Monday, September 21, 2009

Everyone please read!

I would like everyone to please read the comments following a post on anthropocentric value, quasi-option value and frogs.

An anonymous poster (let's call him/her "AP") has commented expressing an opinion that arises each semester. In short, the opinion is that the anthropocentric perspective is bad and that valuation of the environment is impossible and silly. AP is concerned that a) we cannot possibly know enough to understand the value of environmental and natural resources, and b) even if we could, we shouldn't try to do it. AP thinks it is crazy to try to understand every component of value and screams for an appreciation of intrinsic value. Finally, AP calls for a fundamental change in the way humans look at the natural world.

AP makes one great point (I'll leave it up to you to figure it out and comment on it). Unfortunately, I think there is a great deal of misunderstanding by AP (and by many of you as well) regarding the anthropocentric perspective of value and the notion of valuation.

To clarify a few things:

1. "Value" simply means what something is worth. In economics, value is measured by willingness and ability to pay. "Pay" does not necessarily imply monetary payments. You can "pay" with your time, energy or via trade. When you recycle, donate your time to environmental causes, etc... you are showing your value for the environment.

2. The anthropocentric perspective on value simply means that when we try to figure out what something is worth, we try to estimate what it is worth to humans.

3. Humans can and do value the well-being of other creatures. Humans can and do value the well-being of ecosystems. Humans can and do value the environment for intrinsic purposes.

Hence (and here is a huge source of misunderstanding), intrinsic values associated with the environment are perfectly compatible with the anthropocentric perspective. Numerous human cultures and religions emphasize harmony with nature and treating all living things as equal. Many people value care of the environment and promote conservation simply for the sake of conservation. Please note that these are human cultures, human religions and human values and therefore any respect, worship or other values held by people are examples of the anthropocentric perspective, not evidence against it.

4. The economic perspective of value (and a main thrust of natural resource economics) is that we should try to understand, and in some cases measure, all components of value. Market value, non-market value, use value, non-use value, ecosystem service values, etc...

5. Resource economists don't just go around trying to put a dollar value on everything on earth. We attempt to measure the value of things when there are trade-offs involved (its all about scarcity right?). That is, we engage in valuation when there is a need. For example, if a particular natural resource is under threat from pollution, development, etc... a valuation exercise can help us understand the opportunity cost (what stands to be lost) of that market activity. This lends clarity to the trade-offs we face as a society and therefore helps policy makers understand what is at stake.

Questions about the above?

Back to AP... From what I can gather, he/she seems to be worried that valuation will somehow cheapen the environment. To this, my reponse is: many people now look at the environment as FREE (it doesn't get any cheaper than that). Valuation can show everyone that their actions or inactions have a real cost. AP also is concerned that if we put a dollar value on the environment it is sure to be wrong because our understanding of things is incomplete at best. To this I ask: would you rather have an estimate or no estimate at all?

I don't mind the misunderstandings noted above, but here's where AP's comment gets me: AP really wants people to understand that nature has an intrinsic value, that it is indeed worth a great deal when conserved. But then he/she argues vehemently against the one sure way to deliver that message: measure and express that value in dollars.

Final note: If AP had not posted anonymously, I wouldn't use him/her as an example like this. But, since this person chose to remain hidden, I consider this fair game. Heck, for all you know, AP is me, and I'm just trying to get two of the quietest classes I've had in 12 years to start talking!


Anonymous said...

I agree that we must be able quantify value, whether it be intrinsic value, market value, use value or others. AP seems to have a problem with the existing paradigm for valuing..the dollar, which is an economic construct. On the other hand when we say that we implicitly make a valuation of the environment by buying a polluting car, I am not certain that is a fair assessment. Some may in fact buy as green a car as can be afforded or that is available..and still pollute the environment! The question that perhaps needs to be asked is, can we express and quantify worth in units other than dollars?? Can we express the worth of clean air in something other than monetary units?
Derek Alleyne, CERMES

Mook said...

A few questions keeps bugging me, and I know they will bug a lot of other people way more, but before I get to them... We have talked about putting a value on natural resources that some may consider priceless, and I completely understand how this works. I also understand how the models we have been going over in class always try to arrive at a x*, that certain amount where the cost and the benefits are "optimal" for society. These models could be used to say "We need to save Caribbean Sea Turtles because they are economically beneficial," or we could say "We need to get rid of more deer in North Carolina because they cause more damage then they do good at the population level they occupy." This kinda sucks, I mean, the fact that these models could be used to save a species or condemn certain populations of another species if they "cost" too much to society, but it's just the way the math works.

So here's my question: has this model ever been used with humans as the "resource", and if so, are there any sets of data that are widely accepted by the scientific community? We've all seen models of how long we can sustain the human race at our current level of reproduction, environmental damage, so on and so forth. But what about right now? What does our current model tell us of how much a human-being is worth at our current place in history? Are we too abundant for our Earth as we know it with the resources we know we have and the environments we know we interact with?

