Valuing Nature: Technocratic Governance vs Democratic Deliberation Deepak Malghan Even a beginner in economics, who does not have to study the broad contours of the history of economic thought these days, however, recognises the spectacular achievement of neoclassical economics in resolving the so-called diamond-water paradox. Why does diamond, which unlike water is not critical for survival, command a higher price? Classical economists like Adam Smith, who believed in a labour theory of value, tried to resolve this paradox by distinguishing between
Valuing Nature: Technocratic Governance vs Democratic Deliberation
Deepak Malghan
shadow prices for non-market goods. The CVM-based cost-benefit analysis in its many different flavours has been the primary workhorse of environmental economics for over three decades. Technical problems apart, CVM has been rightly criticised for reducing a citizen’s moral choices into narrow market preferences of a consumer.3 Pseudo-demand curves and shadow
E
ven a beginner in economics, who does not have to study the broad contours of the history of economic thought these days, however, recognises the spectacular achievement of neoclassical economics in resolving the so-called diamond-water paradox. Why does diamond, which unlike water is not critical for survival, command a higher price? Classical economists like Adam Smith, who believed in a labour theory of value, tried to resolve this paradox by distinguishing between “use value” and “exchange value” – water has a higher use value, and diamond, a higher exchange value. In the 19th century economists led by Lèon Walras, William Stanley Jevons and Carl Menger ushered in what is today known as the “marginal revolution”. By the late 1800s, the marginal revolution in economics, completed by the likes of A lfred Marshall and Vilfredo Pareto not only managed to establish marginal utility as the basis for a consumer theory, but extended marginal thinking to the theory of production, and thus, established the now canonical marginal theory of demand and supply.
History of Economic Thought
The marginal revolution in economics enabled economists to adapt analytical tools from classical physics – especially, differential calculus. The new-found mathematical apparatus along with the ascendancy of logical positivism resulted in economics jettisoning anything that contained what one may call a “normative residual”. Most importantly, for our purposes here, economics abandoned any interest in interpersonal utility comparisons. Further, microeconomics as a behavioural description of homo economicus moved from classical utilitarian concerns with satisfaction
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Deliberative Ecological Economics edited by Christos Zografos and Richard B Howarth (New Delhi: Oxford University Press), 2008; pp xii +271, Rs 650.
of ends to satisfying subjective individual preferences. Thus, while neoclassical economics solves the value paradox, it does so by stripping the economic agent of moral possibilities – choosing between competing ends is an inherently moral exercise, whereas utility maximisation over a preference set can be reduced to a wholly technical exercise. Ends and preferences belong to two distinct axiological categories.
Influenced by leading positivists like Lion el Robbins (who is best known for supplying the most commonly accepted contemporary definition of economics), modern welfare economics was able to logically separate out messy distributional concerns from its core theory.1 For the large part, contemporary economic theory relies solely on the well-known Pareto efficiency principle to make normative judgments about social welfare.2 Welfare economists also routinely invoke a diluted form of the Pareto efficiency criterion – the Kaldor-Hicks efficiency criterion. This criteria allows for people, who are betteroff from a rearrangement of allocation to compensate people, who are made worseoff, following the rearrangement as long as this transfer from the winners to the losers leaves everybody at least as well-off as they were before the rearrangement. Quite evidently, the Kaldor-Hicks criterion is extremely limited as a guide for social welfare, both in theory and in practice.
In dealing with the physical environment, economists use the cost-benefit analysis through the contingent valuation method (CVM) that is used to determine
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prices estimated by CVM are obtained from preferences weighted by ability to pay – one rupee, one vote rather than one person, one vote, and thus, inherently undemocratic. Thus, while shadow price discovered by CVM surveys might be Pareto efficient, it need not satisfy all, or even some of the justice and fairness considerations. More over, it might not be feasible to estimate demand curves in this fashion because demand for ecological services is known to be hyperbolic – turning highly inelastic as ecosystems are exploited to a level below which critical functions are affected. This and other inherent non-linearities in how ecosystems function mean that a CVM-based marginal cost-benefit analysis is not always technically feasible, and when technically feasible might not be the most desirable way to determine social value of natural ecosystems.
The positivist triumph in welfare economics coincided with the rise of technocracy in government during the years following the Great Depression. As the editors of the this volume point out,
[t]he neoclassical model privileges the theory and methods of cost-benefit analysis, which became prominent in the 1930s when US law introduced the requirement that government-funded water projects should yield rates of return that compared favourably with those of private-sector investments.
The nine well-researched essays in the book attempt to provide an outline of programme for both theory and praxis – a programme that can both move beyond the theoretical limitations of neoclassical economics and infuse democratic deliberation in the practice of ecological economics.
Deliberative Turn
Deliberative Ecological Economics builds on the works of political philosophers and
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democratic theorists, who have highlighted deliberation as the fountainhead of democratic legitimacy. Jospeh Bassette coined the term “deliberative democracy” in 1980, and since then, leading political philosophers including John Rawls and Jürgen Habermas have identified themselves as supporters of deliberative democracy. Deliberative democracy theorists have tried to show that democratic legitimacy in a society is tied to its deliberative and discursive4 traditions in democratic decision-making rather than formal institutions of democracy.
