The New Economy of Nature: The Quest to Make Conservation Profitable. Gretchen C. Daily and Katherine Ellison, eds. Island Press, Washington, DC, 2001. 260 pp. $25.00 (ISBN 1559639458 cloth).
Gretchen Daily and Katherine Ellison are affiliated with Stanford University, where Daily is an interdisciplinary scientist and Ellison a consulting writer. Daily edited Nature's Services: Societal Dependence on Natural Ecosystems, an excellent book on the economic importance of ecological integrity. Her teaming with Ellison portends great science writing, as evidenced by their fascinating chapter on pollinators, and their ultimate goal with The New Economy of Nature is a noble one: sustainability. Their means to that goal is expressed in the subtitle, The Quest to Make Conservation Profitable. The book is enjoyable, owing to its easygoing prose. Unfortunately, the authors may have gone on a wild goose chase, joining a lengthening list of sustainability writers who have focused too much on “natural capitalism” to be prudent. Adam Smith would have pinpointed the problem; I'll do my best to “channel.”
First, however, a brief overview of contents: The prologue describes a shortcoming in economic policy, namely, the failure to account for natural capital and ecological services (such as pollination and flood control) in the measurement of economic welfare. Daily and Ellison inform us that this is changing, however. “Ecosystem assets have the importance of water and are gradually acquiring the scarcity of diamonds as the human population and its aspirations grow” (p. 11). With that combination of importance and scarcity, every economist this side of Alfred Marshall would say the time is ripe to ascertain the monetary value of these assets and to demand compensation in the market when such assets are liquidated. The rest of the book is about developing this “natural capitalism.”
Daily and Ellison toured the world to talk with academics, entrepreneurs, politicians, and various combinations thereof. Adam Smith probably began rolling in his grave at their first stop (Katoomba, New South Wales), where the notion of a “carbon market” was discussed. In the simplest scenario, carbon credits with monetary value would accrue to polluters who lowered carbon emissions or would be acquired from other polluters who lowered carbon emissions. Thus we have incentives for polluters to behave better. In a slightly more complex market, credits could also accrue to whoever plants trees, which then sequester carbon. So far, so good, but then Daily and Ellison suggest, “Some of the billions of dollars generated by the carbon market … might find their way to reforestation of degraded land.” Here I imagine Smith huffing, “Generated? What does this mean—generated?!” But let's finish the overview.
The tour includes places like sprawling Seattle, scenic Costa Rica, and wild Amazonia. In New York, where clean water was at stake, the city invested in natural capital by acquiring and preserving portions of its watershed rather than investing in manufactured capital (i.e., water filtration plants) because it was cheaper, thus illustrating howaccounting for natural capital may result in conservation. It seems a reasonable point, though Marc Sagoff has already thrown cold water on the story (see “On the Value of Natural Ecosystems,” Politics and the Life Sciences. 21: 19–25).
Town leaders in Napa, California, finally convinced the Army Corps of Engineers to let the river run more naturally, thus providing services such as flood control, fishing, and aesthetic pleasure. All this “had lured developers eager to fill the riverfront with big hotels” (p. 107), leaving us to ponder the net conservation effect.
The pondering continues after a passage about Sydney, Australia, where Daily and Ellison visited a workshop on potential international trade in carbon rights. The primary attendees were exuberant entrepreneurs who embarked upon a catered cruise. “For three hours, as the yacht passed the city's famed opera house and then drifted by immaculate suburban mansions and the gleaming, futuristic downtown, white-jacketed waiters circulated with wine, champagne, and plates of barbecued octopus, lamb, and shrimp. The next evening, after the lectures, the special guests were whisked away on a luxury bus to Lilianfels, where more comforts awaited in the form of cocktails, feather beds, gourmet jelly beans, and two types of chocolate mousse” (p. 30). Daily and Ellison failed to note the irony of this “conservation” cruise and the socioeconomic unsustainability it symbolized.
In Australia (but not on the yacht) they also ran into Jim Shields. As friends, roommates, and graduate students in wildlife science at the University of Washington in the 1980s, Shields and I loved the field but were passionate enough about conservation to engage the political economy of conservation. When Daily and Ellison found Shields, he was presenting his concept of the biodiversity credit, or “bio.” They do not clearly explain how the bio would function in the market, but Shields personalized it for me a few years ago. Using analogical terms from my book Shoveling Fuel for a Runaway Train (in which the runaway train is the economy and the shovelers are conspicuous consumers), he said, “Think of it as shoveling fuel into the back of the train.” According to my old friend, if consumers shovel (buy) the right fuel (bios), it will slow the runaway train (the economy) rather than speed it up. I hope he is right, but it doesn't seem probable, for reasons to be presented shortly. In any event, there is no real market for bios (or carbon credits). Such a “market” may only be foisted into existence, much like the regulatory regime it is intended to obviate.
