Ecological Economics: Valuing Ecosystem Services

Without valuing ecosystem services, like pollination by bees or the water purification of a watershed, society cannot accurately measure the overall impact of our economic decisions.


| January 2013


Our planet is finite. Our political and economic systems were designed for an infinite planet. These difficult truths anchor the perceptive analysis offered in The Other Road to Serfdom and the Path to Sustainable Democracy (University Press of New England, 2012). With wit, energy, and a lucid prose style, Eric Zencey identifies the key elements of "infinite planet" thinking that underlie our economics and our politics—and shows how they must change. In the following excerpt from chapter 6, “Getting Over GDP,” learn why society must begin valuing ecosystem services in order to measure the true impact of economic growth.  

As currently organized, our economy creates wealth by drawing down natural and social capital, a process that can’t go on forever. One positive result of an economic slowdown is that it slows this rate of ecological and social degradation, giving our system a little more time and breathing room to make the transition we need to make from our infinite-planet ways.

And, lest you think that in pointing this out progressives and environmentalists are uniquely indifferent to the human sorrows and difficulties wrought by recession, keep in mind that infinite-planet economists have long found a considerable amount of silver lining in the dark clouds of economic woe. High unemployment reduces “upward pressure” on wages and constrains the nonwage claims of labor, like the desire for safer working conditions; both are taken to be positive developments by corporations and those identified with them, including conservatives who have taken to heart the slogan once offered by a president of GM, “What’s good for General Motors is good for the country.” To some of these infinite-planet thinkers, recession is also an opportunity to release the economy from unwanted environmental regulation. Thus the remarkable avowal by Ryanair chief executive Michael O’Leary: “We would welcome a good, bloody, deep recession for 12 to18 months. . . . [It would bring a halt to the] environmental bullshit . . . that has allowed [Prime Minister] Gordon Brown to double air passenger duty. We need a recession if we are going to see off some of this environmental nonsense.”

With less particularly partisan sympathies, mainstream economists acknowledge that with recession comes what Joseph Schumpeter called “creative destruction,” the failure of outmoded economic structures and their replacement by new, more suitable structures. Downturns have often given a last, fatality-inducing nudge to dying industries and technologies. (Very few buggy manufacturers made it through the Great Depression.) With a good portion of 2009’s deficit-financed stimulus money being directed toward building renewable energy infrastructure, recovery from the worldwide Great Recession—the downturn that started with the collapse of the subprime lending market in the United States in 2008—may leave us with an economy several steps closer to being sustainable, an economy better prepared to deal with the waning of the petroleum era.

Gross Domestic Product: A Poor Measure of Economic Health

Creative destruction can apply to concepts as well. The current downturn offers an excellent opportunity to get rid of one economic concept that has long outlived its usefulness: gross domestic product, or GDP. It’s one measure of national income, of how much wealth Americans make, and it’s a deeply foolish indicator of how the economy is doing.

Every mainstream economics textbook that covers GDP in any depth at all offers cautions about using it as a measure of economic well-being—and then most of those books go on to offer reams of analysis and theory that take GDP to be a measure of economic well-being. None of them take good account of the fact that human well-being is, in total, much broader than material well-being and that GDP is a deeply flawed measure even of that. In its very structure GDP lies to us, telling us that infinite expansion of the economy’s ecological footprint is possible. It’s an infinite planet statistic, unsuited for our economic life on Factory Planet. It ought to join buggy whips and cassette recorders on the dustheap of history.






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