There are too many studies that present different facts about human-beings and how we can ensure a sound intergenerational equity, how we can adapt and alter our planet in the future, but what about right now?? Are we in the consumer surplus region of the cost-benefit analysis of humans?

My final group of questions are probably the sickest to think about, but I feel like I should present my thoughts whether or not they will be considered morally or ethically right by everyone in the classes. We have done examples in class, specifically with turtles and fisheries, that apply the cost-benefit analysis to those species in only a certain region: sea turtles in the Caribbean, fisheries of the coast of North Carolina, etc. Can we separate humans by region too? The answer I believe is yes, as much as I'm sufre everyone would like to say "no", but I have no doubt that the cost-benefit analysis of say an American college student would differ greatly from the same analysis of a child in a developing nation. So how do we treat this situation... do we show bias because we too are human beings, and humans are priceless? A human in Location A has the same value to society as a human in Location B? Kinda of scary to think of, maybe there is a point where we should draw the line on what to value, but where?

I searched the internet for data on what a reasonable cost-benefit analysis of human-beings would look like, but again, all I found were projections into the future and a startling/cool website of what the world's population looks like as it fluctuates ( If anybody knows of any links to where some data can be found that expresses an analysis of humans in our current "situation", please post it, but I assume there is no definite data as there are just too many factors to include when researching the cost/benefits of a human being. Thanks for listening to my tirade.

-Mook Cahill

Saracasey said...

i think AP's one good point was that almost every natural resource could have quasi-option value as our knowledge of the benefits of natural resources are limited.

Anonymous said...

Mook, I think you bring up some interesting points, but I'm interested as to why you think we would ever need to do some sort of valuation on human life. I see you bring up the possibility of valuing people in different areas (i.e in developing nations vs. non) but I don't quite understand why we would need to do this. As we discussed in class there are many reasons for valuing non-market resources. A few examples are to determine a Marginal External Cost function in order to implement the optimal Pigouvian Tax or completeing a cost-benefit analysis of a conservation project, etc.

It seems as though you are trying to make a point regarding at what point do we stop putting a value on things. I think the answer to that is we stop when we don't need to put values on things. These environmental resources are valued because it serves a purpose (comparing apples to apples). I can't think of any feasible situation in which the valuation of human life is necessary. - Ryan D.

Dr. Peter Schuhmann said...

Mook and Ryan,

Society values life implicitly based on how much public spending goes to things that could save lives or extend lives. We could spend more, but we don't. Individually, we implicitly value our own lives via our actions (risky behavior, spending on health care, etc.) Explicitly, insurance companies need to know what lives are worth. This is actually a great application of the hedonic method.

According to the US Environmental Protection Agency, the value of a life is $6.9 million.

Google "The value of a statistical life".

or read this for some basics:

Arlene said...

In response to Derek’s question “Can we express the worth of clean air in something other than monetary units?”

The worth of clean air may also be expressed in the utility of it to the users- to us as humans, to birds-remember “Silent Spring”. There are also other ways of valuing clean air and other resources such as attaching non-use values to them. Some people’s value of resources does not necessarily relate to any use or monetary value. Some examples are existence values- simply knowing that we have clean air and bequest value which involves ensuring availability for future generation. These non use values are often ignored because they are not related to economic or dollar values.

Arlene, CERMES

Dr. Peter Schuhmann said...

Derek, please keep in mind that in order to measure value consistently we need a standard. That standard is one's willingness and ability to pay. So, while it might not be "fair" to say that if you cannot afford a high mileage car, then you do not value the environment as much as someone who can and does spend that money, it is the only way to have a consistent and usable definition of value. Otherwise, we could all just say "The environment (or anything else for that matter) is worth $X million!". If you do not have $X million that you are willing and able to spend, that statement is meaningless. Actions do indeed reveal value. If you really valued the environment more than your own convenience, wouldn't you walk or ride a bicycle instead of drive?

Which brings us to the next point, also addressed by Arlene. Can we use something other than dollars to measure value? Sure, we can use time, energy, other goods, etc... but then all of these can also be expressed in dollar terms. Dollars, though not a perfect metric, are useful because everyone understands their meaning and can easily translate a dollar value into other things so that we appreciate the consequences of trade-offs.

Also, we can express non-market values such as existence value in dollars so that (hopefully) they will not be ignored. These are real economic values. The task is a difficult one (requiring special econometric techniques) and is imperfect (we know that we will not be 100% accurate), but we can do this. Indeed, an entire literature and field of study exists on the topic.

Emily Rossi said...

I cant say that I like putting a value on things that I consider priceless, however I know that people ALWAYS pay attention to $$$, so even though I think assigning natural resources a value is impossible, I think that if we didn’t that they’d be taken advantage of a lot more.

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