Getting Prices Right vs. Getting Morals Right

One major justification of my work on the economic valuation of ecosystems is that we need to “get the prices right”. Economists think that factoring the value of ecosystem services into the prices of goods and services traded in markets is one important way of creating incentives to use these ecosystems sustainably. Opponents of the economic approach, however, fear the resulting “commodification of Nature”. Instead, the Douglas McCauleys and Mark Sagoffs of this world suggest that, instead of getting the prices right, we should attempt at getting morals right. In their view, this is the right approach to end the ongoing destruction of Nature, rather than the harmful valuation exercises conducted by economists.

The fear of “commodification”, understood broadly as the increasing dominance of economic concepts such as profit maximization, rationality and privatization in society, goes back at least to Karl Polanyi’s The Great Transformation, published in 1944. Thus, economic approaches are generally considered problematic. Furthermore, it is believed that getting the prices right wouldn’t solve the problem of environmental destruction because markets will never be perfect, as property rights cannot be defined in many cases (the so-called open-access resources problem) and the capability of economic valuation techniques to identify the “true” values of ecosystems is limited. So the over-use of ecosystems will continue, as the actual challenge, so the critics of the economic approach, is to get the morals right. Indeed, the underlying reasons for the continuing disruption of natural systems are short time horizons, selfishness, greed, positional competition, hypocrisy, the consumer mentality.

“Right” prices, which would reflect the true costs of both production and consumption cannot solve these problems. And indeed, no sane person claims that they can. Nevertheless, getting prices right would likely mean, in most cases, raising them. This would have a number of beneficial consequences. First, it would lower consumption by decreasing the purchase power of every dollar or euro we earn (put in economic terms: the relative significance of labour as production factor would decrease, thus negatively influencing its marginal price against the other factors, particularly natural capital). Second, “right” prices would send a signal to both consumers and producers. Thoughtless consumption that fuels “infinite” economic growth would suddenly appear less attractive and, indeed, less feasible. Production of throw-away products would become less attractive, too. Getting prices right would force us to rethink our actions and decisions – and this is exactly what the moralists want. Third, factoring in the value of ecosystem services would create incentives for producers to find alternative, more sustainable ways of creating things.

All this, of course, could not by itself get the morals right. It might, however, help this purpose. And certainly I do not see a significant reason why it would hinder it. Yes, commodification is a danger – but this danger has existed since the wake of capitalism in the 19th century. In the global North, our thinking is deeply imbued with economic concepts, as Polanyi and others rightly observed. Instead of fighting economics maybe we should find ways to make it more “humane” and to reconcile it with ethics. For there is no insurmountable dichotomy here, contrary to what the morals-not-prices advocates seem to believe.

And last but not least – getting prices right might not be a simple endeavour, and there are many difficulties to be kept in mind. We will never get truly right prices, only prices more right than those we experience today. But getting morals right, especially if one would like to avoid an “eco-dictatorship”, where the morals are dictated to the society – this is a truly difficult-to-realize project. Many of the factors identified as being the psychological and institutional drivers of unsustainable behaviour are so deeply inherent to human culture and “nature” that a transition will not be easy to achieve. To be sure – humans are able to change, our morals can evolve. But history has shown that this takes time. It is going to take a lot of time to get morals right to the extent that will secure sustainability. Until then, getting prices right might be a viable and sensible part-solution.

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