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Teaching and Learning Resource (TLR)
1. Title
Valuing Nature? - Economics And Environmental Valuation
2. Keywords
Citizens, consumers, economics, environment, policy, valuation
3. Introduction
The engagement of economic thought with the environmental agenda has led in recent years to the dominance of a form of environmental economics (termed here the 'standard approach') which claims to be able to incorporate economic values for different "environmental goods" into cost-benefit analyses indicating optimal social welfare choices. The approach has been quite influential since the beginning of this decade in relation to environmental policy and regulatory decisions in the UK and elsewhere.
There are, however, conflicting views about its validity; in particular, the role of cost-benefit thinking in environmental matters has been challenged from both philosophical and cultural perspectives. These conflicts have been at the root of a number of controversies over particular issues, and are leading to a re-appraisal of the importance of public deliberation and judgement for determining environmental values.
4. Aim
The aim of this TLR is to provide students with an introduction to these issues concerning valuation of the environment, including the stimulus to think critically about the claims made for economics and the opportunity to consider practical implications through a case-study simulation.
5. Learning outcomes
After using this TLR, students should have:
6. Pre-requisites
Some prior familiarity with the policy aspects of environmental issues is essential for students undertaking this TLR. Previous A-level or undergraduate study in any of the following areas would be especially relevant: economics, politics, sociology, environmental management.
7. How to use TLR
The full TLR is designed to be used broadly as below. Variations could reflect class size, time availability and/or degree stage, by reducing the number of extracts to be read in preparation / considered in the session.
If sufficient session time is available, the class could then move directly into the follow-up case-study simulation activity described in section 14 (below). Otherwise, this follow-up should take place within a week or two of the original session, while the issues are still fresh in students' minds.
8. Instructions to students
See section 7 (above).
9. Stimulus Material
The TLR is based on the reading and discussion of up to six short extracts from contemporary material on environmental economics and related themes. Copies of the readings accompany the TLR. Their sources are:
Extract 1: Blueprint for a Green Economy, David Pearce, Anil Markandya and Edward Barbier (London: Earthscan, 1989) pp. 51-57
Extract 2: ditto, pp.60-64
Extract 3: From the Introduction to Valuing Nature? Economics, ethics and environment, ed. John Foster (London: Routledge, 1997) pp.3-8
Extract 4: The Economy of the Earth, Mark Sagoff (Cambridge: CUP, 1988) pp. 26-29
Extract 5: "The environmental 'valuation' controversy", Robin Grove-White in Foster op.cit. pp. 22-29
Extract 6: "Environmental valuation, deliberative democracy and public decision-making institutions", Michael Jacobs in Foster op.cit. pp. 219-221
Study questions on these extracts are attached as Annex A to the TLR.
A compilation of introductory/summary points regarding the standard approach in environmental economics is also supplied as Annex B to the TLR. Overheads could be made from this to help the lecturer with introducing the study task or summarising feedback (see section 7, above).
A outline of the case-study (Not in Whose Back Yard?) is supplied as Annex C to the TLR.
10. Degree stage
This TLR is intended to lend itself to flexible use. Work exploiting its full scope will be done most productively with level 3 students, since the abilities to appreciate and relate all the considerations drawn out from the six readings by the study questions, and to apply these thoughtfully to the role-play exercise, are unlikely to have been consolidated before this stage. However, a version of the TLR based on only some of the readings (1, 2 and perhaps 6) - with or without the role-play - could be used with level 2 or even (exceptionally) level 1 students to prompt open-ended discussion.
11. Resource requirements
To work through this TLR properly will require:
12. Preparation
Students are to read and think about the discussion material before the session. This preparatory reading could include all the extracts (1)-(6) and the outline case-study Not in Whose Back Yard?; alternatively, depending on either time available (see section 7) or degree stage (see section 10), students may be required to consider a selection from this material.
The TLR is deliberately structured around small-group and class discussion of the study questions relating to the extracts, and the learning outcomes are the less likely to be achieved, to the extent that interactivity is reduced. The effect of issuing the study questions for prior consideration by students individually along with the preparatory reading, is thus a matter for the lecturer's judgement; it is likely to depend on the composition and dynamics of the particular student group, and also on the session time available.
