General discussion

For the past several weeks I have been struggling to understand why we are fervently attempting to monetize externalities and ecosystem services.  I agree that human activities often result in outcomes that society deems as undesirable, and therefore we must consciously change our behavior in order to achieve alternative results.  However, I do not understand why those undesirable outcomes (externalities) must be quantified in monetary terms, and why our responses to them must be economic (internalization of externalities with market mechanisms, property rights, etc).  In fact, the inconsistencies between the Ostrom and Dasgupta chapters illustrate the problems that arise when we adopt a monetized approach.

Dasgupta describes “externalities” as “the effects that decisions have on people who haven’t been party to the decisions”.  Nothing in this very broad definition requires us to think about externalities in monetary terms; indeed, based on this framing, we could “internalize the externalities” just by including all parties in the decisions.   Opponents would argue that economic, political or logistical barriers prevent all parties from being represented at decisions, thereby requiring that alternative ways of “internalizing the externalities” are necessary; however, this still does not satisfactorily explain why we must use monetary metrics.

Perhaps even more problematic in this respect is Dasgupta’s discussion of the fragility of cooperation.  The chapter points out that private investment leads to the breakdown of cooperative agreements, reciprocal relationships, and trust, which causes deterioration of CPRs.  Prior to this, however, Dasgupta discusses the “payment for ecosystem services” (PES)schemes that have proliferated globally, documenting the extensive programs that now exist “in which landowners receive payment for increasing biodiversity conservation, expanding carbon sequestration, and improving hydrological services”.  Because private investment may decrease incentives for cooperation (thus contributing to ecosystem service deterioration), it is reasonable to question whether PES programs are actually helping or harming human-environment systems.  Specifically, if individuals are given money to conserve natural resources that they have historically managed through traditional institutions, this infusion of a liquid asset (money, which is far more “spendable” than a non-liquid asset like a natural resource) may make them invest in substitute resources—not in the natural resources they historically managed.  In addition, providing monetized compensation to individuals may diminish the trust and cooperation that are essential to managing CPRs effectively.  Essentially, I question whether we can treat monetary compensation and natural capital as interchangeable assets, or if they actually incentivize different behaviors.

I would like to propose a radical idea: what if we were to measure externalities in a “moral currency” that describes the equity and social impacts of ecosystem degradation?  Even more radical, what if we were to require “payments” in this moral currency to parties affected by resource degradation?

I will offer one motivating example: consider the timber firm that Dasgupta describes.  The PES scheme he describes would require the timber company to pay the famers that are affected by water supply fluctuations downstream.  However, what if there were also “ethical damages” that the timber company had to pay in “moral currency”?  For example, what if, in order for the timber company to continue operating, the company owners, executives, and employees had to meet the affected farmers in person and explicitly accept responsibility for the damages they were causing.  The company could continue to harvest timber, but they had to meet those people they were affecting, see the damages they were causing, and experience the true “human cost” of their actions.  Psychological research tells us that human behavior is influenced by vivid, affective (emotionally-driven) experiences, and that anxiety is an important component to behavioral change.  What could be more vivid than meeting a family who is directly affected by your actions?  What would be more anxiety-inducing than having to accept personal responsibility for someone else’s well-being? 

Certainly this type of “moral currency” would be far more difficult (physically and logistically, but also emotionally and ethically) than writing a check to an affected community; but it would probably also be far more effective at incentivizing thoughtful resource use in the long-run.  It would also make each and every human being on the planet acutely aware of how their actions are directly affecting the lives of everyone else on the planet.

Yes, this idea may seem logistically infeasible, economically inefficient, emotionally daunting--but it is a first step towards incorporating ethical considerations into our economic and policy institutions, and perhaps one way to connect the “local” to the “global”.

I really like that idea of adding to the pure monetary value of externalities a moral side. This is what you actually be taught by your parents or at school that you have to show responsibility for your action and specifically apologize - in person! - for any wrong you did. Somehow this milestone of any education got lost on the way towards our economy-oriented society. 

I have to agree that this concept might not be feasible but as a theoretical idea it has a lot to offer: It really could really lead to a more responsible interaction and be an important part of any reconciliation process. Event though this example might be not be really closely related, it actually uses this kind of "moral currency": Truth and reconciliation commissions, like in South Africa after the end of the Apartheid, followed the idea of a face to face encounter of victim and offender. It has been considered as the crucial step in dealing with the past and preventing a comparable situation in the future. 

So I would support merging monetary and moral values - at least on a theoretical basis - in order to try to better protect natural resources and to connect the local with the global.

