Costanza!

Last year Robert Costanza published an update to his seminal 1997 paper The Value of the World’s Ecosystem Services and Natural Capital.  Here’s what I had to say about that in 2014:

The paradox is that because nature has so far provided many services in abundance, they are not “scarce” in an economic sense and our human markets place little or no monetary value on them. This would change in the event our human civilization caused the services to be reduced or interrupted in any way. While it may seem strange to value ecosystem services in monetary terms, it can be instructive to ask what we would be willing to pay if we had no choice but to pay for these services. There are many conceptual and practical challenges with this sort of monetary valuation, but there have been some brave attempts to do it, such as those led by Robert Costanza at the Australian National University.[9] By comparing the magnitude of what we would be willing to pay for these services to the magnitude of the human economy, we can get a sense of the importance of ecosystem services in underpinning our human economy. Costanza’s estimate of the annual value of global ecosystem services ($33 trillion in 1997 U.S. dollars) is the same order of magnitude as the world output of goods and services in that year (approximately $29 trillion[10])! While the estimated value of ecosystem services is certainly less precisely measured than the monetary value of goods and services produced, the order of magnitude suggests that humanity could not afford to substitute its own technology and efforts in place of the services provided by ecosystems, at least not with the wealth and knowledge available to us now.

The new paper is called Changes in the Global Value of Ecosystem Services. Here’s the abstract:

In 1997, the global value of ecosystem services was estimated to average $33 trillion/yr in 1995 $US ($46 trillion/yr in 2007 $US). In this paper, we provide an updated estimate based on updated unit ecosystem service values and land use change estimates between 1997 and 2011. We also address some of the critiques of the 1997 paper. Using the same methods as in the 1997 paper but with updated data, the estimate for the total global ecosystem services in 2011 is $125 trillion/yr (assuming updated unit values and changes to biome areas) and $145 trillion/yr (assuming only unit values changed), both in 2007 $US. From this we estimated the loss of eco-services from 1997 to 2011 due to land use change at $4.3–20.2 trillion/yr, depending on which unit values are used. Global estimates expressed in monetary accounting units, such as this, are useful to highlight the magnitude of eco-services, but have no specific decision-making context. However, the underlying data and models can be applied at multiple scales to assess changes resulting from various scenarios and policies. We emphasize that valuation of ecoservices (in whatever units) is not the same as commodification or privatization. Many eco-services are best considered public goods or common pool resources, so conventional markets are often not the best institutional frameworks to manage them. However, these services must be (and are being) valued, and we need new, common asset institutions to better take these values into account.

So $125 trillion dollars per year in value, and last year the IMF says the world economy was about $77 trillion. This is important for a few reasons. First, it strengthens the argument even further that ecosystem services are not just something happening on the fringe of our economy that give us a helping hand. They are absolutely essential and we could not afford to do without them. Second, if I understand correctly, the annual value we can derive is lower per unit area of land because of degradation of the land since 1997. Every year we are using up $4-20 trillion that the Earth is not able to replenish. That value is hard to put in context, because we don’t know what the total stock is, or how low that stock could fall before it would start to constrain our economy.

There’s another implication – if we could develop a precise accounting of the natural capital being used up each year, we could orient our economy to shift more of those costs to the people, governments, and business entities choosing to impose those costs on the rest of us. Carbon taxes are a fairly obvious first step.

 

Middle East spiral?

Here’s a scenario of how the Syria war and larger Middle East instability could escalate into something much worse.

As in imperial Europe in the period leading up to the First World War, the collapse of an entire order in the Middle East is in process, while forces long held in check are being released. In response, the former superpowers of the Cold War era have once again mobilized, at least modestly, even though both are fearful of a spark that could push them into direct conflict. Each has entangling regional relationships that could easily exacerbate the fight: Russia with Syria, the US with Saudi Arabia and Israel, plus NATO obligations to Turkey. (The Russians have already probed Turkish airspace and the Turks recently shot down a drone coyly labeled of “unknown origin.”)

