Green political philosophy

4. Green economic thought

A green view of economic relations is an integral part of a green political philosophy, its theory of value, and its theory of individual and collective agency. In the main, green economic thinking represents a critique of, and a challenge to, much of conventional market-based economic thought – especially in so far as such thinking forms the basis and justification for present-day policies regarding energy and other broadly environmental issues.

What is wrong with modern economic thought, green critics contend, is that it knows the price of everything and the value of nothing. Or, perhaps more accurately, it is mistaken in assuming without argument that everything has a price, even if some things are not actually traded in any market. Three features of green economic thought merit special mention. The first is its critique of, and alternative to, the practice of assigning ‘shadow prices’ to goods not traded in markets. The second concerns the practice of ‘discounting’ the welfare of future generations via a ‘social discount rate’. And the third is the green questioning of the use of cost–benefit analysis in making and justifying political decisions and policies.

Conventional economic thinking translates the question, ‘What is the value of X?’ into another question, ‘What is the price of X?’ That is, what would X be worth in monetary terms, if it were to be traded in a market? Now clearly, since some things are not bought and sold, some way must be found for determining their price. Some economists contend that so-called ‘shadow prices’ can be assigned to such goods as clean air, scenic beauty, the preservation of a particular species, and so on. The hypothetical price is determined by asking people what they would be ‘willing to pay’ to (for example) preserve the Grand Canyon or to prevent the extinction of an entire species of plant or animal. By this means it should be possible to ascertain the economic value of these and other ‘environmental’ goods.

The problem with the practice of shadow pricing, say critics (see for example Sagoff 1988), is that it cheapens things that are beyond price, that is to say, literally priceless. To ask what someone would be willing to pay for being treated with respect would thereby demean the very idea of kindness and respect. Some things actually lose value (and, arguably, all meaning) when they are bought and sold. Such is the case, critics argue, when a price, even a hypothetical one, is put on species, ecosystems and other natural entities.

A second, and scarcely less controversial, practice is that of discounting the wellbeing of future generations by means of the social rate of discount. Roughly, the idea is this: just as individuals discount their own future, so too does an entire society at some time discount its future members’ welfare at all later times. And, just as it is rational for individuals to discount their own future wellbeing, so it is rational for one generation to discount the welfare of future generations.

The green critique of social discounting is easily summarized. It is one thing to discount one’s own future wellbeing; it is a morally much more questionable matter to discount other people’s wellbeing. I am not entitled, rationally or morally, to discount your future wellbeing at my personal rate of discount. And yet that is precisely what defenders of social discounting attempt to do. One’s moral worth does not vary according to one’s place in the temporal order of succession. I am not entitled to discount your wellbeing, whether you are my contemporary or my very distant descendant. The practice of social discounting, its critics claim, works to the distinct disadvantage of future generations and is clearly unjust (Cowen and Parfit 1992; Cowen 1992; O’Neill 1993, ch. 4).

The practice of social discounting, when combined with other economic tools or techniques, such as cost–benefit analysis, further disadvantages future people (O’Neill 1993, chs 4 and 5). Consider, by way of example, the claim that nuclear power is preferable to other alternatives because it has a higher benefit-to-cost ratio. In practice, however, the benefits – including access to cheap and plentiful electricity – accrue to those now living, whilst the costs will be borne by future people, in the form of increased risk of radiation exposure. To measure the benefits over the short term and the costs over the longer term is systematically to disadvantage future people.

It is important to note that this is not an argument against cost–benefit analysis per se or in principle, but against taking a too-constricted time horizon over which to measure costs and benefits. If the wellbeing of future people is not discounted, and the benefits not enjoyed exclusively by one generation while the costs are borne by another, then cost–benefit analysis can be a useful tool of analysis, even for environmentally minded policy analysts, legislators and concerned citizens.

Greens tend to be critical of conventional economic thinking, and particularly of the view that market allocations of valued goods are always fair or necessarily just. This does not mean, however, that all greens are therefore socialists of one or another stripe (although some certainly are). Green economic thought is at present more critical than constructive – more articulate about what is wrong with modern market economics than what alternative system might be devised (see Market, Ethics of the).