What’s a Progressive to Think?

A lovely sliver of moon hung in the southwestern sky tonight. Shining in the fading light of the sun over a recently harvested soybean field, it could almost seduce one into thinking that all is well in the world. But, being mindful of our political world and the world that economics can explain on October 17, 2012…, we are not seduced.

Why, for heaven’s sake, is the Center for Progressive Reform (CPR) agitating against water quality trading ? To figure this out, I read their paper “Water Quality Trading in the Chesapeake Bay”. It recently has got considerable press, and it is being leveraged by groups who oppose letting economic efficiency be an element in environmental policy-making. An article in the Huffington Post used it along with a lot of anti-wall street invective to argue against trading.

Actually, when you read the CPR piece carefully, they do not find much to oppose about water quality trading. They start out recognizing that water quality trading as an environmental management tool has not yet lived up to its promise. That’s true, but hardly a reason not to try to get it right. And they rightly note that it won’t work if there is no effective demand. They then assert a bunch of ways in which they believe demand should be limited.

In their introduction, the authors note the need to avoid “hot spots” in water quality trading. If you limit trading so that only demanders who are discharging into waters that meet water quality standards can buy water quality credits, then you are significantly decreasing potential demand. Reasonably, as we don’t want hot-spots. And eventually they admit that this is how current rules are written for trading. But, on top of this reasonable limitation, CPR recommends that, since pollution reduction from non-point sources is uncertain, programs should require “at least two units of nonpoint source reductions for every one unit of point source reduction credited”.

Requiring that demanders only get credit for one half of the nutrient pollution reduction that is thought to occur when they implement a qualifying mitigation practice could reduce traded quantities quite a bit. To see this, consider a lawyer who can only work 40 hours per week at a fixed hourly rate. A law is then passed saying that lawyers can only bill half the hours that they work. If the hourly rate is fixed, lawyers will lose half their salary and presumably a lot of them will leave the industry (i.e., the market supply of lawyer service will diminish). If the hourly rate can move, however, we might expect it to rise to compensate for the loss of billable time. When price of the service rises, we expect less of it to be demanded so, again, amounts traded in the market would decline.

Demand for lawyer services is probably somewhat price inelastic. That means there would not be a large change in quantity demanded even with a significant change in price. Demand for water quality credits may be either price elastic or price inelastic – I don’t know that the research has been done to find that out. But when a non-point source agricultural pollution reduction practice is bought by the government under existing programs, it is given full reduction credit. Why should practices paid through trading be different?

When the reduction efficiencies for non-point source pollution abatement practices in the Chesapeake Bay drainage were developed, the evaluators surveyed empirical research in a way that weighted the lower-mitigation research results more heavily than results showing greater pollution abatement. At the end of that process, the evaluators took 20 percent off of each effectiveness estimate to account for the contention that implementation by operators in the general economy would not be as effective as implementation by scientists doing the experiment.

If the presumption that scientists can implement practices better than economic actors is wrong, then when we talk about a water quality credit representing a pound of pollution reduction, we are, in probabilistic terms, talking about 1.2 pounds of pollution reduction. When we require a 2 to 1 trading ratio, we are talking about trading one pound of point source pollution for 2.4 pounds of non-point source pollution. This policy would foreclose a great deal of trading in water quality credits. (Note: Virginia already applies this rule and there is no trading there.)

Later in the article, the authors discuss the problem of the credit sellers’ requirement to meet “baseline requirements”. Those require water quality credit generators to reduce pollution export to some specific level before they are allowed to sell credits for additional reductions. The authors rightly make the argument that this requirement will increase the credit price required to get sellers interested in trading. If the operator must reduce pollution export before being allowed to participate in trading, then clearly for each pound of nutrient pollution sold more than one pound must be generated. With the baseline requirement and the unequal trading ratio and the conservative reduction efficiencies, we may be up to three or more pounds of nonpoint pollution for each pound of point source pollution. CPR is obviously not averse to exacerbating the supply/demand problem that they identify at the start of their report.

In their recommendations regarding “Monitoring and Oversight to Avoid Waste, Fraud and Abuse”, CPR recommends that programs follow the guidelines established for water quality trading by the CBPO and its partners. It is not a very damning critique to say, “Yes, do what you say you are going to do”. The authors cite a need for additional staffing, but then note by inference that if trading requires underlying contracts (which it does), participants in the market will be held to account under commercial law. Therein lies one of the more powerful aspects of trading’s potential to increase accountability. Verification is still required, but in the event of non-performance there is, with contracts, a way to go after the non-performer.

