2.0 Environmental Economics Page A 2.0 Introduction 2.1 Analytic Engine: 'X' Marks the Spot Origins The ‘X’ Demand – Consumer Theory Supply – Producer Theory Market – Theory The 9 E’s of Economics The Big ‘O’ in Economics – Opportunity Cost Page B 2.2 Externalities Costs & Benefits External to Market Price Public & Private Goods & Bads Pollution (a) By Type (b) By Geography (c) By Absorptive Capacity (d) By Policy Instrument 2.3 Property Rights Anglosphere Common Law European Civil Code The Commons (Natural & Artificial) & International Law 2.4 Cost/Benefit Analysis, Present Value & the Precautionary Principle Cost/Benefit Analysis (a) Measurement of Costs & Benefits (i) Pollution (ii) Environmental Assets Present Value Precautionary Principle 2.5 Links

 2.2 Externalities

Costs & Benefits External to Market Price

Until now we have assumed that market price includes or 'internalizes' all relevant costs and benefits.  This means the consumer captures all benefits and the producer pays all the costs.  An externality refers to costs and benefits that are not captured by market price for whatever reasons, i.e., they are external to market price.

In effect, the market demand curve reflects only marginal private benefits (MPB) of consumers but not the external benefits accruing to society.  When such external benefits are added, vertically, we derive the marginal social benefit curve (MSB) inclusive of both private and public benefits.

Similarly, the market supply curve reflects only marginal private costs (MPC) but not costs external to the firm’s accounting, e.g., pollution that society must pay.  When social costs are added, vertically, to the supply curve we derive the marginal social cost (MSC) curve inclusive of both private and public costs.

The standard model of market economics is thus based on the assumption that all relevant costs and benefits are internalized in market price, i.e., there are no externalities.  If this assumption holds then ‘X’ marks the spot.  If, however, there are externalities then market equilibrium must be adjusted.   External or social costs and benefits must be added to private costs and benefits reflected in the market supply and/or demand curves.  The point is that such external costs must be paid and external benefits accounted for if the appropriate price/quantity equilibrium is to be established.  The agency to do so is not the market but rather government.  Put another way, the market 'X' solution is superseded by a social ‘X” marking the spot and it is up to government to correct the miscalculation of private agents to generate a new socially optimal equilibrium.  This is a controversial view.   It is expressed in the tradition of both welfare economics (a sub-discipline) and the Keynesian view.

On the other side are those arguably including the Austrian school of economics - von Hayek and von Mises being leading protagonists - who argue: Let the market do it!  If consumers are willing to pay then providers will be willing to supply.  If a sufficient number are not willing to pay, for example, because of the 'free rider' problem associated with public goods, to make it profitable to suppliers then there will be no provision, no market and people will get what they paid for. 

 

Public & Private Goods & Bads

We have seen that excludability and rivalrousness distinguish private from public goods.  If I buy a car I can exclude others from using it by lock and key.  I alone extract its utility.  Similarly, if I am driving no one else can, i.e., driving is rivalrous.  Public goods, on the other hand, are non-rivalrous in consumption, i.e. my consumption does not reduce the amount available to you.  If I watch a fireworks display it does not reduce the amount available to you.  Similarly, public goods are non-excludable, i.e. a user cannot be easily prevented from consuming a public good.  This creates the ‘free-rider’ problem.  Extending the fireworks example, while not willing to pay to enter the stadium I can still watch the display from the balcony of my apartment at no charge.

Allowing for externalities (discussed above) there is in fact a spectrum of goods ranging from pure private to pure public in nature.  The more public a good the less likely it is that private producers will be willing to supply a socially optimal output and the more likely that only government will be willing to do so, e.g., national defense, the Census or inoculation against infectious diseases.

The response of the government to problems presented by public goods varies according to the nature of the good.  Non-market benefits and costs may be considered sufficiently important to justify public action.  In the case of benefits, such goods are called “merit goods”.   In the case of costs, they are called “demerit” goods.  There are thus times and situations in which a democratic government decides that the free market is not producing socially or politically acceptable outcomes and chooses to override the marketplace.

 

Pollution

Pollution is a demerit good the social costs of which private firms do not account for in their books, i.e., it is external to their bottom line.  This means they will tend to over produce both product and pollution.  Government can intervene to adjust market demand or supply curves using a range of public policy instruments and hence achieve equilibrium at a socially optimum level of both production and pollution.

From my perspective pollution is a biological, ecological question concerning a common planetary biosphere.  Figure 2.1, page 16 of the required text, in this view, fails to display the feedback loop from waste - excreta - produced in the economic process back into the economic process as polluted air, earth and water - Fig. 2.1 Feedback Loop.  When there was a frontier to which we could move there was always fresh supplies of each.  With the planet now the house requiring management, we are, as a species, simply fouling our own nest.  The world is relatively speaking a closed biosphere, a closed system.   And there is only one universal poison to all forms of life as we know it: its own excreta.   

The following taxonomy summarizes pollution by type, geography, absorptive capacity of the environment and policy instruments available to adjust market demand and/or supply.  I will briefly discuss each, some below, some in class.

POLLUTION TAXONOMY

in many cases, market creation by fiat

Auction

Cap & Trade

Fees

Product Charges

Property Rights

Relocation

Standards

Taxation: Pollution Tax, Carbon Tax & Solar Subsidy

 

2.3 Property Right

As noted in 1.0 Introduction, the French Physiocrats before the French Revolution constituted the first modern school of economics.  It is from them we have received the terms economist, laissez faire and laissez passer.  They were also the first to identify the economic importance of the Law and property rights.  For the Physiocrats the first step was to establish a legal order that fostered the social good, specifically economic growth and development, by channeling the self-interest of economic agents – consumers and producers.  Once the law of property was appropriately established then and only then would laissez faire and laissez passer come into play.  In the words of economic historian Warren J. Samuels their's was:  "a theory of malleable property rights premised upon an utilitarian understanding of the social function of private property and necessarily involving the state in the continuing reconstitution of property rights".

Law, in all Nation-States, is made at four levels: international, statutory, regulatory and case.  International law is made by Nation-States and International Organizations through the treaty-making process.  For our purposes what is important is that to ratify a multilateral instrument often requires changing domestic law. 

Statutory law is made by domestic legislators in parliaments, legislatures, congresses, etc.  Regulatory is made by bureaucrats – domestic and international - interpreting and implementing a statute or treaty.  Case law is made by judges – domestic and international - interpreting and enforcing international, statutory and/or regulatory law.  

Complicating matters, however, is that when judges make Law it is by setting precedent.  In the Anglosphere this body of precedent is called the Common Law.  If a similar case was resolved in the past, a current court is bound to follow the reasoning of that prior decision under the principle of stare decisis.  The process is called casuistry or case-based reasoning.

