Spanish version here
As human civilization progressed; we can see now that many environmental risks are being mitigated. The root cause of this change is due primarily to a cultural change; which is reflected on how we value the environment both, culturally and economically.
The clearest example of what is expressed above could be seen in the fact nowadays nature is no longer a ‘wild’ place; like Africa use to be called, ‘the wild continent’; but rather something necessary for humans. Moreover, African wild areas, are now places that people around the world visit to contemplate nature and to learn from its peace and equilibrium. In the past, the cities were protected by walls and fences from the ‘wild’. Today, new urban planning calls out for more ‘green spaces’ within the urbanized perimeters.
Etymologically; the terms Economy and Ecology mean almost the same. While Economy comes from the Greek ‘oikos‘ -home- and ‘nomos‘ -management, regulation-; the term ‘Ecology’, first used by the German Ernst Haeckel in 1866; means ‘oikos’ and ‘logia‘ -study-. Consequently, a clear and common meaning could be seen; from the point of view of ‘oikos‘, whether referring to ‘home’ as a household or ‘home, as our Planet, the natural world’ as the ecosystem on which we deeply depend on. Also, the terms ‘nomos‘ and ‘logia‘ are bathed with logical patterns as opposed to random; and as a consequence they are not so distant concepts either.
The definition of ‘classical economics’; it is framed around how humans barter goods and services within a market context. Also, this definition focuses on how parties seek the lowest possible price in the production/delivery and consumption/use of goods and services. This concept of economics, is today, too simple; because it neglects the ‘oikos‘ aspect; that is, the natural ecosystem. As a result, very often, this sort of understanding of economics, it damages the environment and soon or later hits back the very market that triggered the misuse of resources or either pollution by producing a kind of ‘boomerang’ effect.
These economic inefficiencies were often called ‘externalities of the economy’; that is, those issues -in this case, environmental aspects-, to which the market economy did not set a price on; having as a consequence that this price was paid by third parties who may have been neither producers nor consumers of the goods and services that triggered pollution. A classic example, a citizen who does not have a car and yet is affected by respiratory diseases caused by fossil fuel associated air pollution.
Environmental damage began to affect markets and thus commercial activities; causing scarcity of some goods/assets such as ‘acceptable noise levels in a city’ –real estate market-, or the depletion of commercial fisheries- food market-, or the deterioration of ‘air quality’ –real estate market and public health costs-, or with the closure of beaches because of ‘polluted waters’ –tourism industry-.
As Adam Smith, father of ‘Classical Economics’ would say, ‘the invisible hand of the market’ acted; and environmental aspects; began to affect the prices of goods and services.
There are two challenges in terms of the relationship between ‘Classic Economics’ and ‘Ecology’ as pure science of nature, isolated from human behaviour.
The first challenge is that many of the environmental damages do not hit markets performance immediately, but after years since pollution reached nature – a time lapse problem – and no less important, the ‘location problem’, by which pollution events occur miles away from the area where ecosystem or human health is finally affected.
The second challenge refers on how to implement environmentally sensitive market regulations without performing a ‘major surgery’, which is to say, without triggering a mass market disruption and thus leaving many economic actors ‘out of businesses’.
The recognition that ecosystems provide ‘services’ to human civilization was initially appreciated by the Sumerians; who prohibited the felling of trees in area around the Tigris-Euphrates basin. Plato; the Greek philosopher; also recognised environmental damage due to deforestation. Environmental first mover Mr. Von Humboldt did the same in a remarkably illustrative fashion in the early 1800s’. In addition, Humboldt also added environmental topics like monoculture and the misuse of superficial waters for crop irrigation.
In 2005, the MEA or ‘Millenium Ecosystem Assessment‘ was published; an in-depth report requested by the United Nations. In such report; it was globally recognized that ecosystems provide the following services to the Global Economy:
- Supporting Services(nutrient recycling, primary production, soil formation, provision of habitats and pollination)
- Provisioning Services(Food, raw materials, genetic resources, water, medicinal resources, energy, ornamental resources, biogenic minerals – quartz, diamonds, pyrite, calcium, etc.)