I would like to propose a radical idea: what if we were to measure externalities in a “moral currency” that describes the equity and social impacts of ecosystem degradation?  Even more radical, what if we were to require “payments” in this moral currency to parties affected by resource degradation?

I quite like the analytical power of the IAD framework of Prof. Ostrom. In fact, I used it to understand and analyze the information transparency and public disclosure policies of Singapore who rank very low in transparency indicator, but very high in the control of corruption and other good governance indicators. To this extent, I think it is a very powerful tool and can be used across local to global scales.

But having done the analysis, the contentious issue is the "design" of the institutional arrangemnt. Besides the question as to "who designs the institution - donor or state or the community itself?", the other challenge is the "how" of eh design issue. I attach two cases relating to surface water (for irrigation  purpose) and ground water management in India which would reflect the dilemmas. In these two case, the institutional arrangements have been replicated all over the country (in case of  irrigation, as a matter of federal policy) or all over the state/province (Gujarat in case of ground water). So, even though the unit of program implementation has been local, the unit of analysis and monitoriing and evaluation has been at the state or regional level.

Linked to these is the question that I raised yesterday about the presence or gradual emergence of local elites within the institutional structure of a CPR, leading to inequitous distribution of income and hence, discongruities in incentive structure within the group , albeit informally, ultimately leading to collapse.

Does all this imply that Government would still have a role to play and if so, at what level and in what manner? We also have to remember that there have been several instances where government failure occurred due to capture by these local elites. 

I think that Amar has an important point in raising the issue of elite capture. Many local community arrangements for the management of resources seem to be grossly inequitable, maintaining cultural norms on what one deserves from the system based on their pre-established station. 

As I mentioned in our (Cambridge) discussion, I think this can preclude a discussion around the possibility for more aspirationally normative work in this space. The IAD framework is understandably empirical; it provides analysts and policy makers with a (much needed) richer understanding of how decisions are made, including around common pool resource use, within community-level institutions. Ostrom has identified a set of 'design principles' that characterize successful cases of CPR management, but these are based on identifying patterns in what is (i.e. on empirical analysis). 

I guess the question is: Is there a future in building on these design principles, recognizing the weaknesses that many of these institutions that are successful at managing CPRs might otherwise have (like inequity) and developing normative prescriptions to improve them? I appreciate that the metric of success applied is often the sustainability of the CPR in question, but it seems that - if we are going to vaunt these local institutions and promote their place in policy-making and management - we should also recognize the shortcomings and strive to ameliorate them. 

Previously Amar Patnaik wrote:

Linked to these is the question that I raised yesterday about the presence or gradual emergence of local elites within the institutional structure of a CPR, leading to inequitous distribution of income and hence, discongruities in incentive structure within the group , albeit informally, ultimately leading to collapse.

Does all this imply that Government would still have a role to play and if so, at what level and in what manner? We also have to remember that there have been several instances where government failure occurred due to capture by these local elites. 

 

The questions this week seemed to "blur" together for me, so my response addresses several comments.  Ruminating on our discussion of institutions (and effectively management), I keep coming back to a vision of our world evolving to a "global solution" similar to how we manage anything else (e.g., money, land). 

To me, the crux of the institutions challenge seems to be that the sizes of the various "commons" we want to manage vary: spatially, temporally, etc.  We discussed this when we discussed "boundaries" and the complexity of environmental systems.  Yet, much of the institutions discussion has focused on the pros and cons of local community resource management.   

We can and do manage different resources based on the size of their individual "commons", yet we need to do it better and more broadly (i.e., include atmosphere, oceans). To me, "better" looks like a stronger global organization that can set standards to ensure that the global commons is preserved, and also to help us manage "shocks" to local or regional environmental systems.  Does anyone have a strong opinion on what such an international organization should look like? (i.e., if the UN model doesn't work, what will?  As discussed post-Copenhagen, but not much in class so far) 

To maintain global commons, I don't see how we can do it without global standards that cascade down to limits at the local level (e.g., limit the total stock of carbon in our atmosphere).  I like the idea of each community (rather than industry or firm) having a total cap, which they can allocate to industries, agriculture, etc. or trade on a market. Local autonomy remains, yet the whole community is participating in the management of emissions.  Erin's idea of "ethical" valuation appeals to me from an emotional standpoint, but I think she is right that we would have to find ways to "personalize" transactions and bring individuals closer to each other.  In a society that is increasing removed from each other (need I reference Facebook?), I find it implausible that we can inspire the types of personal interaction that would be needed to induce cooperation.  If anything, it seems our society is moving closer to a situation where a Nash solution to the Prisoner's Dilemma would prevail. 

