Ecology and Capitalism: An Unlikely Partnership?
What is the value of the Earth? With the recent events in Asia, the world has been reminded of the sheer, destructive potential of nature.
The enormous damage to life and property has perhaps put into perspective the relative value of things, and reminded us that what we hold dear in this material world may so easily cease to exist.
In an age where the environment is valued as merely a means of production, where the media incessantly warns and reminds us of the finite nature of our resources, perhaps it is worthwhile to just put the value of the earth into perspective.
Obviously putting a price tag on the earth would be extremely difficult for several reasons.
How do you value it? What do you value it against? In economics it is very difficult to give monetary value to something that is too valuable, scarce or unique to trade actively in markets, so a primary assumption could be that the earth is essentially priceless.
There are however a few interesting methods that one might use to put the value of our planet into perspective.
The first and possibly most obvious way would be to determine the value of life for every living thing on the planet - natural capital.
Natural capital refers to the natural resources of the earth's biosphere when viewed as a means of production of essential commodities such as oxygen and water.
The term is often associated with Paul Hawken, author of a book by that name and originator of the Natural Capitalism economic model.
This would require a continent-by-continent valuation of natural capital in order to see if there is systematic inflation of the price of life on some compared to others.
The relative value of commodities in a given environment would make this difficult as errors of over valuation and under-valuation would inevitably occur.
"natural capital" as a concept, suggests that the savings rate of an economy is a poor measure of how much the country is actually saving, as it measures only investment in man made capital.
In the end, the ecosystem itself provides the basis of valuation for much of our man made capital; valuation of land, availability and cost of energy, fertility of land, and value of real estate.
Land is after all a necessary ingredient in the production of even man made capital.
Yet would our natural resources still be as valuable if an earth-like planet existed close enough for human beings to travel to it or be in competition with it? If such a planet existed, we would have to include transport costs in deciding the value of our own planet's resources.
Another method of determining the value of the earth would be to estimate the cost of replacing the earth itself.
This could be estimated in one of two ways: Identifying the costs of Terraforming, or estimating the cost of insuring against a worst-case scenario, global natural disaster.
Terraforming - literally "earth shaping" is an incredibly complex operation and in theory could be done on a planetary scale or more realistically a smaller scale of reproducing a given ecosystem.
Such a thing was attempted in the Biosphere 2 project.
The aim of this ambitious and costly project was to recreate an environment that could support eight human beings for two years.
The ultimate failure of the project demonstrates the extreme difficulty (and at $240 million, the significant expense) of terraforming.
Yet by multiplying the cost of the project by the ratio between the earth's population and that of the smaller Biosphere habitat, economists may be able to derive a very rough minimum value of terraformation on a grander scale.
That cost is roughly $200 million billion (that is "200" with15 zeros after).
Of course this is a crude estimate and based only on today's technology, and due to the failure of Biosphere 2, we can assume it would cost a great deal more to actually make it work.
The replacement by insurance method is a little less accurate as a means by which to value the earth because this would have to take into account not only natural capital (difficult enough to value) but would also have to consider capital in the form of property and it seems inaccurate to consider such artificial wealth in valuing natural resources.
Basically, the averted insurance payments can be thought of as a yield, and we can use the total cost of insurance as a way of measuring the value of the earth's productivity for as long as these averted failures do not occur.
A final way of determining the planet's value is rather more subjective than the others.
In the end we must consider how much we would be willing to pay in order to avert the destruction of our planet or to ensure our survival as individuals.
The best way to decide this is to imagine a case in which our resources have become so depleted that the supply is too low and the demand too high and thus the expenses of securing them become astronomical.
If in such a case Humans were forced to resort to conflict in order to secure and protect what little is left, we would need to consider the additional costs we would be willing to pay for national and personal security.
Of course all these attempts to value the earth are largely theoretical and speculative.
If we were to put an estimate on the value of the earth -whatever method we use to arrive at it - it would be at least hundreds of quadrillions of US dollars.
With all the money in the world (literally, in this case) it is doubtful that we could find the expertise and knowledge required to replace the earth.
It is certainly worth keeping in mind that preserving the ecosystem works to our advantage - economically and in terms of our quality of life.
Most money is made by manipulating natural resources and the environment for some advantageous purpose, whether directly through rent and exploitation of resources, or indirectly by utilising the resources thereof for profit.
A healthy environment and sustainability are essential to the success of Capitalism as an economic model.
