The Crowding out of Complex Social Goods

In recent decades, it has become increasingly common for advocates of conservation to demonstrate the financial value of the environment through the lens of financial capital. While environmental valuation has elucidated many of the numerous and varied ways in which individuals derive benefits from nature, prevailing approaches only render a subset of benefits visible – mostly those associated with goods and services that generate benefits for individuals. Methods that highlight the value of complex social goods are relatively less well developed. By focusing exclusively on individual goods, environmental valuation and associated decision-making frameworks (such as cost-benefit analysis) may serve to undermine the social institutions, motivations and behaviours that support the environmental goods and services we seek to protect.

There are numerous and varied ways in which people benefit from the environment (i.e. ecosystem services, more commonly referred to as ‘use’ and ‘non-use’ goods by economists). These benefits can be (simplistically) classified in two ways: first, according to whether the benefit accrues primarily to an individual or to the broader community; second, according to whether the benefit is relatively simple or complex. Environmental goods and services can thus be thought of as:

• simple, individual (e.g. commercial fishing to earn money and provide food for consumption and nutrition);
• complex, individual (e.g. recreational fishing to provide food, to enjoy being out at sea even if no fish are caught);
• simple, social (e.g. subsistence fishing to catch food for an entire community—particularly members who are unable to fish for themselves);
• complex, social  (e.g. traditional hunting and fishing, which provides food for individuals and the broader community, while maintaining important shared socio-cultural practices).

The valuation tools developed by economists over the last 100 years are differentially suited to assessing particular types of goods and services. The most common methods are adept at highlighting the benefits of simple individual goods. Recent developments have also seen progress towards the valuation of complex individual goods.  Much less well developed, however, are methods to estimate the benefits of complex social goods. This has several implications.

First, economic logic suggests that, ceteris paribus, investment should be directed to programs with the greatest benefit per dollar spent. If, due to their complexity or because we lack methods for assessing them, entire classes of benefits are routinely omitted from deliberations, spending will invariably be directed towards interventions and projects that generate more easily monetized benefits (i.e. towards simple individual goods), rather than to projects that generate the greatest benefit, per se (at least some of which are likely to be associated with complex social goods). This could directly ‘crowd out’ complex social goods from investment considerations.

Second, dominant valuation methods assume that an ecosystem service may be ‘valued’ as the amount an individual is willing to accept (in monetary terms) as compensation for its degradation or disappearance. This framing contrives the price at which an otherwise socially unacceptable trade-off may be sanctioned, belies the true nature of social goods, and trivialises difficult decisions regarding the best course of action for society as a whole.

Third, Cost-benefit analysis (CBA) and associated valuation methods assume that one can estimate the value of a good (or project) to society simply by adding together the values that accrue to individuals. Yet just as the value of a shoe is critically diminished in the absence of its partner, so too are complex social goods likely to be fundamentally complementary. In other words, it may not be possible for an individual to forgo receipt of a complex social good without diminishing the overall value of that good for everyone.

Fourth, the institutionalisation of CBA and the valuation methods that underpin it has crowded out alternative methods and institutions capable of dealing with complex natural resource management issues. The emphasis on financial incentives in environmental protection has been shown to weaken other intrinsic values, social norms, motivations and behaviours crucial to the promotion of the public good.

Our most well-developed methods for putting a price on nature, do not have as the underlying task that of determining “What is right for society as a whole?” but rather, “What would generate the greatest (net) benefit for individuals within society?” It is important to consider what individuals want.  But only focusing on what generates the greatest net benefit for individuals risks the crowding out of social goods, institutions and norms that support the environment and individual and community well-being. Should we abandon traffic signals because some individuals are willing to pay substantive amounts to do so or would this bear an unacceptable cost to society? If we are to produce a truly complete valuation of nature, we must include the complex social interactions and bonds which are rooted in nature, not just the potential for individual gain or loss. The challenge, of course, is to work out how to measure them.

Acknowledgement
This research is supported through funding from the Australian Government’s National Environmental Science Programme.

 

Dr Natalie Stoeckl is a Professorial Research Fellow in the Division of Tropical Environments and Societies at James Cook University in Australia.  If you wish to discuss this research with her further, please contact her at:  Natalie.Stoeckl@jcu.edu.au