13. Links with other TLRs
The aims and/or learning outcomes of this TLR are related to those of other TLRs listed in the following 'thematic cluster':
14. Follow-up activities
To encourage students to think about how economic valuation of environmental features might bear on practical implications for policy- and decision-making, the case-study situation outlined at Annex C to the TLR could be considered, and also explored through role-play. This situation has been chosen because, although small-scale and only mildly contentious, it can nevertheless be used to demonstrate the underlying complexity of even apparently straightforward environmental valuation contexts.
A suggested format for using the case-study is as follows:
As part of this exercise, the students could be asked to produce a Council press release explaining their decision to interested parties. This could be undertaken as a group activity or on an individual basis; and could even form one part of an assessment strategy for the TLR.
15. Recommended reading
Attfield, R. and Dell, K. (eds) (1989) Values, Conflict and the Environment 29--30 and 34--35, Oxford: Ian Ramsey Centre.
Beckerman, W. (1994) `Sustainable development: Is it a useful concept?', Environmental Values 3, 3: 191--209.
Bowers, J. B. (1993), 'Pricing the environment: A critique', International Review of Applied Economics 7: 91--107.
Burgess, J., Limb, M. and Harrison, C. M. (1988) `Exploring environmental values through the medium of small groups: Parts 1 and 2', Environment and Planning A 20: 309--326 and 457--476.
Holland, A. (1994) `Natural capital', in R. Attfield and A. Belsey (eds) Philosophy and the Natural Environment, Cambridge: Cambridge University Press.
Jacobs, M. (1991) The Green Economy: Environment, Sustainable Development and the Politics of the Future, London: Pluto Press.
O'Neill, J. (1993) Ecology, Policy and Politics: Human Wellbeing and the Natural World, London: Routledge.
Pearce, D. (1993) Economic Values and the Natural World, London: Earthscan.
Willis K. G. and Benson, J. F. (1988) `Valuation and wildlife' in R. K. Turner (ed.) Sustainable Environmental Management: Principles and Practice, Boulder, CO: Westview Press.
16. Users' comments
“The aims and learning outcomes of the TLR are highly valuable to our geography students. On reflection I would even go so far as to say that they are essential as a basis for their understanding and critical appraisal of much of the content of their course.”
“I found the resources for this TLR to be very good, on the whole, especially the summary points in Annexe B (some of which I adapted for use as OHTs …) and the reading extracts and accompanying questions. I valued the reading references very highly.”
“Students gained so much from this process that they requested we adopt the same approach again in relation to other topics. I have often used a similar approach with academic journal articles but not with shorter extracts. It is definitely something I will do again.”
“If I were to use this TLR again I would substitute the follow-up activity with something more directly related to the students’ fieldwork experiences or dissertation choices.”
"I do not have a strong background in the environmental-economic approach but I have a growing interest in the field … I found this TLR interesting and instructive.”
ANNEX A - STUDY QUESTIONS
Extract 1
1.1 Why (according to Pearce and colleagues) does it make sense to apply economic thinking to environmental issues?
1.2 What do they claim we can hope to gain from the economic valuation of the environment?
1.3 How do they counter the objection that the environment is "priceless"?
Extract 2
2.1 How do the authors describe the economic valuation of the environment as working in practice?
2.2 What problems with this approach do they identify?
2.3 Can you suggest any problems with it that they don't identify?
Extract 3
3.1 The quotation from Schumacher reminds us that there are broad human activities, concerns and values which give economic thought and analysis their point. Suggest what some of these "meta-economic" considerations might be.
3.2 What does the extract mean by economistic thinking?
3.3 Why is economic valuation of the environment an economistic procedure, according to Foster?
Extract 4
4.1 What are the main distinctions which Sagoff is drawing between our choices as consumers and as citizens?
4.2 What is wrong, in Sagoff's view, with basing environmental decision-making on consumer preferences?
4.3 Sagoff argues in a specifically American context. How far is what he says applicable to other countries too?
Extract 5
5.1 Grove-White lists a number of problems which have historically dogged attempts to bring economic valuation and cost-benefit analysis into environmental decision-making. What are they?
5.2 What reasons does he suggest for the new lease of life given to these methods in the early 1990s?
5.3 What problems does he foresee arising from the increasing use of these methods by policy- and decision-makers in the UK's present political culture?