Let us hope that it should never come to it that we are forced to actually measure the value of our planet, by the exponential scarcity of resources.
The enormous damage to life and property has perhaps put into perspective the relative value of things, and reminded us that what we hold dear in this material world may so easily cease to exist.
In an age where the environment is valued as merely a means of production, where the media incessantly warns and reminds us of the finite nature of our resources, perhaps it is worthwhile to just put the value of the earth into perspective.
Obviously putting a price tag on the earth would be extremely difficult for several reasons.
How do you value it? What do you value it against? In economics it is very difficult to give monetary value to something that is too valuable, scarce or unique to trade actively in markets, so a primary assumption could be that the earth is essentially priceless.
There are however a few interesting methods that one might use to put the value of our planet into perspective.
The first and possibly most obvious way would be to determine the value of life for every living thing on the planet - natural capital.
Natural capital refers to the natural resources of the earth's biosphere when viewed as a means of production of essential commodities such as oxygen and water.
The term is often associated with Paul Hawken, author of a book by that name and originator of the Natural Capitalism economic model.
This would require a continent-by-continent valuation of natural capital in order to see if there is systematic inflation of the price of life on some compared to others.
The relative value of commodities in a given environment would make this difficult as errors of over valuation and under-valuation would inevitably occur.
"natural capital" as a concept, suggests that the savings rate of an economy is a poor measure of how much the country is actually saving, as it measures only investment in man made capital.
In the end, the ecosystem itself provides the basis of valuation for much of our man made capital; valuation of land, availability and cost of energy, fertility of land, and value of real estate.
Land is after all a necessary ingredient in the production of even man made capital.
Yet would our natural resources still be as valuable if an earth-like planet existed close enough for human beings to travel to it or be in competition with it? If such a planet existed, we would have to include transport costs in deciding the value of our own planet's resources.
Another method of determining the value of the earth would be to estimate the cost of replacing the earth itself.
This could be estimated in one of two ways: Identifying the costs of Terraforming, or estimating the cost of insuring against a worst-case scenario, global natural disaster.
Terraforming - literally "earth shaping" is an incredibly complex operation and in theory could be done on a planetary scale or more realistically a smaller scale of reproducing a given ecosystem.
Such a thing was attempted in the Biosphere 2 project.
The aim of this ambitious and costly project was to recreate an environment that could support eight human beings for two years.
The ultimate failure of the project demonstrates the extreme difficulty (and at $240 million, the significant expense) of terraforming.
Yet by multiplying the cost of the project by the ratio between the earth's population and that of the smaller Biosphere habitat, economists may be able to derive a very rough minimum value of terraformation on a grander scale.
That cost is roughly $200 million billion (that is "200" with15 zeros after).
Of course this is a crude estimate and based only on today's technology, and due to the failure of Biosphere 2, we can assume it would cost a great deal more to actually make it work.
The replacement by insurance method is a little less accurate as a means by which to value the earth because this would have to take into account not only natural capital (difficult enough to value) but would also have to consider capital in the form of property and it seems inaccurate to consider such artificial wealth in valuing natural resources.
Basically, the averted insurance payments can be thought of as a yield, and we can use the total cost of insurance as a way of measuring the value of the earth's productivity for as long as these averted failures do not occur.
A final way of determining the planet's value is rather more subjective than the others.
In the end we must consider how much we would be willing to pay in order to avert the destruction of our planet or to ensure our survival as individuals.
The best way to decide this is to imagine a case in which our resources have become so depleted that the supply is too low and the demand too high and thus the expenses of securing them become astronomical.
If in such a case Humans were forced to resort to conflict in order to secure and protect what little is left, we would need to consider the additional costs we would be willing to pay for national and personal security.
Of course all these attempts to value the earth are largely theoretical and speculative.
If we were to put an estimate on the value of the earth -whatever method we use to arrive at it - it would be at least hundreds of quadrillions of US dollars.
With all the money in the world (literally, in this case) it is doubtful that we could find the expertise and knowledge required to replace the earth.
It is certainly worth keeping in mind that preserving the ecosystem works to our advantage - economically and in terms of our quality of life.
Most money is made by manipulating natural resources and the environment for some advantageous purpose, whether directly through rent and exploitation of resources, or indirectly by utilising the resources thereof for profit.
A healthy environment and sustainability are essential to the success of Capitalism as an economic model.
Let us hope that it should never come to it that we are forced to actually measure the value of our planet, by the exponential scarcity of resources.