Imagine a scenario that pulls any of those allies deeper into the mess: some Iranian move in Syria, which prompts a response by Israel in the Golan Heights, which prompts a Russian move in relation to Turkey, which prompts a call to NATO for help… you get the picture. Or imagine another scenario: with nearly every candidate running for president in the United States growling about the chance to confront Putin, what would happen if the Russians accidentally shot down an American plane? Could Obama resist calls for retaliation?

As before World War I, the risk of setting something in motion that can’t be stopped does exist.

As I’ve said before, I don’t think any of this is Obama’s fault, but if it does ultimately lead to something very bad, the roots may be traced back to events that happened on his watch whether they were under his control or not (also, clearly, to direct actions taken by his predecessor), and his legacy could be the president who let the post-World War II and post-Cold War order slip away.

the yeast vats are here

Asimov’s 1953 novel Caves of Steel featured food grown in vats by genetically modified yeast. It took awhile, but that’s here.

Cargill’s new product is an example of synthetic biology, a form of genetic engineering that uses modified organisms to manufacture compounds that would never be produced naturally. What makes EverSweet taste sweet is not stevia; it is a compound produced by a bioengineered yeast…

Ingredients that are being replaced or are likely to be exchanged for products made through synthetic biology include vanilla, saffron, coconut oil, patchouli, olive squalene, and rose oil. Indeed, the world’s largest cosmetics, flavor, and fragrance companies are hoping that synthetic biology will help them replace more than 200 natural botanical extracts.

This particular article is most worried about large food and chemical corporations replacing products formerly produced by small farmers. That’s a shame. It also talks about the growing backlash from the anti-GMO crowd. But the fact is, the backlash is probably growing because the technology has reached commercial viability. There may be a silver lining – if we are worried about ultimately hitting photosynthetic limits on food production, this may be a way around it. I think yeast will eat pretty much anything organic – mine like barley and honey, but I suspect you could feed them garbage, sewage, etc. in a severely resource constrained world. The dark cloud to the silver lining is always that if you remove one constraint, your ecological footprint will tend to keep growing until you encounter another one. The people in the caves of steel weren’t doing all that well as I recall.

credit, interest, and a steady state economy

This article in Ecological Economics says that a positive interest rate and a no-growth economy could coincide.

Does credit create a ‘growth imperative’? A quasi-stationary economy with interest-bearing debt

This paper addresses the question of whether a capitalist economy can ever sustain a ‘stationary’ (or non-growing) state, or whether, as often claimed, capitalism has an inherent ‘growth imperative’ arising from the charging of interest on debt. We outline the development of a dedicated system dynamics macro-economic model for describing Financial Assets and Liabilities in a Stock-Flow consistent Framework (FALSTAFF) and use this model to explore the potential for stationary state outcomes in an economy with balanced trade, credit creation by banks, and private equity. Contrary to claims in the literature, we find that neither credit creation nor the charging of interest on debt creates a ‘growth imperative’ in and of themselves. This finding remains true even when capital adequacy and liquidity requirements are imposed on banks. We test the robustness of our results in the face of random variations and one-off shocks. We show further that it is possible to move from a growth path towards a stationary state without either crashing the economy or dismantling the system. Nonetheless, there remain several good reasons to support the reform of the monetary system. Our model also supports critiques of austerity and underlines the value of countercyclical spending by government.

work sharing

Work sharing – it’s an idea to look into before the robots take over most of the work.

Work-sharing for a sustainable economy

Achieving low unemployment in an environment of weak growth is a major policy challenge; a more egalitarian distribution of hours worked could be the key to solving it. Whether work-sharing actually increases employment, however, has been debated controversially. In this article we present stylized facts on the distribution of hours worked and discuss the role of work-sharing for a sustainable economy. Building on recent developments in labor market theory we review the determinants of working long hours and its effect on well-being. Finally, we survey work-sharing reforms in the past. While there seems to be a consensus that work-sharing in the Great Depression in the U.S. and in the Great Recession in Europe was successful in reducing employment losses, perceptions of the work-sharing reforms implemented between the 1980s and early 2000s are more ambivalent. However, even the most critical evaluations of these reforms provide no credible evidence of negative employment effects; instead, the overall success of the policy seems to depend on the economic and institutional setting, as well as the specific details of its implementation.

