Economic approaches to
Sustainability:
Policy Principles and Practices
Opening Policy Windows
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Problem stream
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Policy Stream
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Develop consensus around policies
necessary to solve problem
Politics stream
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Defining existing condition as a problem
Getting policy makers to accept definition
National mood; leading politicians accept
gravity of problem and willing to implement
necessary policies
What does your project focus on?
Problem Stream
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What is the conventional and
alternative problem definition for:
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VCAT
Alternatives to development in Ecuador
CASSE
Salmon restoration
How do we get policy makers to accept
these definitions?
Policy Stream: Tools
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Prescription
Payments
Penalties
Property rights
Persuasion
Power
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Concrete examples from each of your
projects?
Policy and property rights
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Excludability and property rights
Property rights as a bundle
Changing conditions and the need for
changing property rights
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Externalities in a full world
types of property rights
• Property rule
• Privilege
• Inalienability
Policy Stream: General Design
Principles
Every independent policy goal
must have an independent
policy instrument
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What should our policy goals be?
● Sustainable scale
● Just distribution
● Efficient allocation
● Others?
➲ Example of scale policy detrimental to
distribution?
➲ Examples of policies that meet several
goals?
Attain necessary degree of macro
control with minimum sacrifice of
micro-level freedom and variability
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Incentives (payments, penalties) vs.
prescription
Examples for scale?
Market mechanisms in theory allow
individuals to set MC=MB
Constant incentive to innovate
Attain necessary degree of macro
control with minimum sacrifice of
micro-level freedom and variability
Marginal
Firm 1
Firm 2
Firm 3
First 20%
$50,000
$10,000
$25,000
2nd 20%
$200,000
$25,000
$50,000
3rd 20%
$400,000
$50,000
$100,000
4th 20%
$800,000
$100,000
$175,000
Final 20%
$1600,000
$500,000
$200,000
abatement
costs
Leave a Margin of Error When Dealing
with the Biophysical Environment
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Uncertainty and Irreversibility
Precautionary principle
Is democracy appropriate when we live
close to the edge?
Examples from projects?
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Europe vs. US
WTO
New chemicals?
4Ps: Polluter Pays Precautionary Principle
(financial assurance bonds)
Start from historical conditions
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Market system
➲ Existing property rights
● CAT
● PES
● Pollution
➲ Public property rights
➲ Government regulation
➲ Role of courts in restricting property
rights
● Lake Tahoe
➲ Sovereignty and international policies
Adaptive management
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Uncertainty
Evolution (ecological and technological)
Need to change our policies as we learn
more and as conditions change
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Treat policies as scientific experiments
e.g. Montreal Protocol, Kyoto?
How can this be built into your projects?
Institutions at the scale of the
problem (subsidiarity)
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Spatial distribution of ecosystem
services
Decentralized decision making for
decentralized problems
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The market is a decentralized decision
making process for activities that affect
only individuals
Globalization
Examples from projects?
Policy sequence
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Scale
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Distribution
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determines how much there is to be
distributed
Pareto optimal outcome possible from
any initial distribution
Must be decided before allocation
Allocation
Changing Complex Systems
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Leverage points
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Where can we have the most impact?
See Meadows, Donella. 1997. “Places
to Intervene in a System,” Whole Earth,
winter issue.
Leverage Point 9
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Changing Numbers (subsidies, taxes,
standards, interest rates, etc.).
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Command and control regulations
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Create no incentives to exceed standards
Pigouvian taxes
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Standard economists stuff
Can still be powerful
Scale is price determined
Constant incentive to innovate
Can't be used internationally
Subsidies (perverse and otherwise)
Leverage Point 8
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Changing material stocks and flows
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Quotas
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Built capital: Hawken, Lovins, Atkisson’s
solution of replacing everything
Natural capital: Maintaining buffering capacity
can be an important leverage point
Scale is price determined
Constant incentive to innovate
Relevance to projects?
Leverage Point 7
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Regulating Negative Feedback Loops
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Numbers (#9) more effective when they
achieve this
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Feedback has to be proportional to problem
Too long or too short can be problematic
e.g. Pollution taxes
Route exhaust pipes through car?
Financial Assurance Bonds
Producer responsibility for disposal
#6
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Controlling Positive Feedback Loops
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Population
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Tobin tax
Economic growth
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Tradable baby permits
Speculative bubbles
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non-equilibrium
Wealth tax
Erosion rates
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Penalties for poor land use practices
Deforestation destabilizes hillsides
…resulting in greater runoff, erosion and
erosion gullies…
#5
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Information flows
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Creating new feedback loops
Educating the public
Related to persuasion
Electric meters
Most polluting industries
Toxic waste sites
#4
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Changing the rules (incentives,
punishments, constraints)
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Changing property rights, privilege,
constitutions
The commons (democracy over plutocracy)
WTO
Free speech
Banning campaign contributions, lobbying,
etc.