If, however, a current case is different then a judge may set a precedent binding future courts in similar cases.  Often such precedents compel legislators and bureaucrats to change statutory and regulatory law.  Furthermore, precedent established in one jurisdiction may spill-over into others.

In the Anglosphere – the English-speaking world – the Common Law of precedent rules especially in the United States.  Thus while on the one hand, the first Republican Revolution of 1776 overthrew an ancient regime of subordination by birth, on the other, the U.S.A. adopted British Common Law with all its precedents and prejudices.  The second Republican Revolution of 1789 in France, however, not only overthrew the ancient regime it also overturned the Common Law. This was replaced by the Civil Code rooted in principle rather than precedent, specifically in so-called Natural Rights.  We will now briefly review the nature of property rights under these two global legal systems.

 

Anglosphere Common Law

Property title is the right to the possession, use, or disposal of a thing.  This implies ownership or ‘proprietorship’.  In feudal times it referred to a piece of land under one owner, i.e., a landed estate.  Such estates were initially associated with a Title such as the Duchy of Cornwall.  With Title came Property.  Title was granted by the Sovereign and consisted of a bundle of rights & obligations (e.g., fealty) which were often qualified by the Sovereign.  Some could be inherited; some could not; some rights were included, some were not.  All Property and Persons, however, were ultimately subject to the Sovereign.

Under Common Law, all Property (and, in constitutional monarchies, all Persons) remains ultimately subject to the Sovereign whether Crown or State, a.k.a., the ‘People’.  Sovereignty is supreme controlling power ultimately exercised through overwhelming coercive force.  The territory over which Sovereignty is asserted is established by continuing occupancy and/or by conquest.

Today, Title to Property usually takes the form of a document, deed or certificate establishing the legal right to possession.  The coercive power of the State may be invoked to protect and defend it.  There are three contemporary forms.  There is immovable or ‘real’ Property such as land, buildings and fixtures which together with moveable Property or ‘chattel’ (derived from the Anglo-Saxon for cattle) constitute tangible Property.  Then there is intangible Property such as business ‘good will’ and intellectual property such as copyrights, patents, registered industrial designs and trademarks.  Each of these rights & obligations are granted by and subject to the pleasure of the Sovereign whether Crown or State.  In Law each consists of different bundles of rights & obligations, e.g., the term of a patent vs. copyright.

John R. Commons (1924) observed in his classic Legal Foundations of Capitalism that Property, in the economic sense of what can be bought and sold, is the history of its ever increasing intangibility.  In this sense, Property has become not so much the thing in-and-of-itself but rather an evolving set of rights & obligations associated with it, e.g., a warranty.  Thus Property today includes intangibles like artistic & literary works, inventions, futures options, equity shares, software and investment certificates in land and buildings, e.g., ‘CDOs’ or Collateralized Debt Obligations including an unknown number of sub-prime mortgages.  Such intangible Property is arguably the legal foundation of the knowledge-based economy (Chartrand 2007).

With respect to ‘real’ Property there are two principal forms of Title.  First, allodial Title refers to absolute ownership without service or acknowledgement of or to any superior.  This was the practice among the early Teutonic peoples before feudalism.  It is important to note the political and economic as well as legal implications of such myth.  For example, leading up to the English Civil War of the 1640s Parliament needed an argument to counter the ‘Divine Right of Kings’ claimed by the Tudors and the Stuarts.  They found it in Anglo-Saxon Myth.  Among the ancient Anglo-Saxons the chief was chosen by members of the tribe based on throneworthiness, i.e., the candidate who could provide the most loot, pillage, plunder and rape.  Ancient Anglo-Saxon kings were thus invested with authority by the people and hence Parliament is supreme (MacDougall 1982).  Allodial ownership is, however, virtually unknown in Common Law countries because ultimately all Property is subject to the Sovereign – Crown or State.  In this sense there is no such thing as absolute private property. 

Second, fee simple or ‘freehold’ is the most common form of Title and the most complete short of allodial.  It should be noted that the ‘fee’ refers not to a payment but to the estate or Property itself as in the feudal ‘fief’.  Fee simple is, however, subject to four basic government powers - taxation, eminent domain, police and escheat (derived from the feudal practice of an estate returning to a superior Lord on the death of an inferior without heir).  In addition, fee simple can be limited by encumbrances or conditions.  These may include limitations on exclusive possession, exclusive use and enclosure, acquisition, conveyance, easement, mortgage and partition.  In addition it may or may not include water rights, mineral rights, timber rights, farming rights, grazing rights, hunting rights, air rights, development rights and appearance rights.

Proprietors – allodial or fee simple – may, subject to limitations in their Title, lease, let and/or rent their real Property   In the Civil Code tradition the legal right to use and derive profit or benefit from Property belonging to another person (so long as it is not damaged) is called ‘usufruct’ from the Latin meaning ‘use of the fruit’, not ownership of the tree.  In Common Law, one might call it ‘tenant title’.  It does not constitute legal Title but does entitle the holder to use the Property and to have that right enforced by the State against the legal Titleholder and others.

Finally, there is occupancy or possession-based Title.  In effect, this invokes ‘squatter’s rights’.  It does not represent legal Title.  Nonetheless, if possession by occupancy is not disputed it may, in time, become legal Title. 

 

European Civil Code

The European Civil Code emerging from the French Revolution draws heavily on the old Roman law especially the Institutes of Justinian.   Observing the relative lack of interest in the concept of common property over the last three hundred years of Anglosphere legal tradition, Carol Rose has tried to revivify Roman concepts of public property lacking in the English-speaking tradition. In effect, she concludes that the evolution of Anglosphere law has been dominated by questions about private, not public property (C. Rose 2003).

There are five categories of public property under Roman law: res nullius, res communes, res publicae, res universatitis and res divini juris. To begin, the Latin word res means ‘thing’. Res nullius refers to things that are unowned or have simply not yet been appropriated by anyone such as an unexplored wilderness. Res communes refers to things that are open to all by their nature, such as oceans and the fish in them. Res publicae refers to things that are publicly owned and made open to the public by law. Res universitatis refers to things that are owned by a body corporate, i.e., within the group such things may be shared but not necessarily outside the group. Finally, res divini juris (divine jurisdiction) refers to things ‘unownable’ because of their divine or sacred status (Kneen 2004).