Central Oslo Car Free by 2019

According to Reuters:

Cars will be banned from central Oslo by 2019 to help reduce pollution, local politicians said on Monday, in what they said would be the first comprehensive and permanent ban for a European capital…

Under the plans, the council will build at least 60 kilometers of bicycle lanes by 2019, the date of the next municipal elections, and provide a “massive boost” of investment in public transport.

Several European capitals have previously introduced temporary car bans in their city centers, including Paris last month. Some such as London or Madrid have congestion charges to limit car traffic.

CIA torture

Here are some really sickening descriptions of post-2001 CIA torture. It starts with a pretty awful case, but then it goes on and on.

It was the CIA’s goal, through a program designed and executed by two psychologists the agency contracted to run its torture operations, to break his mind. Integral to the program was the idea that once a detainee had been psychologically destroyed through torture, he would become compliant and cooperate with interrogators’ demands. The theory behind the goal had never been scientifically tested because such trials would violate human experimentation bans established after Nazi experiments and atrocities during World War II. Yet that theory would drive an experiment in some of the worst systematic brutality ever inflicted on detainees in modern American history.

 

carbon pricing

Here is Christine Laguarde on The Path to Carbon Pricing.

The transition to a cleaner future will require both government action and the right incentives for the private sector. At the center should be a strong public policy that puts a price on carbon pollution. Placing a higher price on carbon-based fuels, electricity, and industrial activities will create incentives for the use of cleaner fuels, save energy, and promote a shift to greener investments. Measures such as carbon taxes and fees, emissions-trading programs and other pricing mechanisms, and removal of inefficient subsidies can give businesses and households the certainty and predictability they need to make long-term investments in climate-smart development.

At the International Monetary Fund, the focus is on reforming its member countries’ fiscal systems in order to raise more revenue from taxes on carbon-intensive fuels and less revenue from other taxes that are detrimental to economic performance, such as taxes on labor and capital. Pricing carbon can be about smarter, more efficient tax systems, rather than higher taxes.

Carbon taxes should be applied comprehensively to emissions from fossil fuels. The price must be high enough to achieve ambitious environmental goals, in alignment with national circumstances, and it must be stable, in order to encourage businesses and households to invest in clean technologies. Administering carbon taxes is straightforward and can build on existing road fuel taxes, which are well established in most countries.

This is one of the few policies that probably almost all economists would agree on – taxing externalities. Instead of allowing businesses individuals to profit while imposing a cost or harm on others, you make them pay that cost as a tax. This has dual benefits – first, it creates an incentive to reduce the negative behavior, second it raises revenue that can replace a tax on work or income. It’s good for the economy, the environment and people.

We do have politicians from one of the two major U.S. parties talking about climate change, and we have a big international summit coming up. So there are opportunities. We should get something done, and then build on it by finding other harmful materials and behaviors we can tax, like fuels that cause air pollution, building materials that cause water pollution, packaging that is not designed to be recycled, and dangerous consumer goods like motor vehicles that kill a million people a year. This is not unprecedented – we did it with cigarettes. By the way, to get this done, we need a constitutional amendment making it crystal clear that a person is a human and a human is a person, and a corporation is not a person for the purposes of political speech.

 

biking as the only form of transport

This article has an interesting slide show on what a city really designed around biking (aka cycling) might look like. Bike lanes go right into and out of buildings. I like the concept, but I wonder what it would be like to walk in this city. I like the idea of a city built for walking as the first and preferred form of transport, then bicycling second, then maybe personal rapid transit third. In my utopia, homes, work places, shopping/resting/gathering places, and natural areas are located so that most people take most daily trips on foot, hop on their bikes a few times a week to go to a meeting or visit friends across town, and hop on some form of motorized transportation maybe once or twice a month to go out of town. Actually that pretty much describes my typical month right here in decidedly non-utopian Philadelphia, USA.