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Joshua Farley Community Development and Applied Economics Gund Institute for Ecological Economics. Ecosystem Services: What are they, we need them, and how to preserve them. The Economic Perspective. What is Economics?. The allocation of scarce resources among alternative desirable ends

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Joshua farley community development and applied economics gund institute for ecological economics l.jpg

Joshua Farley

Community Development and Applied Economics

Gund Institute for Ecological Economics

Ecosystem Services: What are they, we need them, and how to preserve them. The Economic Perspective

What is economics l.jpg
What is Economics?

  • The allocation of scarce resources among alternative desirable ends

  • 3 questions an economist must ask

    • What are the desirable ends?

    • What are the scarce resources?

    • How do we allocate?

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Outline of Presentation

  • Answer these questions as they apply to Vermont’s natural resources

  • What are the scarce resources, and what are their characteristics?

  • How do we allocate?

  • What are the desirable ends?

  • Radically practical thoughts on solving the current economic crisis (if there is time and interest)

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What Are the Scarce Resources?

  • Law of Physics: You can't make something from nothing

  • Everything the economy produces requires raw materials and energy provided by nature

  • Law of Physics: You can't make nothing from something

  • Everything the economy produces returns to nature as waste

  • Exponential growth impossible in finite system

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  • Essential to do work

  • Fossil fuels

    • Finite supply

  • Combustion causes pollution

    • Degrades ecosystems

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Ecosystem Goods

  • Raw materials provided by nature

  • Essential inputs into all economic production

  • We can use them up as fast as we like

  • If I use it, you can't

    • Competition for use

  • Market goods

  • Ecosystem structure, building blocks of ecosystems

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Ecosystem Services

  • Structure generates function

  • Ecosystem functions of value to humans known as ecosystem services

  • Includes life support functions

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Regulation Services

  • Water regulation

  • Disturbance reg

  • Erosion control

  • Soil creation

  • Pollination

  • Climate regulation

  • Nutrient cycling

  • Biological control

  • Waste absorption

  • etc.

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Provisioning Services

  • Production of food, fuel, fiber (regeneration of structure)

  • History of Vermont

    • Clearing of land (Timber, Farmland)

    • Erosion, soil loss, economic collapse

    • Depopulation

    • Can we do this again?

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Information Services

  • Recreation, tourism

    • Forests: jobs for 2,393 Vermonters

    • Annual payrolls of $33 million annually

  • Unknown benefits: e.g. Taxol

  • Cultural attachments

  • Scenery

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Supporting Services

  • Habitat

  • Refugia

  • Without biodiversity, there are no other services

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Characteristics of Services

  • Provided at a given rate over time—we can't use them as fast as we want

  • If I use it, you still can (except waste absorption)

    • Cooperative in use

    • Prices create artificial scarcity, e.g. avian flu

  • Can't be owned

  • Non-market goods—no price signal to indicate scarcity

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Ecosystem Services and Ignorance

  • Passenger pigeons and Lyme disease

  • The ozone layer

  • Ecological thresholds

  • Irreversibility

  • What role do your salamanders play?

  • What risks should we impose on future generations?

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Agricultural Land

  • Land as Good

    • Soil fertility is mined at rate we choose

    • Competitive within a generation

    • Market good

  • Land as Service

    • Crops produced at certain rate over time

    • Cooperative: can be used by this and future generations

  • Provides more eco-services than developed land

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So What? ag land

  • All economic production depletes ecosystem structure

  • All economic production generates waste

  • Resource extraction and waste emissions necessarily degrade ecosystem services

  • Ecosystem services have become the scarcest resources

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The Economic Problem ag land

  • How do we allocate finite ecosystem structure between:

    • Economic production

    • Production of life sustaining ecosystem goods and services

  • How should we distribute resources among individuals?

    • Who is entitled to ownership of ecosystem goods?

    • Is anyone entitled to ecosystem services?

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Relative Values ag land

  • Both economic production and ecosystem services essential to our survival

  • Economics looks at marginal value—value of one more unit

    • More we have of something, the less one more unit is worth

    • Value of economic production is decreasing

    • Value of ecosystem services is increasing

    • When do we stop converting?

  • Law of economics: stop doing something when marginal costs exceed marginal benefits

  • Estimated value of global ecosystem services twice that of economic output

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Relative Costs ag land

  • Is it fair to subsidize development? Developed land: $1.08-$1.29 in services for every dollar in taxes

  • Undeveloped land: $0.06-$0.52 in services for every dollar in taxes

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The Property Rights Issue ag land

  • Private property rights

    • Is it fair for landowners to degrade ecosystem services that entire community depends on?

  • Public property rights (government ownership)

    • Is it fair to prevent landowners from using their land as they wish?

    • How do you feel about Ticonderoga paper mill?

  • No property rights

    • Waste absorption capacity

    • Aquifers?

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Solving the Problem ag land

  • Market solutions

    • one dollar, one vote—plutocracy

    • Provides incentives that may make us all better off in some circumstances

  • Effective for many types of goods and services

    • Those that can be owned

    • Those for which use by one person prevents use by another

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Solving the Problem ag land

  • How do make decisions about resources that can't be owned, and my use does not leave less for you to use?

    • Markets don't exist

    • No market incentive to provide resources

    • One citizen one vote? Democracy?

    • Cooperative provision, cooperative use?

  • Existing property rights give owners the right to do as they choose with ecosystem goods (structure), hence control over ecosystem services

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Options ag land

  • Let rights to goods trump rights to services

    • Risk another collapse of Vermont's economy

    • Services probably provide more benefits than goods. Inefficient.

  • Limit rights to ecosystem goods

    • Property rights as a bundle

    • Lake Tahoe example

    • Is this fair? Speculators vs. farmers.

  • Purchase rights to ecosystem services

    • Conservation easements

    • Payments for ecosystem services, e.g. NYC

    • Community purchase of land

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Common property rights (citizen ownership) ag land

  • Declare common property rights to unowned goods and services

    • e.g. waste absorption capacity, aquifers, airwaves, etc.

  • Restore common property rights when possible

    • e.g. waterfront and public trust doctrine

  • Create common assets trust to manage resources for this and future generations

  • Can use market mechanisms, e.g. cap and auction

  • Revenue can be used to purchase and create more common property

  • Vermont Common Assets Trust

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What are the Desirable Ends? ag land

  • Goal of most economists is economic growth

  • Per capita income has increase 10x since 1900, total income has increased 40x

  • Per capita income in 1969 was 35% of today's

    • Was life less good then?

  • Should our goal be to ensure that our children consume 2x as much as we do? Our grandchildren 4x as much?

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Other Desirable Ends ag land

  • Sustainability

  • Justice (just distribution)

  • Health

  • Education

  • Stability (safe, secure jobs and environment)

  • Happiness and satisfaction with life as a whole

  • Efficiency

    • What is the cost of achieving these goals?

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Solving the Sustainability Problem: Case study of the current crisis

  • System wide change required

  • Conceptual

    • How does the world work?

    • What are our goals (the desirable ends)

  • Institutional

    • What are the rules under which the system operates?

    • What are the organizations that create and implement those rules?

  • Technical

    • Techniques and technologies