The basic worry that CPR seems to have with water quality trading is its foundation in asking regulated sources to pay for reductions from unregulated sources. The alternative to this is to either have the government pay for it all or to regulate the unregulated sources. Given our nation’s current fiscal conversation, it does not seem likely that the government can buy all of the pollution reduction that we need to see. And, I dare say that we will have an uphill climb in imposing nutrient effluent regulations on agriculture. Politically and practically, it seems rather unlikely that we will see wholesale regulation of row crop production any time soon.

Much of the remainder of the CPR report is given over to concerns about monitoring and verification of pollution reductions from nonpoint sources. These are real and substantive issues. But they are not limited in any way to pollution reductions gained through trading. They apply just as much to current programs and to any regulatory approach that one can imagine as they do to trading.

In short, nothing in the CPR paper justifies the negative attitude toward water quality trading that permeates its conclusions. Yes we need to follow the rules that have been established. Yes we need to keep a careful eye on both credit generators and other market agents to ensure that they are doing what they say they are doing. Yes, we need to monitor water quality to ensure that it is improving as expected. And yes, we should have a plan B describing what we will do if water quality trading in the Chesapeake does not work as hoped. But none of this amounts to a crippling indictment of water quality trading.

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The bone we have

I can’t remember the source, but I remember reading to my children a story of a greedy dog with a bone who saw his reflection in the water.  Thinking his reflection was another dog with a bigger bone, he barked and lost his bone to the river.  There are a couple of morals to this story: Be satisfied with the bone you have; Think before you bark; Beware imperfect perception and conception; etc.

I am reminded of this story reading Dr. George Van Houtzen’s recent report on nutrient trading in the Chesapeake Bay Watershed (http://www.chesbay.us/nutrienttrading.htm).  In that report Dr. Van Houtzen takes pollution reduction requirements as currently configured and then uses expectations about unit costs of pollution reduction to show a different allocation of reductions that lowers the total cost of achieving them.  Point being, that when you examine the cost of reducing pollution from all the accounted sources as allocated by the States’ watershed implementation plans (WIPs), you can identify other allocations of nutrient pollution reduction that generate the same aggregate reduction at lower total costs.

Unless we were expecting the pollution allocation authorities to be omniscient with regard to pollution reduction costs and omnipotent with regard to their allocation, Dr. Van Houtzen’s findings should not surprise us.  Leaving aside what is known and not known about nutrient pollution reduction costs, most of us understand that the government authorities are constrained in allocating pollution reduction costs across sources.  Regulated sources can be imposed upon much more easily than non-regulated sources.  Un-regulated sources have to be asked or paid and we spent 25 years testing the possibilities of “voluntary” approaches in the Bay Program.  We know the answer to the question, “how much additional cost will you accept to ensure a public good?”  Not enough.

So what does any of this have to do with the story of the greedy dog?  Well, trading is currently a chimera, worth at most a few tens of thousands of dollars across the entire watershed.  It is the promise of a bigger bone.  But in Maryland alone, for just the two pollution reduction activities, riparian buffers and cover crops, we currently spend almost $30 million per year.  That’s the bone we have.  It seems to me unwise to chase the chimera and ignore what we have.

A large part of the cost savings achieved through nutrient trading derives from making pollution reduction the traded good.  Current public programs that pay for riparian buffers and cover crops use the less specific metric, acres.  If those programs were re-jigged to pay adopters by the pound of nutrient pollution reduced, then some of the cost savings expected from trading programs could be achieved through existing programs, without creating water quality trading markets.

This is not an argument against water quality trading markets.  I think that someday we will be able to keep our pollution production low enough to avoid harming the Bay through offsets and trading.  But I believe that that day is probably a long way off.  And, in the meantime, I wonder why those who support efficiency gains through trading do not pursue similar gains by way of performance pricing in existing programs.  The fact that they have not successfully done so is not promising for their prospects in creating trading markets.

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Does Accountability Roll Downhill?

The Chesapeake Bay Total Maximum Daily Load (TMDL), or “pollution diet,” is supposed to result in increased accountability in the effort to restore to the Bay. What increased accountability means exactly has been up for grabs over the past few years. It was presumed that the states would be made accountable by being given an absolute limit on the amount of nitrogen, phosphorus and sediment pollution they could send to the Bay as of 2025. But what the states were going to do with those new requirements was always an open question.