- Regulating Services (regulation of species, pest and disease control, waste decomposition, carbon capture and climate regulation, water and air purification).
- Cultural Services(Historical, spiritual, recreational, therapeutic and cultural).
If we want to internalise the previously called ‘externalities of the economy’; the highest challenge of the current markets, seems to be a clear tendency towards ‘globalisation’. Today it would seem that local markets tend to disappear, being engulfed by the global market. Certainly, for there to be a global market; human culture must be totally homogenised, standardised; which seems to be against the very nature of men; so diverse in ethnic groups and cultures. Maybe in the future, more than a global market; markets could be created subject to ecoregions; that respond more or less to the same ecosystemic and cultural conditions.
There is something clear about Planet Earth, as global ecosystem; this is the called ecosystem ‘connectivity’ factor. This connectivity could be clearly seen by the flow of fluids such as water and air; that do not know boundaries or limitations; when moving from one location to another within the planet.
Today, universities already teach syllabus such as ‘Environmental Economics’ and also ‘Natural Resource Economics’. In the first case, the main focus of study is on how to allocate prices on pollution; and in the second, the focus lays on what is the most efficient rate for the consumption of natural resources.
As case studies, from which we can learn from some economic strategies where environmental damage was be successfully minimised and how the use or natural resources was clearly improved; we can read below:
Fisheries regulation: A study compared the strategies of the USA and Canada on how to manage commercial fisheries. USA adopted a ‘ command and control’ approach in terms of fish size, zoning and fishing effort; while Canada implemented ITQ or Individual transferable quotas, which much better represented the reality of the fishing industry. The result of the implementation of both strategies showed that the Canadian scheme maintained and even increased the fishing stocks and industry profitability; while the opposite happened in his neighboring country.
Transportation: Singapore, a nation with high purchasing power, but with a very small territory; developed the best possible transportation policy to deal with environmental harm. As a result, Singapore today has no traffic problems and no significant levels of air pollution associated with car usage. Among its solutions, it implemented an annual quota system for new vehicles to be registered. Car registration became more expensive than the car price, but also it created a market where car owners could freely transfer their car registration to other new car owners. It also established different prices for, tolls, parking, according to zones and times. Also, a large percentage of the funds raised by the government with this car registration approach were directly invested in public transport; that is, transforming a problem into a benefit for citizens.
Land use regulation: In Thailand, in the village of Tha Po, in an economic study carried out by two economists; It was demonstrated that the removal of 550 Ha of mangrove for the purpose of prawn aquaculture produces more damage than profit since mangroves are breeding areas of many other commercial fish species; and that the elimination of them; affects local commercial fishing and in addition, it removes the economic benefit of the mangroves in relation to flood & soil erosion control; therefore affecting agriculture and the property industries too.
Land use and water regulation: In 1989, the City of New York, with almost 9 million inhabitants; was forced by the new ‘Healthy Water Act’ to acquire water purification plants valued at $ 8 billion. This local government instead of investing in expensive plants; invested in buying the lands upstream – some 56,000 ha; throughout the catchment area of the Catskill-Delaware basin, from where 90% of the city water comes from. These lands are located about 250 km upstream and at that time the area was subject to the following land use: 61% forestry, 500 farming stations and some 60 rural villages.
New York’s greatest achievement was to acquire land upstream, up to the water sources worth $ 240 million, and another $ 310 million over ten years. As a result: the New York government saved on the difference between the investment on the purification plants and the price of the land acquired. The water quality of the basin has dramatically and directly improved as a result of the services of a now protected ecosystem – hence local Biodiversity – and moreover, the new city’s lands began to give income in the tourism and recreational industries.
In a nutshell; markets are always flexible and tend to look for efficiencies; within these efficiencies; today the undeniable tendency is to incorporate environmental efficiencies.
Copyright@ 2019 Pedro J. Toranzo