 

The Commons (Natural & Artificial) & International Law

The Natural Commons

There is, however, another class of environmental problems for which market equilibrium fails to internalize all relevant costs and benefits.  This concerns common or shared resources.  In December 1968, Garrett Hardin, a biologist, published “The Tragedy of the Commons”.  The article was based on his presidential address to the Pacific Division of the American Association for the Advancement of Science in June 1968.  Hardin demonstrated unfettered competition for natural resources within and between countries was destroying the natural commons, a.k.a., the environment or biosphere including air, water, land and biodiversity living therein.  Given such resources belong to everyone yet to no one, i.e., they are ‘public goods’, competitive self-interest dictates getting for oneself as much as possible as quickly as possible with no consideration for others – past, present or future.  This is “The Tragedy of the Commons”.   Unfortunately, a variation also plagued Second World or communist command economies resulting in even greater environmental damage, debilitation and destruction.

The Artificial Commons

As noted in 1.0 Introduction there are sciences of the natural and of the artificial, i.e., human-made.   The most important ‘artificial’ commons is knowledge.  First, knowledge is non-excludable in that once published one cannot be easily excluded from knowing. In fact, the word ‘publish’ derives from the Anglo-Norman meaning “to make public’ or “to make known” which, in turn, derives from the Classical Latin publicre meaning to make public property or to place at the disposal of the community.

Second, knowledge is a non-rivalrous good, i.e., your consumption does not reduce the quantity available to me. Excludability and rivalrousness are necessary conditions to internalize economic costs and benefits into market price – the idealized outcome.  But how can something be exchanged in a market, i.e., bought and sold, if one cannot stop others from taking it for nothing and, if they do take it one’s inventory is not thereby reduced?

The answer is intellectual property rights like copyrights, patents, trademarks and registered industrial designs. Such rights, however, must be imposed by the State thereby breaking one of the implicit tenets of the standard model of market economics – no government involvement in the economy. In fact without government there can be no knowledge-based economy.

In economic theory, IPRs are justified by market failure, e.g., when market price does not reflect all benefits to consumers and all costs to producers such as when market price does not include pollution costs. These are known as external costs and benefits, i.e., external to market price.

IPRs, in this view, are created by the State as a protection of, and incentive to, the production of new knowledge which otherwise could be used freely by others (the so-called free-rider problem). In return, the State expects creators to make new knowledge available and that a market will be created in which it can be bought and sold. But while the State wishes to encourage creativity, it does not want to foster harmful market power. Accordingly, it builds in limitations to the rights granted to creators. Such limitations embrace both Time and Space. They are generally granted only with full disclosure of the new knowledge, and

only for a fixed period of time, i.e., either a specified number of years and/or the life of the creator plus a fixed number of years; and,

only for the fixation of new knowledge in material form, i.e., it is not ideas but rather their fixation or expression in material form (a matrix) that receives protection.

Eventually, however, all intellectual property (all knowledge) enters the public domain where it may be used by anyone without charge or limitation. In other words a public good first transformed by Law into private property is transformed back into a public good.  Growth of the public domain is, in fact, the historical justification of the short-run monopoly granted to creators of intellectual property.  Even while IPRs are in force there are exceptions such as ‘free use’, ‘fair use’ or ‘fair dealing’ under copyright. 

In many ways the public domain is the inverse of a natural resource commons.  First, use of the public domain does not reduce the quantity of resources available to others.  Second, in its normal state the public domain grows and will continue to grow until the collapse of human civilization in its contemporary incarnation.  Third, while there can be no subtractions from the public domain through use, additions are not simply additive.  Rather, additions combine with existing knowledge mutating and generating yet more new knowledge.  Or, in terms of Isaac Newton’s famous aphorism: “If I have seen further it is by standing on the shoulders of Giants.”  The public domain is not a domain of scarcity but of fertile abundance.  In this sense the public domain, unlike any natural resources commons, exhibits increasing returns to scale.

 

International Law

Law is backed by the coercive power of the Nation-State. Sovereignty, at root, is the State’s monopoly of force. As suggested by John R. Commons (1934), the probability of the State (or rather its officials) exercising this monopoly to enforce contracts (rule of law) is a primary concern for all business enterprise everywhere.

Jus cogens

Between Nation-States, however, Law relies on jus cogens or the presumptive norms of international law, arguably the most elemental of which is pacta sunt servanda: meaning ‘agreements must be kept’. Such “higher law” may not be violated because it serves the interests of the entire international community, not just the needs of the individual States. There is, however, no definitive statement by any authoritative body of what constitutes jus cogens. Rather they tend to arise out of case law as well as changing social and political attitudes Such norms can be both affirmative as with pacta sunt servanda or prohibitive as with prohibitions against aggressive war, crimes against humanity, war crimes, maritime piracy, genocide, slavery and torture.

According to pacta sunt servanda, all instruments in force are binding on Parties to them who, in turn, must perform them in good faith. Thus Parties cannot invoke domestic law in the case of a State, or internal rules in the case of an International Organization, as justification for failure to perform. The only legal exception is when this norm conflicts with another, e.g., the prohibition against slavery, in which case according to Article 53 of the 1969 Vienna Convention on the Law of Treaties such instruments are void.

If a State fails to perform there may or may not be legal recourse for other parties to an agreement, e.g., WTO dispute panels or appeal to the International Court of Justice. Only at the extreme will the Security Council of the United Nations ‘legitimize’ coercive force against a treaty-breaker.

Accordingly the complex web of global and regional agreements, conventions and treaties rests on the ‘good faith’ of Nation-States. Each comes to the table with its distinct legal tradition as well as wants, needs and desires.  To ratify an instrument, however, usually requires a State to adjust domestic laws that conflict with treaty obligations.

With respect to the environment international law effectively establishes the property rights of Nation-States.  Such agreements include:

International Convention for the Protection of New Varieties of Plants, 1961

Biological and Toxin Weapons Convention, 1972

Convention on International Trade in Endangered Species of Wild Fauna and Flora, 1973.

Budapest Treaty on the International Recognition of the Deposit of Microorganisms for the Purposes of Patent Procedure, 1977

Law of the Sea Treaty, 1982

Vienna Convention on the Protection of the Ozone Layer, 1985

Montreal Protocol on Substances that Deplete the Ozone Layer, 1987

Rio Declaration on Environment and Development 1992

UN Convention on Biodiversity, 1992.

Kyoto Protocol to the United Nations Framework Convention on Climate Change, 1997

Cartagena Protocol on Biosafety, 2000.

International Treaty on Plant Genetic Resources for Food and Agriculture, 2001

For a more complete list please see Wikipedia’s  List of international environmental agreements.