Extract 6
6.1 Jacobs argues that environmental features are public rather than private goods. What characteristics do you think might make the following "public goods"? :
6.2 Why are deliberative institutions appropriate, according to Jacobs, for valuing public goods?
6.3 What such institutions (a) are in place already, and (b) might feasibly be put in place, to assist in the valuation of environmental features for policy- and decision-making
ANNEX B
INTRODUCTORY / SUMMARY POINTS CONCERNING THE STANDARD APPROACH IN ENVIRONMENTAL ECONOMICS
THE ECONOMY AND THE ENVIRONMENT
ECONOMY
(Local / regional / national / global)
System of (human) activities of production, distribution and exchange of goods and services
Set of institutional arrangements by means of which resources (inputs) are converted to outputs to satisfy human needs and wants
ENVIRONMENT
Resources
Wastes
Life support
ECONOMICS AND THE ENVIRONMENT
ECONOMICS
The study of how people exercise choice in the attempt to satisfy their needs and wants through the production, distribution and exchange of goods and services
The study of choice
The study of that part of social welfare which can be brought directly or indirectly into relation with the measuring-rod of money (Pigou, 1920)
ENVIRONMENT
Resources
Wastes
Life support
ENVIRONMENTAL ECONOMICS
The environment provides essential resources for economic activity
These resources are subject to limits and are currently being over-used in the process of that activity
This is often because they are treated as "free goods" (they do not have prices in the relevant markets)
It is possible to identify and express the economic value of environmental resources in monetary terms
This will enable
ENVIRONMENT, VALUE AND ECONOMICS
"User values, or user benefits, derive from the actual use of the environment. An angler, wildfowl hunter, fell walker, ornithologist, all use the natural environment and derive benefit from it...The values so expressed are economic values in the sense we have defined. [A benefit is any gain in welfare (or satisfaction or "utility").]"
"To assert that there is a pollution problem or an environmental problem is to assert, at least implicitly, that one or more resources is not being used so as to maximise human satisfactions. In this respect, at least, environmental problems are economic problems".
NATURAL CAPITAL
Natural objects or features capable of having an economic value
Hence,
Comprising naturally occurring
MEASURING THE ECONOMIC VALUE OF THE ENVIRONMENT
Direct methods
Revealed preferences
Expressed preferences
Indirect methods
COST-BENEFIT ANALYSIS
Bypass project involves destruction of ancient woodland
Benefits of project (BD):
Costs of project (CD) :
Environmental costs of project (benefits of preservation) (BP) :
Proceed only if:
ANNEX C
CASE STUDY: NOT IN WHOSE BACK YARD?
(Only slightly adapted from real life)
Background Information
Location: Rural Loamshire in the West of England.
Proposal: British Gas Transco is seeking to acquire a 6-acre field near the village of Little Totting to build a new compressor station, thus enabling it to reinforce its supply capacity to the South Wales area where there has been a large and unanticipated increase in demand for gas. The station itself would be comparatively small and located in purpose-built sound-proofed accommodation "designed to look like an agricultural building", but a new access road would also be needed.
Nature of site: Unspoilt farming country in an Area of Outstanding Natural Beauty. One other village in the immediate vicinity.
Issues:
Current state of play: Planning application soon to be considered by South Loamshire Council. Transco has indicated that it would appeal against a refusal.
Questions
Role play (undertaken in groups)
Instructions
You are the South Loamshire Council. You have received a proposal from the Little Totting Residents' Action Group that the Council should commission a contingent valuation survey to determine the environmental costs associated with the proposed development, in order to inform its decision on the planning application. You are meeting to determine your response to this proposal.
1. Choose a Chair and Secretary/rapporteur.
2. Discuss - as far as you are able - the full range of views likely to be held within the community on the topic of the proposed development. Between you, you should ensure that you represent the views of each of the following 'stakeholders' in your community:
3. Make a decision - either by consensus or taking a vote - in response to the proposal from the Little Totting Residents' Action Group that the Council should commission a contingent valuation survey to determine the environmental costs associated with the proposed development. (Note: you are not required to decide whether the proposed development should be given planning permission.)
After groups have considered the issues, the rapporteurs will report to the whole class on the respective decisions taken and the reasons for them.