Since the imposition of the TMDL in 2010, Maryland and the other Chesapeake Bay partner states have all developed Watershed Implementation Plans (WIPs) expressly to answer the question, “How will you achieve the nutrient and sediment pollution requirements in your state?”  As part of their guidance for writing these WIPs, the states were requested to describe their sub-allocation of load reductions by geographic area and source sector.  This looks a lot like accountability rolling downhill.

Maryland’s TMDL agreement is mirrored in its WIP.  Point sources of pollution are made accountable for almost all their reducible load.  (Reducible load is the difference between the loads that would result from doing everything possible – to the limit of available technology and beyond the limit of available funding – and the loads that would obtain if we did not try to reduce them at all.  It is a hypothetical thing, and it is the basis of the TMDL pollution load allocation both within and across states.)   Other pollution sources such as stormwater, septics and agriculture are made accountable for a smaller share of their reducible loads, either because the costs of reductions from those sources are very high or because imposing the reduction cost on the polluter is thought likely to create serious economic dislocation.

While decision-makers have attempted to take into account costs and practical prospects for achieving the pollution reductions that they are allocating, difficulties remain.  Maryland’s sub-allocation of load reductions leaves stormwater pollution sources with a $6.27 billion bill.  But many of the counties and municipalities who are responsible for those stormwater sources are strapped for funds even before we start talking about this obligation.  It is not clear that the public that funds those counties and municipalities will be willing to bear those costs.  And given the current budget realities of state and federal agencies, it does not seem likely that funding for those reductions can come from them.

Ultimately, responsibility for pollution should rest with those who generate it.  (Yes, accountability does roll downhill to the polluter.)  But in specifying how much load reduction each source is accountable for (or, conversely, how much pollution it is allowed to contribute), it is not necessary that those load reductions all actually come from that source.  To see this, bear with a simple numeric example:

Imagine a total load reduction requirement of 8x which is allocated among three sources.  Source 1 is accountable for 1x; source 2, is accountable for 3x, and source 3, is accountable for 4x.  If source 1 finds it much cheaper to buy 1x amount of reduction from source 3 (who must have additional reduction capacity) and does so, then the reduction requirement of 8x is still being met.  Source 1 doesn’t reduce anything and now source 3 has to reduce 5x.  If a lot of other conditions are met, allowing source 1 to buy its reduction allocation from source 3 does not change anything.  Except in economic terms.  In economic terms, the cost of achieving the desired outcome has been reduced.

As people cotton on to the fact that we are the polluters and we must bear the costs of reducing our pollution, the reasonableness of allowing, say, stormwater sources to get some of their pollution reduction allocation from other sources will become more apparent.  If all the reductions required from stormwater sources must come by stormwater retrofits, and if this raises costs so high that voters come to question the whole process, it is not clear how we are better off.  Nor would we be better off if the pressure to achieve impractical reductions from some particular source turned the accounting process into a sham.

Through its allocation of accountability for pollution loads, the TMDL has specified pollution reduction requirements only in a very general sense.  But there remains the hazard that rigid regulation of this accountability will cause the process to come undone.  Flexibility in how the reduction obligations are met does not mean backing off the total load reductions that restoring the Bay demands.   It just means allowing the polluters a way to do the job at the lowest cost feasible.  And, since we are the polluters, why would we not want to do the job at least cost?

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Does one Specious Argument Deserve Another?

January 4, 2012 1 comment

The Chesapeake Bay Foundation recently published a study arguing that, rather than destroying jobs, the Chesapeake Bay restoration will create 230,000 additional jobs.  This job creation argument arises in response to an argument made by others (Congressmen Bob Goodlatte (VA), and Tim Holden (PA), the American Farm Bureau Federation, among others), that the new TMDL regulation will impose job-destroying costs on our already weak economy.  As is so often the case when non-economists engage in an economic argument, both sides are using those parts of the story that comport with their own preferences to make it sound as though their position is supported by “economics”.

My old professors at the University of Maryland’s Department of Agricultural and Resource Economics (AREC)) would have approached the economics of restoring the Chesapeake Bay by considering all of the benefits implied under two different existential states.  One state would be an imagined restored Chesapeake Bay with its attendant benefits, and the other would be the current, degraded Chesapeake Bay and its attendant benefits.  They would have considered both monetary and non-market benefits in both states.  The difference between the benefits generated under either state would provide a measure of the “value” of a restored Chesapeake Bay.