 

2.4 Cost/Benefit Analysis, Present Value & the Precautionary Principle

As demonstrated with respect to private goods the analytic engine of economics is about choice, specifically constrained maximization.  In the case of consumers, maximization of happiness constrained by income (the Demand Curve); in the case of producers, maximization of output subject to cost (the Supply Curve).  Under conditions of perfect competition the point of intersection of these two curves marks the ideal outcome of quantity and price.  All benefits go to the consumer and all costs are paid by the producer, i.e., all benefits and costs are internalized in market price.  When any cost or benefit is external to market price there is an externality.  It is only through public intervention such as taxes, quotas, legal action (including establishing property rights), etc. that externalities can be accounted for and an appropriate price/quantity outcome achieved, i.e., approximation of the perfectly competitive outcome.

Public intervention in the marketplace, however, generates costs, e.g., enforcement costs of pollution control.  In the case of public goods for which no private market effectively exists the question becomes how much to produce and at what cost?  Both public intervention and production of public goods involves not just economic but also political questions, i.e., political economics.  Over time various techniques and principles have emerged to guide public sector decision makers.  We will examine three: cost-benefit analysis, present value and the precautionary principle.

 

Cost-Benefit Analysis

The preeminent economic technique for justifying public intervention in the marketplace or in production of public goods is cost-benefit analysis.  Innovated by the Tennessee Valley Authority during the 1930s (part of the ‘New Deal’) cost-benefit analysis involves calculating all relevant cost and benefits of a project.  In the simplest terms, if benefits outweigh costs the project goes forward; if costs outweigh benefits it does not.

Benefits and costs, however, come in two flavours – those that can be quantified and generally expressed in dollars and cents and those that cannot.  These can be called tangible and intangible costs and benefits.  Ideally all tangible costs and benefits are quantified at market prices. Some intangibles can then be estimated in quantitative terms using techniques such as ‘willingness to pay’ surveys.  Others cannot.  At the end of the day, in good cost-benefit analysis, the quantitative cost/benefit ratio is calculated but then subjected to a value judgement with respect to the importance of non-quantifiable cost and benefits.

In addition to tangibles and intangibles, cost-benefit analysis also recognizes first-round, second- round and subsequent effects.  A market example is the impact of a frost on Florida orange juice.  The first round effect is a higher price.  A second round effect involves consumers shifting from more expensive orange juice to less expensive apple juice.  The increase in demand for apple juice, however, causes its price to rise (second round effect) which in turn leads to a shift towards other substitutes and so on and so on.  In cost-benefit analysis a decision must be made as to how many ripples should be included in the analysis. 

Costs and benefits also have a spatial dimension.  Should only local costs and benefits be included or also regional, national and international ones?  Similarly some are near term while others stretch out into the distant future.  How far out in time should the analysis stretch?  Furthermore, both costs and benefits are subject to increasing risk as they stretch further and further out into the future.  Some risks can be subjected to probability calculation; some cannot.  And some risks have a high probability but limited impact while others have a low probability but significant impact – so-called ‘Black Swans’ events.  In addition costs and benefits of an intervention are distributional in nature.  Some win; some lose raising questions of equity or fairness.  Needless to say cost-benefit analysis is a technically demanding field involving specialized expertise.  In some cases cost-benefit analysis is simply not possible.  In such cases a second-best approach may be used - cost-effectiveness. 

 

(a) Measurement of Costs & Benefits

There are two distinct sets of costs and benefits associated with the environment.  The first set concerns pollution and damage to human health and to the economy.  The second concerns valuing the contribution of environmental assets to the economy.

 

(i) Pollution

When a substance is introduced into the environment - air, earth or water - through human production or consumption of goods and services it may or may not have detrimental effects on human health and/or on the wider biosphere.  In the past such effects were generally noticed only ex poste, i.e., after the fact.  Increasingly, however, with more stringent environmental regulation, their effects may be determined ex ante, i.e., before the fact, before introduction into the environment.   In either case a two step process is taken.  First, a risk assessment is conducted to determine if there a cost and its magnitude.  Second, risk management is conducted to determine the most cost effective way - technological and/or behavioural - to manage its effects.

With respect to risk assessment a four step process is involved:

Hazard Identification - Does the substance cause harm?

Dose-Response Assessment - At what levels and after what duration does harm result?

Exposure Assessment - Who is affected and how are they exposed?

Risk Characterization - What is the overall harm to the general and specific sub-populations, e.g., children?

 Generally risk assessment relies on 'hard science'.   Laboratory experiments on animal or plant surrogates as well as field research on exposed populations can determine the nature and magnitude of harm.  Based on this evidence health care costs can be estimated and 'life and limb' analysis conducted, e.g., how much is working life income reduced by exposure.  Thereby total cost can be estimated

Risk management, on the other hand, depends mainly on 'soft science', i.e., the sciences of the artificial.  Various techniques are used to determine the most cost-effective way to reduce both the quantity and effects of the pollutant.  This can be done three ways:

Survey Approach - Ask those generating the pollutant about the most cost-effective ways to reduce it.

                               The problem of revealed preference arises in this case.  Polluters (both producers and

                               consumers) have an incentive to overestimate the cost of reduction in order minimize

                                regulatory control.

Engineering Approach - Research existing and potential technologies to cost-effectively minimize

                                      pollution for the typical polluting firm or consumer.   The problem is that not all

                                      firms or consumers have the same production or consumption function and

                                      hence actual costs of implementing the technology or behavioural change may be

                                      significantly higher than the typical situation.

Combined Approach - Both survey and engineering approaches are used to balance the opinions of

                                    polluters and available technologies.

The benefits of reducing pollution can be calculated using risk assessment and the costs of instituting control estimated through risk management.  A balance must then be struck between how much reduction at what cost in return for what benefit.  What this means is that in most cases total reduction is not achieved but rather a cost-effective level at which marginal benefits of reduction equals marginal cost.

What is not considered by the author of the required text is the feedback loop of pollution on the costs of doing business (Fig. 2.1 Feedback Loop. ).  Pollution of the air, earth and water affects not just human health and/or the biosphere but also business that rely on them as inputs to the economics process.  For example, a firm relying on water such as a beverage company needs clean water.  If the source is polluted it or the community as a whole must bare the costs of purification in the form of direct business expenses or increased taxes.  Similarly in a community like Port Hope in Ontario years of using radium to make the dials of clocks glow has polluted the soil and any business wanting to use the site of such former businesses must face (or the community) the cost of cleaning up and disposing of the polluted earth.  

 

(ii) Environmental Assets

Fig. 3.1 page 37 of the required text summarizes the author's view of measuring the value of environmental and resource value.  In summary these include use, option and non-use values.  Use value is generally determined at market prices.  For example, how much in entrance fees is collected at national or provincial parks together with costs of getting there and any spending that takes place within the park.  Option value or option demand is generally determined using surveys asking citizens how much they would be willing to pay to ensure such sites are available even if the respondent does not use it.  Finally, non-use value is similarly determined using surveys asking citizens how much they would be willing to pay to ensure  a given site is preserved in its natural state.