 At the same time, the atmosphere and oceans (as referenced in question 3) seem like perfect examples of resources that are at least (if not greater than) the "sum" of what happens at local levels, and thus community-based resource management should be used manage them.  I don't understand why we don't just write new laws which introduce "caps" and guidelines that communities can implement as they wish (like we do education standards, for example).  And we punish harshly communities who don't oblige (e.g., take away their funding).  By allowing decision-making autonomy at the local level, we still maintain a system with flexibility for management based on local conditions. 

An advantage to having an international governing body is that we can provide insurance to bail out communities, states, regions, etc. that are hit with "shocks".  A "global fund" could give communities who are hit with a "shock" (e.g., drought) a payout.  We do this in the developed world (sort of) and in the developing world through aid.  Yet, rather than a system of aid where the private funder controls how the money is spent, Ostrom's work suggests to me that a model which maintains local autonomy is more effective.  Thus, we'd have to pay out when "shocks" occur without strings attached (again, we do this through UN, etc. sort of..though note that I am not a government scholar/political scientist).

I have avoided Tara's comments about how we implement a local model of community management because I would argue that we have to let communities do it themselves. Otherwise, it is no longer self-organizing.  You can imagine that, over time, a few models evolve that work best in allocating resources in a way that is acceptable to most citizens, and individuals  gravitate toward places where those models exist (isn't this what countries do?).  To me, when we try to solve issues of governance, as well as equity and efficiency, at a local level, we are making the problem "bigger" than it needs to be, and we are increasing the risk that nothing at all will happen.*  Aren't we more likely to succeed if we first try to work within the current  system to move toward better global environmental sustainability and management of global environmental change?  Is sustainability too broad a concept to translate into viable policy and management systems?

* As a (half-joking) aside, I wonder sometimes if environmental scientists (and other similar types) are too sensitive to equity issues because they are accustomed to their cause being marginalized in politics, etc.?

Session 9.-

We discussed how the framework presented by Elinor Ostrom can be applied to two contrasting examples and how it is useful to frame the issues.

Cuatro Cienagas- Biodiversity vs. milk production.

Cuatro Ciénegas is a series of lagoons that hosts one of the the most amazing biodiversity of microorganisms in the World. It is located in the north central parto f the country, within ana rea with a highly diverse and endemism rich desert.

This biodiversity is of high relevant for the whole world due to the range of primitive organisms that representes most of the metabolic routes known (and unknown) to date for bacteria (Minckley, 1969).

Yet, the underground water system that maintains the lagoons and this biodiversity of bacteria is being used by the most important milk company of the country. This area provides 40% of the total milk national production.

Here the shared resources is the underground water reservoir, yet nor the resource nor all the users are well defined. This resource is managed officially by the government, the substraction of water by one user hinders the other user to se the water, and the amount of water is finite given that the recharge of this water happened thousands of years ago with another climate. Corruption is associated to the multiple users that are, or not, officially allowed to used to water, and to the amount of water that is actually used. There is no monitoring of the different users and the amount of water withdrawn. There is lack of communication between the stakeholders in charge of Cuatro Cienegas (federal government, scientists, local population) and the local users of water; they also do not trust each other. The power of the milk company is very different to that of the local stakeholders even those related to the reserve.

Community forestry management at Ixtlan de Juárez, Oaxaca, México.

Ixtlan de Juarez Oaxaca is mainly a community dedicated to forest Management. This resource and its management depend on very antique costumes and social organization that has been preserved from generation to generation.

The social structure, the knowledge of how to manage the forest, and the power organization is based on training young adults and letting them learn through participating in different power positions. Some of the young adults are sent to cities to further their education and then come back; they are also trained locally at an adhoc university. The institutional agreements enforced by very clear sanctions. In general there is little out migration because there are good job oportunities locally. These communities own their resources.  These structures have been in place for a long time. The local authorities do not depend on state or country level processes. Equity is maintained in the community through rotation of the responsabilities for religious celebrations to the most wealthy people (Pérez y Fierros, 1994).

Yet, this institutional organization is threatened at present. Policies that inject economic resources into communities can destabilize these communities.

Minckley, W. 1969. Environments of the Bolsón of Cuatro Ciénegas, Coahuila, México: With Special Reference to the Aquatic Biota.  Texas Western Press (El Paso) 65p.

Pérez, S. y A. Fierros.1994. Potencial productivo de especies forestales en Ixtlán de Juárez, Oaxaca. Western Journal of Applied Forestry.(8) 101-108.