With a measure of the benefits of a restored Chesapeake Bay in hand, my old professors would have then turned their attention to the costs of getting from the current state of the Chesapeake Bay to a restored state.  Along the way, they would reference the Pareto improvement aspect  (somebody is made better off, nobody is made worse off), and its weaker but more practical cousin, the Kaldor-Hicks criterion (those who are made better off could – in principle – adequately compensate those who are made worse off and still enjoy a gain) as a basis for their comparisons.  And they would have boiled it all down to eloquent equations that only students of economics could hope to penetrate.

Having tasted that sort of holistic approach to making prudent decisions about protecting the environment, it is frustrating to listen to current arguments about the Chesapeake Bay TMDL.  Of course it will cost somebody something to restore the Chesapeake Bay.  And, since one person’s cost is another person’s gravy train, restoring the Bay will create winners and losers.  Who are winners and who are losers will be determined by who is liable for the costs and what the money gets spent on.

My old professors in the AREC department eschewed normative economics in favor of the positive kind (that is, their economics addressed questions of efficiency, not equity), so they would have likely addressed the question of who pays in abstract terms of who held the property rights for environmental harm (or, benefit).  They might have suggested ways that the winners could compensate the losers in fact, rather than just in principle.  But they would have recognized that the 230,000 new jobs required under the effort had to be balanced against what had to be foregone to pay for those jobs.

Somewhere in this process, my old professors would have cottoned onto the fact that minimizing the short and long-term costs of restoration required getting the pricing right.  That is, that in pursuing restoration we are better off spending less for more restoration rather than paying more for less restoration.  They would have expected innovation to reduce restoration costs over the longer term, but only if there were attendant rewards to innovation.  They would have seen competition as being integral to that process.

Most of my old AREC professors have moved on, one way or another.  In their stead are professors who remain at the forefront of their field but who are practically irrelevant in the discussion of economics surrounding the Chesapeake Bay restoration.  Whether their absence from this discussion is a supply issue or a demand issue is a topic for argument.  And, while such an argument would be much more informative than the current one about whether we will enjoy additional jobs, fewer jobs or just different jobs as a result of trying to restore the Bay, it is less useful than the contributions that they could make if they simply applied their craft to the question of how to improve our performance in pursuing Chesapeake Bay restoration goals.  I often wonder why that is not happening.

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The Many Uses of Costs and Benefits

Costs and benefits are getting airtime at the Chesapeake Bay Program these days. A consulting firm has been hired to evaluate the costs of the States’ plans for implementing their respective portions of the Chesapeake Bay TMDL and funding is being sought to support research to evaluate the diverse benefits of achieving the TMDL.

It is not that the Chesapeake Bay Program didn’t already have enough on its plate, what with overseeing the TMDL and all. And, cost/benefit analysis is not something that they have ever done before – at least for public consumption. Moreover, under the Clean Water Act, there is no requirement that benefits exceed costs in the imposition of a TMDL. But, if one looks for a reason for all of this investment in cost/benefit analysis one finds a likely suspect in uncertainty about how serious we are about the TMDL.

Assume a group of economically interested parties who might suffer losses under the more stringent pollution abatement requirements of the TMDL. Such a group might feel that restoring the Chesapeake Bay is an extravagance that our society cannot afford. If they banded together and retained advisors, those advisors would doubtlessly recommend at least two strategic objectives. First, call the science into question. And, second, show that it will cost more than anyone in their right mind would want to pay.

Assume on the other side a group of economically interested parties who have an interest in restoring the Bay, but no attendant financial risks whether this happens or not. That is, they get paid for working on restoring the Bay, but not for actually restoring it. Some in this group are just paid advocates, while others have more direct impact on the development of policies by which the TMDL is to be achieved (i.e., public servants and their staff).

When you place these two assumed groups into current history, you get studies from the first one implying that restoring the Chesapeake Bay is all cost (see: http://www.sagepolicy.com/wp-content/uploads/2009/06/builders4-14.pdf) and studies from the latter group implying that it is all benefit (see http://www.cbf.org/document.doc?id=591). Interestingly, both studies employ the same analytical package (IMPLAN), but each describes results that suit the underlying aims of their respective users. Does this confirm Mark Twain’s contention that there are lies, damn lies and (economic) statistics?