The most important distinction is between revealed vs. stated preferences.  Nobel Prize winning economist Paul Samuelson formulated the theory of revealed preference in 1938.  It has arguably become one of the laws of economics along with the laws of demand and supply.   In short it states that preferences are revealed by the observed behaviour of consumers and producers in the market place.  Choices made, putting down the money, reveals the real preferences of economic agents.  This contrasts with asking them to state their preference.  There are, Samuelson argues, always incentives for agents to hide their true preferences.  For example, if asked how much a citizen would be willing to pay to live close to a fire station the citizen will tend to underestimate benefits to avoid the possibility of increased property taxes.  Accordingly, revealed preference is the preferred method of mainstream economics with survey techniques subject to question, no matter how sophisticated their design or statistical tools applied.

Below I provide an expanded version of the author's figure providing 'one-liners' summarizing the different techniques used to estimate the value of environment assets.  While revealed preference techniques generate the most reliable information stated preference techniques must be used when there is no market or market related evidence available.  The limitations of Contingent Valuation techniques or willingness to pay or willingness to accept using surveys are subject to listed biases but are not always described or explained in the text.  Attribute-Based Models, on the other hand, rely on analysis of Lancastrian 'attributes' named after economist Kelvin J. Lancaster (1924-1999).  Lancaster argues that consumption involves not a good as such but rather its varied attributes or characteristics.   It is these attributes that are desired rather than the good itself.

All of the listed techniques are, in effect, attempts to derive the demand curve for environmental attributes such as clean air, earth & water, natural beauty, et al.  The measurement of such values can be used to justify retaining a given site instead of some form of development, e.g., roads, bridges, community expansion (sub-divisions), etc.

 

MEASUREMENT Of ENVIRONMENTAL & RESOURCE ASSETS

 

Present Value

As benefits and costs extend out into the future they become ever more uncertain.  One calculates their current worth – their present value - using a discount rate.  The higher the rate, the lower the present value of future benefits or costs.  Determining the appropriate discount rate is critical to properly valuing future costs and benefits.

With respect to public intervention or production of public goods there is, however, an added dimension to present value – politics.  While future benefits or costs may be significant they are politically discounted to maximize election and re-election of politicians and governments.  Three examples demonstrate.  First, with an aging electorate politicians are more concerned with present older voters than with future generations.  Quite simply future generations are not politically relevant unless the current generation says so at the ballot box. 

Second, there is the political ‘edifice complex’.  A new $100 million bridge or building bearing a politician’s name is much more valuable politically than an annual $20,000 paint job required to preserve and maintain an existing structure for 100 years.  Arguably the much reported deterioration of public infrastructure in the United States and Canada reflects this political discount rate. 

Third, no matter political intentions about the future the reality is we simply cannot know for certain what future generations will want, need or desire from us today.  This is especially important when considering questions of sustainability.  The concept of sustainability is roughly analogous to the economic concept of a 'steady state' where the existing pattern of economic activity continues through time.  In the view of some economists resources are highly substitutable or fungible.  Technological change will, in this view, provide a substitute for any resource that is depleted through current use.  Whether or not it is appropriate to preserve a current resource for future generations thus becomes a question of substitutability.

A related question is preservation (non-use) versus conservation (wise use) of a natural resource.  Economist Joe Bain in his classic Industrial Organization lays out the question:

 

The Precautionary Principle

Cost-benefit analysis involves calculation of the probability and magnitude of costs and benefits associated with a new technology, public intervention in the market place or production of public goods and services.  If probable benefits outweigh probable costs it is approved; if not it is rejected. 

Applying the ‘precautionary principle’ means that if a new initiative has any chance of generating irreversible harm, no matter its short-term benefits, it is rejected in spite of a positive cost-benefit ratio.  In fact, the precautionary principle is both an economic and moral criterion.  It invokes a social responsibility to protect the public from harm if scientific investigation finds a plausible risk. In the Rio Convention mentioned above and in the European Union, the precautionary principle has been made into a statutory requirement.  Its application is most apparent with respect to genetically modified foods.  In the Anglosphere cost-benefit analysis has consistently found them to be a good investment.  In most cases natural and genetically modified crops and animals are treated as equally safe.  In the European Union, however, the remote possibility of irreversible harm to human health or the environment has led to significant restrictions on the use of genetically modified foods including labeling of all products.   Some observers argue that this 'plant protection racket' is fuelled by a Veblen Effect, named after economist Thorstein Veblen who introduced the concept of 'conspicuous consumption':

 

The Plant Protection Racket

By Thomas R. DeGregori

 Butterflies and Wheels, 2003.

Inferiority as a Luxury Item

Before the Industrial Revolution, artists and artisans would strive to make a work as perfect as possible. They used the technologies of their time to make as fine a product as their skill and limited technology allowed. Given the long painstaking efforts involved in creation, such items were few in number and available to only a minuscule number of elites. They were the crowning achievement of their time and brought great prestige to those fortunate few who owned them. Renaissance painters used the mathematics of perspective to create their trompe l'oeil (a French term meaning "trick the eye.") David Hockney's recent claim that some of the Renaissance artists achieved realism by using a camera obscura to design their paintings is controversial and shocking to many today but one wonders whether it would have mattered to anyone prior to the Industrial Revolution (Hockney 2001).

With the advent of the Industrial Revolution, one of the qualities that allegedly makes a craft item superior became its demonstrable inferiority. Before that time, increasing precision was one aspect of the way in which artisans sought to refine and improve their craft. Nineteenth and twentieth century tech­nology not only carried this refinement beyond the point that our hands or eyes can detect, it did so with mass production. Today some people will point with pride to the imperfections that indicate handcrafting. Thorstein Veblen makes reference to the "claims to excellence put forward" for some products that "rest in some measure on the degree of its approximation to the crudities" of earlier inferior technologies (Veblen 1934, 121). Veblen was referring specifically to the very expensive books produced by William Morris and the Kelmscott Press. Veblen went into great detail on the means and methods used for book production by the Kelmscott Press and scathingly referred to their "pains­taking crudeness and elaborate ineptitude" (Veblen 1934, 122). William Morris, an ardent socialist and leader of the Arts and Crafts movement, earned his livelihood by selling his non-industrial arts and crafts to those made rich by industrialization.

In Veblen's example of book production, limiting an edition is the ultimate reversion to a criterion of earlier technology to enhance a product's pecuniary value (Veblen 1934, 122). It is an artificially-contrived scarcity, whether it be in a "hand-produced" item of William Morris or the mass-produced results of technologies. The crudeness must be contrived to be different because modern industry has taught us how to turn out great quantities of high quality items (Kouwenhoven 1967, 35).

