TCS Daily

Economics for Ecologists

By John Baden - September 30, 2004 12:00 AM

In 1968 I had the immense good fortune to work with Garrett Hardin, a distinguished ecologist. His Science article, "The Tragedy of the Commons," is the most reprinted article in the magazine's history. Together, Garrett and I produced a book in print for nearly 20 years, Managing the Commons. (A second edition is published by Indiana University Press.)

Hardin noted when a resource is owned in common, there is little incentive for any individual to protect it. Garrett used this as a heuristic example we all intuitively understand. However, as Elinor Ostrom and other political economists have documented, traditional societies devise systems to resolve the problem. Systems evolve to generate information, coordinate and monitor use, and assign rights to a valued resource.

But this happy outcome only occurs when individuals have incentives and means to constrain self-interested, exploitative behavior. The ocean fisheries are an example of predictable failure. Because open oceans are unowned, fishermen lack incentives to conserve fish. Each faces strong incentives to take as many fish as possible lest the benefits of a larger catch go to someone else. Nineteenth-century whaling, which drove several species to the brink of extinction, is a classic case. Cod is a current one. Ecologists rightly lament such outcomes but sometimes don't quite understand their subtleties.

For decades I've noticed a vacant niche: a program to link ecologists with economists. Let's explore it.

The Greek word "oikos," household, is the root of both "economics" and "ecology." It suggests complementarities between these disciplines. Yet economists and ecologists often miss opportunities to work together.

Ecologists often bemoan the absence of their insights in public policy debates. Some believe that economics dictates the environmental agenda with little sensitivity to or understanding of ecological principles. Likewise, economists often feel dismissed, dissed, and misunderstood by professional ecologists.

During the first Earth Day some professors from the biological sciences (departments of ecology were just emerging) became interested in environmental policy. A few of them offered naïve proposals requiring draconian governmental dictates -- often based on wildly unrealistic expectations about human behavior.

Environmentalist Barry Commoner provided an extreme example when he wrote in 1969, "Nothing less than a change in the political and social system, including revision of the Constitution, is necessary to save the country from destroying its natural environment."

Despite the remarkable political naïveté implicit in this statement, many ecologists still see the primary barriers to a better, more environmentally sensitive society as a lack of strong good intentions and adequate political power. Their solution is to place ethical, intelligent people in positions of authority and empower them to pursue good policies, i.e., they want Green Platonic despots. However, no society has ever divined a way to identify and deploy Platonic despots of any shade.

Cultures do change. This is evidenced by generational differences in environmental sensitivity. It is, however, usually easier to change institutions. Note, for example, the radical changes in acceptance of interracial mixing. This followed the institutional reforms of the Civil Rights Movement.

Good economists understand institutions, but few communicate with the ecological community. Those who work on important and interesting environmental matters generally publish in journals read only by a few professionals. Their important economic insights into public policy are usually unheard or misinterpreted.

Economists are especially sensitive to the unexamined consequences of well-intended policies. They emphasize institutions, for institutions generate information and incentives to act.

We would like to foster among ecologists a more sophisticated understanding of the importance of property rights, the market process, and the rule of law. This will help them achieve conservation goals. When we conceptualize economics as a branch of evolutionary biology, the discipline becomes more accessible to this audience. In fact, they are logically alike, intellectually isomorphic. Like biological systems, economic life evolves as people and organizations learn, respond, and innovate. Markets, like DNA-driven organisms, are highly efficient information-processing systems. Unfortunately, flawed information yields perverse outcomes.

FREE would like to host a conference exploring these issues with professional ecologists. Our goal is to help them understand how to reform institutions and harmonize them with the ecological household upon which we all depend. Having worked in anthropology before economics, I believe productive cross-cultural communication is possible. Let's try.

John A. Baden is chairman of the Foundation for Research on Economics and the Environment (FREE) and Gallatin Writers. Both are based in Bozeman, Montana. Pete Geddes, FREE's program director, contributed to this column.


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