If we strip away the interests of the two assumed interest groups, perhaps we can evaluate the question of costs and benefits to better effect. First, let’s define the cost of restoring the Chesapeake Bay as the sum of the costs of all the things that we must do differently in order to achieve the TMDL. We can define the benefit as the sum of all the value that is generated by a restored Bay. Clearly, to get at costs and benefits we need to compare two different states – before and after.

In the “before” state, costs show up as ecosystem degradation but not as something that is paid by the production and consumption activities that generate that degradation. Since restoration costs are counted as being paid in the “after” state but not in the ‘before’ state, they are all additional. In monetary terms, since our economy will be paying an expense that it did not use to pay, we all will be a little bit poorer. How these costs are distributed matters, but the basic point is, if we don’t count environmental degradation as a cost, then restoration costs are all new and in that sense, the Sage Policy/Maryland State Builders Association study is sort of correct.

On the benefits side, if turning around the decline of the Bay results in more recreational benefits, higher valued harvests of the Bay’s living resources, increased property values, etc, then those gains will count as economic benefits to restoration. Additionally and importantly, each of us who has been disappointed about the degradation of the Bay will be relieved of that disappointment when the degradation is turned around. Consider the question: What would you pay to switch out of a group that has to say, “we turned the Chesapeake Bay into a septic mess”, into a group that can say, “we changed the way we do things so that we could have a healthy Chesapeake Bay”? Economists will be asking a question like that in their evaluation of benefits of Bay restoration and the smart money says that the values implied by our answers will show the benefits of restoration to be greater than the costs.

If none of this seems all that satisfying, welcome to my world. We don’t know the least costs by which the TMDL can be achieved and we can only guess at the values that might be generated by actually restoring the Bay because it hasn’t happened yet. People’s answers to willingness-to-pay questions change at the drop of a hat. I suppose that it will give people something to talk about, but it seems to me that there are more important questions around. Like, what will it take to ensure that our choices for restoring the Bay generate the smallest cost possible (i.e., how do we keep from getting any poorer than we have to)? Or, how can we establish incentives to innovate so that the costs of restoring and maintaining the Chesapeake Bay fall over time? How can we keep from disproportionately hurting any particular group and spread the costs equitably while maintaining incentives to innovate and reduce costs?

Maybe we can get around to my questions next year.

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Asking a Good Question, Wrongly

In March of 2011, a Congressman on the House Agriculture subcommittee on Conservation, Energy, and Forestry asked the EPA Deputy Administrator how much implementing the Chesapeake Bay TMDL was going to cost.  The Deputy Administrator had no way of answering that question, so he said that he would find out.  Now the Chesapeake Bay Program has added a cost study to its 2011/2012 to-do list.

This should be good news to someone who has been suggesting that maybe we should be worried about cost efficiency in the Chesapeake Bay cleanup, right?  Not really.  Because the question as it is understood by the Chesapeake Bay Program only asks what the cost will be of doing all the things that the States have committed to do in their Watershed Implementation Plans.   It does not ask for a comparison between those costs and, say, some least cost approach for achieving the goals of the TMDL.  It just asks how much it will cost the states to do all of the things that their agency staff say need to be done to achieve the TMDL goals.

A more useful question would have been, how does your program ensure that the costs of achieving the TMDL are minimized?  What are the marginal costs and how much would we have to pay to achieve the level of reduction required by the TMDL if we tracked along some optimal path?  Think about it.  If it is possible to specify the costs of implementing the complete range of nutrient pollution reduction practices over the whole range of sources and conditions, and if you have a model that tells you how much pollution reduction is achieved for all of that implementation, then it should be possible to specify a cost-efficient or, least cost, trajectory to the TMDL goals.  You just divide costs by reduction for each practice and condition and then sort those values from lowest to highest.  That gives you a marginal cost trajectory for each practice out to everything, everywhere.

So, while we at least got a question about costs, we did not get what I think of as the right question.  Maybe it would be useful to consider some possible reasons why we didn’t.

1.)    Maybe cost efficiency doesn’t matter.  We are a wealthy country.  So maybe the Chesapeake Bay TMDL is something that we can handle without reference to economic welfare.  Maybe we can afford to ignore cost efficiency.  The obvious counter-point to this is that we didn’t get to be a wealthy nation by being foolish with our money.  Our resources, maybe, but not with our money.

2.)    Maybe the states’ agency staff have already identified the least-cost options for achieving the TMDL goals without using any of the analyses or policy mechanisms that economists would recognize as necessary for identifying least-cost attainment (with a single market price and at some given level of technology).  Or, maybe somewhere in the agencies there are economists who do this work for agency-eyes-only.  Maybe.