Private property rights: Conversion of
Mangrove Ecosystems to Shrimp
Aquaculture
Public property rights
#3
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Power of self organization
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Complexity theory and diversity
How do we maintain diversity?
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Endangered species act
Anti-trust legislation
University tenure
#2
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The Goals of the system
Changing the desirable ends
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Economic growth, or ecological sustainability,
just distribution, emphasis on other capitals?
“Ask not what America can do for you, but
what you can do for America” vs. “Get the
government off our backs”
Can objective science achieve this?
#1
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Change the paradigm!
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What is biophysically possible?
From neoclassical economics to
ecological economics
#0
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Transcend Paradigms
Politics Stream
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Focusing events
National mood
Changing administrations
Getting politicians to accept gravity of
problem, implement necessary policies
Examples from your projects?
State of the Political Stream
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“Obama Urgent on Warming, Public
Cool” NYT
Belief that climate change is human
caused has decreased (Rasmussen
poll)
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“44% Say Global Warming Due To
Planetary Trends, Not People”
95-0 non-binding resolution that we
won’t sign any climate change
treaties in which poor countries don’t
participate
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At the time, America emitted nearly 10x
per capita as China, and nearly 20x as
India
Why are we failing on the
political stream?
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Strong media coverage of climate
change skeptics?
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NYT headline today: “Use Energy, Get Rich
and Save the Planet”
“Dissenter on Warming Expands His
Campaign” http://climatedepot.com/
Media emphasis on unknown rather
than known?
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Poor communication skills by scientist?
Lack of advocacy by scientists?
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Journal article title: Dragnet Ecology--"Just
the Facts, Ma'am": The Privilege of Science
in a Postmodern World
Lack of a focusing event?
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“the political system’s inability to address
long-term challenges without a thunderous
precipitating event “
Insights from Behavioral
Economics
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Why do we need to understand
behavior?
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Environmental problems are caused by
humans
Understand what is desirable
Understand what is possible
Learn how to change behavior
People respond to immediate
threats
"Dumbo, caught obsessing about
higher planetary CO2, did not leave
any descendants"
People respond to immediate
threats
Finite pool of worry, Single
action bias
How do we make decisions?
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Rational analysis of scientific and
technical information?
Personal experience, affect and
emotion, trust, values, worldviews?
Personal experience and time lags?
Affect and word choice
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Taxes vs. offsets
Negative thoughts first or positive
Parallel and interacting
World Views: Cultural Theories
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Hierarchist:
bureacuracy
Egalitarian: huntergatherer
Individualist: market
Fatalist:
prisoner/slave
Group vs. Individual behavior
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Problems we face require cooperative
group solutions
Groups more patient (lower discount
rates)
Groups do a better job assessing
relevant info
Easy to make people act as groups
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“blue star team”
What influences preferences?
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Not predetermined: generally formed as
we make a decision
Framing
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80% survival rate vs. 20% mortality
Default choices
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Organ donors
Group or individual decisions
Starting points
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WTP or WTA?
What we think about first
Nudges: Libertarian
Paternalism
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Strategic choice of words (strategic
interpretation of scientific data, story
telling)
Order options (defaults)
Create group effects
How libertarian?
Problems
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Can be defined in different ways
Different definitions call for different
policies
Focusing events call attention, provide
opportunities to push policies
Policies
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Depend on definition of problem
Generally designed and polished in
universities, think tanks, before being
implemented
Peer review and persuasion
Need political opening to implement
Politics
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Problems and policies defined more by
ideology than science
Answers needed immediately
Bargaining dominates persuasion
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Market fundamentalists have political
opening, allowing them to get their
problem definition and policy solution
on the political agenda
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Some change from Bush to Obama, but not
enough
Unless ecological economics can take
advantage of focusing events, its
problem definitions and policies
accomplish nothing
How do We Open the Policy
Window for Ecological
Economics?
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Move beyond academia to think-tanks,
advocacy and activism
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Think tank approach
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Repository of policy pieces—for politicians and
media
Rapid dissemination
Student involvement and leadership
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Problem based integration of research,
teaching and service
Transdisciplinary, trans-institutional and
transnational
Strong policy focus
Effective communication
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To policy makers, media, public
Steady exposure, available, rapid response