No previous transformation was as beneficial to human enterprise and crea­tivity as the Industrial Revolution. Yet it was damned for being dehumanizing, and its technology was considered antithetical to artistic endeavors. The dual­ism between thought and practical action that characterized earlier civilizations such as that of classical Greece was revived with a vengeance. It is more than appropriate that among the anti-technology artists and artisans, there was a revival of Greek forms in neoclassicism. William Blake, who is famous for his reference to "dark Satanic Mills," was himself "dependent upon prosperous patrons for his livelihood" (Boime 1985, 111). The "fiery chariots," the furnaces, and other technologies were important images in Blake's poetry and drawings, reflecting more of an ambivalence to industrialization than is recognized by many who quote him. The neoclassicism in fine arts that followed Blake and the revival of Greek ideals were facilitated by "one of the first and most refined products of modern manufacture ... the steel pen, which everyday recorded the images, means, and ideas of the new era" (Howard 1985, 790-2). Steel pens were better and they were cheaper (Howard 1985, 794).

By the late 19th century, the elitist mania for handcrafted items led to an interest in "primitive" art which pre-Industrial European elites would have considered too crude to be art. A strange contradiction emerged as the art was praised while those who created it were degraded. Leah Dilworth uses Veblen's analysis when writing about the demand for crafts produced by Indians of the American Southwest in the late 19th and early 20th centuries. Mass-produced objects had a "sameness" to them, and because they were mass-produced they were by definition "perceived as being common and it is this commonness that the leisure class objected to." To Veblen the leisure class "preference for the singular marks of imperfection, or marks of the hand, became ‘honorific'." For collectors of Indian crafts, "singularity and the mark of the maker's hand were highly valued" (Dilworth 1996, 154-155 and Veblen 1934). The belief in the eventual "dying out" of the Indian, undoubtedly further enhanced the value of the craft. It was "natural" and "authentic."

One can appreciate "primitive" art and the great works of earlier times apart from any crudeness or extraordinary effort to achieve perfection. The elite's preference for that which is inferior was carried over to other areas of life. Occasionally manufacturers found it profitable to advertise the inferiority of their technologies such as "fire-brewed" beer when any brew master will testify to the superiority of electric kettles for more precise heat control.

As societies become more affluent and wages rise, hand made products become more expensive, sometimes prohibitively so. Even reaching out for overseas production in low wage countries is not always effective as these areas are seeking to improve their lot with low cost industrial production serving a mass global market. Affluence also creates an ever-growing class of well-off consumers, many of whom seek to emulate the crudities of consumption of the elites. The crude items of every day use that were the few meager processions of the poor have become the prestige consumption of the affluent. To acquire the "authentic" or "natural" or "real," be it in construction with expensive stone or wood or in foods, eating only the rare or organically grown - these natural lifestyles are expensive because the means for providing them are extremely limited, making it a way of life possible only for a privileged portion of the world's population. Time magazine had a cover story on "The Simple Life." A perceptive correspondent for The New Yorker made an "unofficial tally of Time's ‘expensive, high tech and sophisticated’ stuff, as against the new simplicity's ‘recyclable, cheap, plain and nostalgic’ stuff." The results were:

‘Recyclable, cheap, plain and nostalgic’ goods ... : $459.40.

‘Expensive, high tech and sophisticated’ equivalents: $145.83.

He concluded that he didn't think that he could "afford the simple life (The New Yorker 1991, 30, and Time 1991, see also Carlson 2000).

It seems that the poor can no longer afford the crudities that were once their lot in life and have to make do with the products of industry when they can afford any consumption at all. Even the poverty of Gandhi was costly, as his trademark goats had to be boarded when he was in urban areas, prompting the often-paraphrased comment of Edgar Snow that Ghandi never realized how much it cost the Indian rich to keep him in his poverty.

Consumption of inferior products has become a growth industry in affluent societies particularly in the area of food and health where the fetish of ‘inferior is better, safer and healthier’ has deep ideological roots. Terms like "organic," "biodynamic," "all natural," "alternative therapies," "herbal" and "holistic" have lost any meaning that they may once have had and are to be understood as endowing a commodity with immeasurable, not fully definable vital properties. The quintessential inferior vitalist product is the homeopathic remedy whose mystic vitalist potency is derived from having virtually every last molecule of the "medication" diluted away.

 

The Vitalist Revolt

The ongoing vitalist revolt against the emergence of modern chemistry and agricultural science since the work of Antoine Laurent Lavoisier, Friedrich Wöhler and Justus Baron von Liebig is most evident in food production and consumption. First it was claimed that it was impossible to synthesize an organic compound, and then it was argued that minerals could not be used to help plants grow. When these claims were disproved, the argument was made that the food grown using minerals as fertilizer lacked some vital or living force. To Lady Balfour, a proponent of "organic agriculture" and a founder of the Soil Association in England, Liebig's "naive theory" that inorganic material could be used in plant production, did result in increased food production but the food was nutritionally inferior (Balfour 1948, 50-51 and Balfour 1976, 56). It lacked a "vital quality," as the modern world, "largely ruled by chemistry," had neglected the "continuity of the living principle in nature" (Balfour 1976, 25).

The emergence of synthetic urea brought an even stronger response -it was man-made, alien to the environment and dead, in the words of Rudolf Steiner. We must remember that the movement for "organic" or "biodynamic" agriculture was first a response to the use of synthetic fertilizer and not to pesticides. Synthetic fertilizers have proved their worth and there is no question that we would not be able to feed 6.3 billion people today without them, nor could we do so for the expected 9 billion people in 2050 when population growth is expected to level off or even decline (Smil 2000 and 2001, 159). Though many believe in the mystic vitalist properties that manure provides to the crop, plant physiology tells us that manure has to be broken down in the soil and that the plant takes in cations and anions that are no different from those provided by synthetic fertilizer. The difference is that with modern agronomy, the farmer can more accurately provide the needed nutrient in proper proportions with synthetic fertilizer than with manure whose nutrient content may vary considerably.

However post-modernists and others may attack modern science, it has permeated our society sufficiently that there is often a felt need to find scientific evidence to justify a belief, even essentially vitalist ideas like the belief that "natural" is better. Having failed to prove that "organic" produce was superior in any other way, its proponents have now turned to the argument that its superiority results from its being less well protected from competitors, which means that it is being produced in an agronomically inferior way. After all, from the earliest agriculture, farmers have sought to protect their crops from competitors such as other plants, rodents, birds and microorganisms. In the attempt to find nutritional benefit in "organic" food crops on the basis of their being less well protected, the advocates are venturing into a mine field where there is a vast array of unexploded ordinance.