3.)    Maybe no one but economists thinks about it all that much.  This is likely, but it does not imply that people do not care whether they get value for expenditure.  Even though people may not have thought through the connection between marginal costs and how much pollution reduction you can get for any given budget, the general public probably would prefer more, rather than less pollution reduction per tax dollar, were we to ask them.

4.)    Politics.

At a symposium in Washington recently, someone suggested that, given the current federal budget outlook, we should not expect cost efficiency to be high on the agendas of the agencies who oversee and support the achievement of environmental protection goals.  This assessment was made by someone who operates much closer to the corridors of power than I do, so I have to take him at his word.  But what a depressing thought.  Having less money to play with will not encourage decision-makers to play less?

There is an incentives story in here, somewhere.  There must be something or some things that distract decision-makers from seeking and achieving cost efficiency in pollution reduction.  Or, maybe I am wrong to suppose that there should be any cost efficiency goal in the first place.  There is no explicit mandate for policy-makers to pursue cost efficiency in pollution reduction, other that the general idea that it is better not to be wasteful.  In either event, isn’t there a role for economists, who have well-developed tools for analyzing these sorts of questions, to advocate for a more agreeable standard of achievement?

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The Invisible Economist and Eco-System Services Markets

Over the years, I have had a couple of work assignments that took me into the economics of road building.  Road building makes it easier to move people and things around, and those activities have extensive economic effects.  Roads are an important determinant of social welfare and people’s living standards.  But, aside from the economics that I was supposed to be applying in those projects, I was also intrigued by some of the institutional aspects of actually building or rebuilding a road.

Roads are typically mandated by governments.  While governments may retain some transport engineering capacity, roads are generally built by private for-profit engineering firms and road building companies.  The agency that implements road-building policy decides where the road will go and other particulars.  But, after that, they just manage the expenditures and watch the private firm build the road.

An interesting thing about this institutional set up for road building is that all the players need their own road engineers.  The government agencies need road engineers for specifying the bid solicitations and managing the project.  The engineering firms obviously need road engineering capacity.  And the actual road-building companies need engineers to make good on implementing the design.  There always seem to be another set of engineers who follow along afterwards to verify that the road has been built the way it is supposed to have been built.  Everybody in the process has a road engineer or two.

Roads, like healthy natural eco-systems, are public goods.  That means they provide benefits that are difficult to exclude anyone from enjoying.  While environmentalists might not want to think of themselves as being in the same league as road builders, their work does share this public good aspect.  And, the authority and funding for protecting or managing natural ecosystems, like building roads, largely originates in the public sector  (– all the good work of not-for-profit organizations not withstanding).

So, if environmental managers/protectors want to innovate with eco-system services markets, who is the technical equivalent of the road engineer in this process?  Is it the physical or life scientist who defines the parameters of a healthy eco-system?  Is it the modeler who can show a defensible way to put the various science findings together?  Or is it the economist, who can suggest ways to incorporate this modeled science into the economic world, where everything is denominated by monetary values.

I would argue that it takes expertise from all of these disciplines to build functioning eco-system markets.  I would further argue that, by and large, economists are missing from the process.  I recently had occasion to look at the water quality trading schemes that are being developed in response to the Chesapeake Bay TMDL – a classic eco-system services market innovation.  The absence of economists associated with those various schemes, while not complete, was very near complete.  I was puzzled by this.

Was it that the people designing the trading schemes were not aware of how economics could inform their design and perhaps help them to avoid pitfalls?  Was it that the economists were not available to help with this work (or, same result, were speaking a language that nobody else could speak)?  Were there institutional pressures, or was it just the result of random bad decisions?

It is always nice to wrap up with a thought that resolves the issue under discussion.  But I can’t do that here.  Because I haven’t really answered any of the questions in the preceding paragraph.  Governments have been building roads for a long time and they have only just recently started trying to create ecosystem markets.  Maybe this is all just a function of where we are on the eco-system services markets learning curve.

Maybe I should lower my expectations.  But if that is the case, I hope that getting eco-system services markets wrong the first time around will not be as costly as building a bad road.  People die on bad roads.  Still, getting eco-system services markets wrong will delay the environmental outcomes that we all desire.  And, it would be truly sad if failing to get it right the first time deflates all the interest that currently seems vested in the idea.

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