Like Shields, Daily and Ellison seem to think that, as long as enough shoveling occurs in the back of the train, the rampant shoveling in the front of the train can be counterbalanced. As long as there is enough expenditure on conservation, in other words, the expenditures on nonconservation won't be so destructive, and cumulative expenditure can continue to rise. Adam Smith rolls, because there is no attention paid to what the shovel digs up—that is, where the money comes from.
In The Wealth of Nations, published in 1776, Adam Smith ushered in the age of capitalism with observations on the division of labor and the origin of money, without which no market (the matrix of capitalism) would exist. Smith had been to France and studied the Tableau Economique (François Quesnay's prototypical model of economic production), and he knew it was agricultural surplus that freed the hands for the division of labor and the exchanging of money. Were it not for agricultural surplus, everyone would be preoccupied with sowing and reaping, and money would be meaningless. The more agricultural surplus, the greater the division of labor and the more money to be spent. Smith's observations resonate with ecological trophic theory, in which it takes plants (producers) to have plant consumers, and plant consumers to have predators. Without the producers serving as the foundation, there is no economy of nature, old or new.
Recall that Daily and Ellison spoke of a carbon market “generating” money. Adam Smith rolled because the generation (origin) of money is agricultural or extractive surplus, not the foisting of carbon credits into a far-from-free market. In other words, the human economy is founded upon the liquidation of natural capital. The division of labor and the generation of money for carbon sequestration, ecotourism, and bios are possible only in proportion to that liquidation.
In the 1990s I worked on the San Carlos Apache Reservation, home of the biggest elk in the world. (Jim Shields even helped with an elk survey once.) The tribe sold some elk tags to nontribal members, with the revenue earmarked for habitat improvement. One year we sold three tags for $43,000 apiece. Two of them went to the owner of the largest old-growth sawmill in the Northwest, and I always wondered how many acres of old-growth trees were cleared to generate the money for the hunt.
Finding ways to make things cost more is not the solution, because it ultimately puts more pressure on the agricultural and extractive sectors to produce more surplus to generate more money. Nowhere is this clearer than on page 112, where Daily and Ellison describe the result of a sustainable forestry initiative: “To avoid building new roads into the old-growth areas, [Weyerhaeuser] had turned to extracting one tree at a time by helicopter, with 250-foot grapples. As a result, the timber harvest had dropped to a tiny fraction of what [MacMillan Bloedel] had collected before 1993, and costs had skyrocketed.” In other words, the logging was much less efficient and the amount of natural capital liquidated elsewhere to purchase a unit of this timber skyrocketed. The book is loaded with such zero-sum examples, especially pertaining to ecotourism.
Daily and Ellison fail to build upon the outstanding foundation of ecological macroeconomics developed over the past few decades. In the United States, two major themes in ecological economics have been economic scale and natural capital accounting, with clear leadership provided by Herman Daly and Robert Costanza, respectively. Neither is mentioned in the text. The lack of reference to Costanza (except for once in a very poorly stocked bibliography) is especially surprising, given his role in developing the concept of natural capital valuation.
The fatal flaw, however, is ignoring Herman Daly's steady-state economics, which would have provided the appropriate macroeconomic framework. Incredibly, while they note the problem of increasing population and consumption, Daily and Ellison never use the phrase “economic growth” (the growing product of population and per capita consumption), missing the opportunity to connect directly to the biggest table in the policy arena. The closest they come to an explicit reference to economic growth is “the scale of the human enterprise” (p. 22). They allude to the issue a few other times, yet the allusions are elusive and illusory. They seem to say, “The increasing scale of the human economy is problematic, but now that resources are becoming scarce enough to be priced in the market, firms can make money on those resources too, so that there will be more ways to make money even as we conserve more natural capital.” Roll over, Adam Smith.
For those with a background in ecological macroeconomics, The Economy of Nature should be a helpful book. It has a nice style—clear and conversational—and provides real-world examples of natural capital valuation and marketing. Without that background, however, I think it has (along with an increasing number of natural capitalism books) the potential to misguide students and policymakers, especially when they are already heavily exposed to “win–win” political rhetoric about reconciling economic growth with environmental protection.
Brian Czech (email@example.com) is a civil servant, who also teaches ecological economics at Virginia Polytechnic Institute and State University.