreaks, fields of poppies and cow slips, the ability of land to soak up rainfall to prevent flooding, and the wee beastie superhighways that we call hedgerows. I listened to an interview with Caroline Spelman last week, and I must say she sounded relatively convincing. But my real worry, of course, is that finding a mechanism for doing the pricing comes back to the fallibility of humans once again. And when those humans are politicians, bureaucrats and environmentalists, I worry even more.