Uses of Models

							 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.
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         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?

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    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
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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”)


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     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)

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         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

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         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)

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    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)

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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?
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    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?
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 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.
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