 Recognizing that “nature” is not a natural category need not be an impediment to consensus. It can open more space for human expression and creativity.  Seeing how knowledge and technologies are constructed does not disable us from making “better- worse” judgments. We just have different tools.  Admitting uncertainty need not block all action. Precaution can be seen as a starting point for seeing fresh alternatives.  A critical approach to environmental knowledge may reveal systematic biases, e.g., neglect of social science evidence about risk at WTO. 10/3/11ESPP-78 1

 Environment and economics  A particular way of modeling environmental problems and solutions  History  How did we learn to think in this way about the environment?  Components of Economic Model  Modeling institutions (government vs. market)  Modeling human behavior (incentives, information)  Modeling nature (externalities, ecosystem services)  Questions  How good is the economic model?  What are its most salient deficiencies?  What implementation problems and opportunities does the model present? 10/3/11ESPP-78 2

 Economy  A recent term  Pervasive: green, fuel, bio, hydrogen, renewable…  Forgotten history (cf. Mitchell 2002)  Calculability  Institutions  Relations of power (whose exchange values prevail?)  Not “mere” construction/representation 10/3/11ESPP-78 3

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 Makes unseen environmental costs visible ( “ externalities ” )  Allows comparison with benefits (already monetized): cost-benefit analysis  Enables comparison of unlike activities (based on use and degradation of same natural resources)  Offers instrument of global environmental governance (world environmental market)  Produces measures for better accounting (ecosystem services, “ecological footprints ” ) 10/3/11ESPP-78 6

 Economics is a model of human (and organizational) behavior  Economics is descriptive (is) and normative (ought)  Basic elements  Behavioral theory: utility maximization  Normative assumption: efficiency is highest good  Analytic strategy: weigh everything relevant in economic terms  Decision rule: pick cost-effective solution (regulation) or allow cost-effective solution to be picked (market) 10/3/11ESPP-78 7

 Features of regulation  Style: command and control  Assumptions ▪ Perfect information (but see TSCA) ▪ Adequate state capacity (analysis, design, monitoring, control) ▪ Sufficient political will (capture, resistance)  Features of market  Style: entrepreneurial  Assumptions ▪ Incentives drive behavior (buy-in) ▪ Releases creativity from below (performance standards) ▪ Can get pricing right 10/3/11ESPP-78 8

 Allocating costs of information  Whoever introduces a new product should demonstrate its safety (e.g., FIFRA of 1972)  Whoever releases a pollutant should tell the public what it is releasing (e.g., Toxics Release Inventory of 1986)  Allocating costs of clean-up  Whoever damages the environment should be responsible for clean-up: “polluter pays principle” (e.g., Superfund law of 1980)  Allocating costs of unequal performance  Whoever needs to emit more should trade with whoever is emitting less (e.g., carbon offsets under 1977 and 1990 Clean Air Act amendments) 10/3/11ESPP-78 9

 This is how people do behave this is how people should behave  Rationale for deregulation  Justification for creating new markets ▪ Privatization (of water, for example) ▪ Tradable permits (in carbon, for example)  A self-fulfilling model: problems are explained in terms of “market failure”  Reform efforts tend to remain inside the model (single-loop learning) 10/3/11ESPP-78 10

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 What counts as a demonstration?  A single substitution of trees for cooling tower  How is the “service” calculated?  North or south planting  Stream angle  Species of trees [cf. Cronon, “wrong nature”]  Who makes the calculations?  Rise of private consultancies  What does not get asked? 10/3/11ESPP-78 12

 The discount rate debate  Foundations for discounting  People prefer the present  Marginal utility of consumption lower in future  Uncertainty  Technological change  Largely an argument about practices of economic analysis  Is discounting ethical or scientific? 10/3/11ESPP-78 13

 Recognise that for climate policy-making institutional limits to global sustainability are at least as important as environmental limits.  Employ the full range of analytic perspectives and decision aids from the natural and social sciences and humanities in climate change policymaking.  Direct resources to identifying vulnerability and promoting resilience, especially where the impacts [of climate change] will be largest. 10/3/11ESPP-78 14