Alvin L. Alm
I I
Intellectual warfare has broken out recently between economists and ecologists. Ecologists are becoming increasingly critical about the methods economists use to determine the value of ecological systems, particularly in cases where damages are virtually irreversible. Economists often react by suggesting that ecologists should stick to their hugs and plants. This debate surfaced in the Science Advisory Board’s report “Reducing Risk.” The SAB urged economists to develop new tools for evaluating critical ecological resources. Before examining the merits of this recommendation, it is useful to explore how economists generally value environmental resources. Many economists contend that the benefits of environmental control actions should be measured against the costs. For example, an effort to control ambient air pollution should measure the costs (e&, of scrubbers and other controls) against the benefits (e& greater productivity, less damage to crops and materials). Economists argue that the option chosen should achieve the most benefits in excess of costs. In conducting henefit-cost analyses, benefits and costs are discounted to reflect the time value of money. For example, a dollar invested today could be expected to yield much more than one dollar in five years. Conversely, if the benefit of some action was one dollar five years from now, then the currenl value of the benefit would be considerably less than one dollar. When heavy
upfront investments are made to prevent problems from occurring decades in the future, discounting may result in very small current benefits. In my opinion, economic analyses are useful in the decision-making process. But policy makers must be aware of the limitations of such analyses, just as they must be aware of the limitations of other analytical techniques. First, all environmental benefits cannot be quantified, particularly aesthetic values such as improved visibility. Second, the public generally is more willing to pay for environmental protection than benefit calculations alone would indicate. There are intangible concerns that are not measured by current economic techniques. The most serious limitation, however, is the inability of economics to evaluate irreversible changes in ecological systems. (In fairness to economists, most do not attempt to do so.) For example, the SAB report concluded that the greatest ecological risks were habitat alteration, species extinction, global w m ing, and stratospheric ozone depletionall global and virtually irreversible problems. In each case, most of the costs of taking actions now would result in benefits that mostly would occur later. Stabilizing an irreversible trend, particularly one with long lag times ktween action and effect, would have few short-term benefits. Moreover, the benefits from ecological shifts are extremely hard to estimate, and once answers are at hand, it probably will he too late to prevent serious damage. Traditional economics tools simply are inadequate to cope with certain ecological problems. A different approach is to think of the protection of ecological systems as a long-term investment, comparable to investments made in the marketplace. In business strategy, levels of investment are based on growth potential. Some lines of business have little growth potential and are milked for current profits. Areas that are critical to the survival of a company receive long-term invest-
013-936W90/0924-1783$02.50/0 0 1990 American Chemical Society
ments to preserve and upgrade technology and service. For any long-term competitor in world markets, investments must be made in sustainable growth. TNIY competitive companies must make continued investment in fac ment, R&D, and human resources if they are to succeed in the long term. One can view environmental investments in sustainable development in a similar manner. The planet we live on represents the infrastructure that sustains all life and provides for economic growth. Since the industrial revolution, we have been disinvesting in our lifesustaining planet. This rate of disinvestment has resulted in the substantial destruction of habitat, elimination of species, destruction of the ozone layer, and the potential for large temperature increases. Although opinions may v;uy about the rate of damage, there is no doubt that it is occurring. Reversing disinvestment will he mammoth undertaking. Obviously, e? tinct species cannot be resurrected an we cannot stuff omne into the Antarcti hole. On the other hand, we could ri verse the process of deforestation an greatly reduce the amount of greenhouse gases and chlorofluorocarbons. Thinking about certain ecologically beneficial actions as investments, rather than costs, requires a shift in attitude by both ecologists and economists. Ecologists must face the fact that economics plays a role in ecological decisions, and economists must realize that certain environmental investments are critical, even if benefits cannot readily be calculated.
Alvin L. Aim is director and senior vicepresident for energy and the environment for Science Applications International Corp., a supplier of high-technologyproducts and services related to the environment, energy, health, and notional securiry.
Environ. Sci. Technol.. Vol. 24, No. 12. 1990 17t