 

Trace Amounts

The "organic" enthusiasts never seem to tire of trying to find evidence of the superiority of their product. In March 2002, yet another study was announced which purported to show that "organic" vegetables were more nutritious than those that were conventionally grown (Baxter et al. 2002). Canned soups made with "organic" vegetables were found to have a higher level of salicylic acid than vegetable soups that were not labeled "organic." These higher levels were the result of the fact that the organic plants were less well protected against various forms of infestations, and they expressed salicytes to protect against the invaders. Since farmers from time immemorial have sought to protect their crop, being less successful at it could be defined as being inferior, but an Orwellian inferiority where inferior is really superior.

Salicylic acid is the active ingredient in aspirin for which there is a claim that it has beneficial health effects for those who take one or two a day. This was taken as tantalizing evidence of nutritional superiority that warranted further research even though salicylic acid is not known as a nutrient. No matter how heroic the efforts to hold other factors constant, it is difficult to take seriously a study comparing commercially canned vegetable soups where one could either have compared the vegetables directly or made the soups themselves to make sure that everything else was the same except the vegetables.

Even if we accept the study's validity, its conclusions are still in doubt. The tiny amount of salicylic acid that they found was 117 nanograms/gram. This is "1/10,000,000 of a gram or 0.00001% or (1/100,000 of 1%). For a typical 400 gram serving of soup at 117 nanograms/gram = 50,000 nanograms of SA, which is 0.005% of a gram, or 0.05 milligrams of salicylic acid, or 1/20th of one milligram" (Avery 2002). A bowl of organic soup provides "roughly 1/6,000 of a standard aspirin compared to conventional soup" which provides "only 1/36,000 of an aspirin" (Avery 2002).

A more recent paper found that foodstuffs produced by "organic" or "sustainable" methods produced more phenolics because they were less protected (Asami et al. 2003). Once again, phenolics are not thought to be a nutrient but they are believed to be anti-oxidants and therefore possibly helpful in preventing cancer. If being less well protected is the source of the alleged benefit, then conventional farmers could reduce the protection that they provide plants and thereby improve their "nutritional" value. Of course this would reduce the farmers' output and raise the price of the product.

 

Consider all Factors

In my view as an economist, the authors missed the point that consumption of fruits and vegetables is price sensitive, so that even if the authors are correct one would still have to balance the alleged nutritional benefits of the foodstuffs with the reduction in the consumption of them, particularly by those in lower income groups who need them most. Phenolics and salicytes are called secondary metabolites because they are not essential for the plant's metabolism. They are expressed in response to some attack against the plant. Some secondary metabolites have been found to be rodent carcinogens. Simply stated, if a plant is less well protected than it will be producing a variety of chemical defenses and it is likely to be carrying some residue from whatever attacked it. It is not valid or good science to cherry-pick what one wants to measure and ignore the rest. One has to look at the total potential benefits and harm to be able to say anything meaningful about the difference between various forms of plant production, and then one has to consider the cost factor for any judgment about nutrition to have any validity. The authors of the articles, finding "organic" foods have more nutrients, fail to test for higher levels of other secondary metabolites that may be carcinogenic, nor do they test for higher levels of a microbial infestation that may have caused the plant to express the chemical toxins.

In my judgment, it would be helpful if authors spoke about the increased production of "chemical toxins" to ward off infestation in less well-protected plants. After all, in spite of the use of the term "chemicals" as a pejorative, chemicals are what the plant is producing. And if they are being produced to protect against an invader then they are likely to be in some way toxic to it. Once we have the generic category of "chemical toxins" than we can proceed to enumerate them and identify which are (or may be) beneficial to humans, which are (or may be) harmful to humans and which are likely to be neither. Unfortunately, just as we have words like "organic" that are endowed with vitalist virtues, we also have terms like "chemicals" and "toxins" that have been so demonized that sensible discourse using them has become almost impossible.

Much of the opposition to transgenic food crops is that they are allowing and will increasingly allow farmers to produce food crops with reduced pesticides or even no pesticides and use agronomic methods such as sustainable conservation tillage which prevent soil erosion, conserve water and preserve biodiversity in ways that "organic" agriculture cannot. When honestly and properly understood, pesticide-free transgenic food crops (crops using lower amounts of less environmentally toxic pesticides than the "all natural" pesticides of "organic" farmers) undercut the benefits of "organic" food consumption. This means that conventional farmers could mass-produce food that more than matches the alleged health and environmental benefits of "organic" food at a lower cost and price. Why then, would anyone buy "organic" food let alone pay a premium for it? Further, the transgenic food crops have vastly lower levels of fungal or other infestation, and as recent pro-organic studies show, they produce far fewer toxins. Even the most optimistic supporters of pest resistant Bt corn and cotton fully expected that in time some insects would develop resistance to their bioengineered insecticide (the Bt gene expresses a protein fully digestible by humans but lethal to target insects), yet six years have passed and "target insect pests have developed little or no resistance to Bt crops thus far, according to US Department of Agriculture-funded scientists." Ironically, the diamondback moth "evolved resistance to Bt sprays used by organic growers, but no pest has evolved resistance to transgenic Bt crops in the field" (Fox 2003, see also DeGregori 2003). The irony is of course that it is the organic growers who have vociferously complained that the transgenic Bt varieties would lead to the emergence of super bugs resistant to their Bt spray.

More than 500 species of insect have evolved resistance to one or more conventional insecticides. So far, the track record for Bt is better. In the field, only one pest, the diamondback moth, has evolved resistance to Bt sprays, and none has evolved resistance to Bt crops. Despite this success, the incredible adaptive ability of insects means that resistance remains a threat (Fox 2003).

Transgenic food crops using rDNA are the most predictable and therefore the safest form of plant breeding humans have ever devised. And almost everywhere in the world they are regulated, as they are the only food crops where we know what to test for. The potential for enhanced nutrition or even using the plant to express a protein that has pharmaceutical capabilities at an incredibly low price is enormous. But in the perverse logic of inferior-is-better, because "organic" foods are inferior to those resulting from transgenic food crop production, they are really superior.

Never has human food production been safer or more abundant than it is now. But we must always remember that in any human endeavor, there is never 100% certainty. The food crops in the field today, conventional and "organic" alike, are the products of 20th century plant breeding. In addition to the traditional crossing of closely related types, throughout the last century there emerged mutation-breeding using either highly toxic mutagenic chemicals or gamma radiation from a nuclear source that immediately produces random, massive change throughout the plant's genome. There is nothing predictable in the outcome here. What could be more frightening to the consumer should critics wish to use it than for our food to be the product of carcinogenic chemicals or radioactivity (which of course it is not)? But of course this would leave nothing on the shelves or in the fields for people to eat. In addition, plant breeding has added techniques such as somaclonal variation, protoplastic cell fusion, embryo rescue, self-pollination and tissue culture to put crops in the field and food on our table. Again, there is nothing predictable here but of course that is the intention, namely to produce quickly as much variation as possible so that the plant breeder has more possibilities to choose from.

The use of tissue culture in plant breeding has also often resulted in somaclonal variation of plant lines and irregular phenotypes or field performance. Somaclonal variations are mutational and chromosomal instabilities of embryonic plants regenerated from tissue cultures (Haslberger 2003).

Unfortunately, these "chromosomal instabilities" persist for some time not only in the original crop but in future crops in which it is part of the breeding stock.

These instabilities may result from activation of dormant transposons in the chromosome. The consequent genetic variability is known to persist for many generations and is difficult to eliminate by backcrossing (Haslberger 2003).

Yet our food supply remains safer than it ever has been. And we must never forget that these mutation crops are very much a part of the crops of the "organic" farmers whose opposition to synthetic pesticides requires them to use varieties that are more resistant to disease infestation.

 

Natural Toxins

It is interesting to note that in searching for the possible "unintended consequences" of rDNA. the most serious unintended outcome was found in crops from "traditional breeding. a traditionally bred squash caused food poisoning, a pest-resistant celery variety produced rashes in agricultural workers (which was subsequently found to contain sevenfold more carcinogenic psoralens than control celery) and a potato variety Lenape contained very high levels of toxic solanine (Haslberger 2003).

These crops are no longer cultivated (Kirschmann and Suber 1998, Ames and Gold 1990a and Prakash 2001). The most recent episode was an outbreak of "killer zucchini" which produced the "only food scare in recent history in New Zealand" and interestingly it "stemmed from the farming methods of organic farmers and others who use unconventional farming practices" (LSN 2003). In February 2003, Zucchini with "high levels of natural toxins" was sold on the vegetable market and resulted in "several recorded cases of people suffering food poisoning" (LSN 2003). We often worry about the toxicity resulting from spraying crops but rarely are we as concerned about those from not spraying them.

An examination of common factors shows the levels of toxin apparently increased among zucchini growers who did not spray their crops. Unusual climatic conditions meant there were huge numbers of aphids about in January and insect predation is sometimes associated with increased levels of toxins in plants (LSN 2003).

In this case, there was a "clear link between increased toxin levels and older open-pollinating varieties of seeds" (LSN 2003). It is another of the "inferior is superior" views that there is something inherently virtuous in farmers planting their own saved seeds but it is "likely zucchini grown from saved seed will therefore be more vulnerable to toxin build-up" (LSN 2003).

The scientists who reviewed the "killer zucchini" case were very clear that the "most likely cause of the build-up of toxins is a genetic weakness in older varieties." However worthy the farmer's intentions may have been, "the growers' decision to use older varieties and to save seeds is likely to have resulted in a health risk for consumers - something which has never happened with crops derived from genetic modification" (LSN 2003).

The work of Bruce Ames and two different National Academy of Science studies have shown that over 99.9% of the toxins that we ingest are the natural products of plants, and as we have noted, most of them are rodent carcinogens (Ames et al. 1990a&b, NAS 1973 and NRC 1996). Worst of all from the inferior-is-superior perspective, with rDNA, conventional farmers will mass-produce better protected food with fewer toxins in the plant and on it. Mass production means that those who consume these safer foods are not partaking of some special virtue, apart from better health.

 

Some Ideas are Dangerous

The inferior-is-superior food fetish is harmless as long as it is the exercise of personal consumption practices of those who can afford it. But it has taken a nasty turn, as these ideas are now lined up in opposition to the use of the latest and best in modern science and technology to contribute to meeting the needs of a growing world population for improved nutrition provided in an environmentally sustainable way. When these ideas galvanize street protests, the burning of crops in the field and buildings, the destruction of research in improved crop production, and other actions that make advances in agriculture more difficult, then these ideas have become dangerous and must be countered vigorously and continuously with better ideas. Freedom of speech and freedom for research must protect the minority but also the majority that may wish to carry forward the enterprise of science/technology and promote the benefits that they allow. This means that the laws protecting crops in the field, research, and researchers must be enforced. Modern agricultural science has given us much and our task is both to defend it and to find ways to allow access to those who have not fully realized these benefits.

 

Scarcity and Snob-value

In addition to higher levels of nutrition and cleaner, safer food, modern consumers now have an incredible array of foodstuffs from around the world as well as an opportunity to savor, with some frequency, cuisines from cultures whose culinary delights were unknown to their parents or grandparents. In an article appropriately titled, "Mean Cuisine," Greg Critser asks the question, "Why, in a time of unprecedented abundance for everyone--vine-ripened Mexican tomatoes for $1 a pound! World-class reds and whites from Montepulciano d'Abruzzo for $5 a bottle! An international glut of inexpensive extra virgin olive oils and cheeses and nuts and fruits at Trader Joe's and Price Club! - why oh why are the chefs of America so dour, so chary - so very very very bummed out?" (Critser 2001). "Why the big change" Critser asks? "Ten years ago, a pint of cold-pressed, extra-virgin Italian olive oil would set you back about $20. It was scarce, and so it was the chef's preference. Today one can buy a gallon for the same price. Today, of course, imported oil is not the chef's choice" (Critser 2001). The answer is abundance, and abundance is a threat to the values of snobbery of the critics of modernity.

Critser adds that the "culprit is globalization." The foods, particularly, those that were once imported at a price beyond the reach of ordinary citizens, have now become common and relatively cheap in supermarkets across the land. Globalization has been the mechanism by which the increasing global food production leads to greater diversity of available foodstuffs and therefore greater choice, but it also deprives the snobs of that sense of exclusivity in the items they consume. In a world of increasing free trade and technological advancement, the food snobs seek to pursue an anti-trade ("buy locally"), anti-technology agenda in order to preserve their status and self-esteem, even if it is at the expense of continuing the increase in food production to meet a growing world population and make the technologies of accessibility and abundance available to those who have not had the opportunity to benefit as fully as others from them. Rules that make items of consumption more expensive, restrict access to them to those who can afford them, thus making them more prestigious. Whatever the rhetoric used to defend them may be, the fact remains that those actively opposing the advance of science and technology are also working against the well-being of the less fortunate citizens of this planet. Humanism and science are today, as in the past, intricately interrelated in the endeavor not only to understand the world but also to make it a better place for all who call it home.

 

Thomas R. DeGregori (http://www.uh.edu/~trdegreg/)is a Professor of Economics at the University of Houston and the author of the forthcoming book, Origins of the Organic Agriculture Debate Iowa State Press: A Blackwell Publishing Company - http://store.yahoo.com/isupress/0813805139.html - which formed the basis of much of the material in this paper along with material from his other recent books.

 

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