Of the many sources that inspired the “deliberative turn” in democratic theory, the essays in this volume have followed in the “critical theory” tradition of the Frankfurt School, and especially, the influential Theory of Communicative Action by Habermas. For Habermas and his colleagues, “communicative rationality” is central to the development of democratic traditions in a society. Nobody has done more than John Dryzek, a prominent contributor to the deliberative theory, to flesh out the implications of deliberative democracy for ecological politics. Dryzek’s footprint is in evidence throughout the present volume. In the specific context of ecological politics, Dryzek has tried to show how democratic deliberation is a pragmatic tool in the tradition of pragmatists like John Dewey. Deliberation for Dryzek and his followers (that include the editors and several contributors to the present volume) “is a process that allows preferences to be transformed through reflection over available information, a reflection that should occur in the absence of any sort of direct or indirect coercion or information distortion” (pp 3-4).
This book will enthuse ecological economists, and perhaps, annoy significant sections of both neoclassical economists and political philosophers that are not sympathetic to the possibilities of critical theory. My own sense is that the central message of the book – recognising multiple relationships that people share with nature and a deliberative approach to reconciling these differences – transcends the prescriptions of particular critical theorists that the book alludes to. Even if one is not persuaded by the particular
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deliberative frameworks suggested by the book, the impressive theoretical and empirical evidence presented in the book about the limitations of reducing all valuations to monetary exercise is in itself a most valuable contribution. This is a book that should be read by anybody with a serious interest in grappling with humankind’s ecological predicament. The essays in the book have tried to build an important bridge spanning disciplinary boundaries – especially between ecological economics and political science. Even when one disagrees with the specific approaches taken by the various authors in the book, the book’s call to get out of disciplinary silos is central to any meaningful response to our ecological predicament. The research presented in this book represents the best of serious and substantive interdisciplinary dialogues as opposed to mere paeans in praise of multidisciplinary engagements.
The chapters in the book have been collected from a special symposium on deliberative valuation methods held during the biennial meeting of the International Society of Ecological Economics (December 2006). I will only highlight key contributions in general terms as the editors do a fantastic job of summarising individual contributions at the end of their introductory chapter. The chapter by Christos Zografos and Jouni Paavola, “Critical Perspectives on Human Action and Deliberative Ecological Economics”, provides an excellent overview of how insights from critical theory in the Habermas tradition can be incorporated into deliberations about nature. Clive Splash’s chapter, “Deliberative Monetary Valuation” sets the tone for what follows. It presents a general framework to re concile monetary valuation and the deliberative methods discussed in the other essays. The next chapter by Hermans et al uses a case study from a watershed in the US state of Vermont to illustrate the practical use of a relatively new methodology – conjoint analysis. The third and fourth essays advance ordinal valuation and multi-criteria analysis as alternatives to conventional CVM. The volume also includes the Kenneth Boulding prize lecture by one of the pioneering ecological
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economists, Richard Norgaard. Norgaard’s essay looks at the recently concluded Millennium Ecosystem Assessment as an exercise in deliberative economics and draws lessons for the links between science, democracy and d eliberation. The last three chapters in the book that include a case study in d eliberation from Namibia and South Africa underscore the inherently interdisciplinary n ature of valuation through a deliberative process.
Universality?
The series editors (Joan Martínez-Alier and Pushpam Kumar) in their foreword to the book have claimed that the “methods discussed in this volume have universal application”. This is certainly true in a narrow technical sense – deliberative valuation techniques described in the book can indeed try and reconcile differing valuations of nature. The greater test of universality, as recognised by the series editors themselves involves reconciling diffe ring conceptions of nature and normative conceptions of valuation. Can deliberative techniques developed in the book prove useful in a complex society like India?
[H]ow does one arrive at a decision on the conflict between multinational bauxite mining companies in Orissa; or the conservationists who would like to keep the beautiful Niyamgiri Hill intact; or the Dongria Khond issue – is each group using its own language of valuation? (p xi, emphasis added).
This very perceptive conundrum is at the heart of universality question. The farmers of Vermont when deliberating on channelling a river (chapter 3) are presumably operating from within a shared cosmology – a far cry from the conflict between aluminium mining companies and Orissa’s adivasis.
My own view is that ecological economics’ use of insights from the deliberative strand in democratic theory represents a very promising beginning in developing alternatives to the mindnumbing contingent valuation exercises that reduce all value to market prices. However, this is only a beginning and the shortcomings in the deliberation methodologies described in the book
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will perhaps only become clearer as they are widely used in more diverse settings.
Indian Context
The contributors to the present volume make a strong (and important) argument against social value of sustainability being determined by the markets. However, in India, the state plays a central role in determining what is to be sustained, or more often, what is to be destroyed. In a context like India, the role of the state in ecolo gical battles is of paramount importance. For example, one can never overstate the tales of gut-wrenching ecological and human suffering directly related to development projects sponsored by the Indian state. In the last two decades the coercive power of the State has often been used in conjunction with the enormous reach of private corporations with global predatory ambitions. The struggle of Dongri Khonds against a mining behemoth, alluded to by the series editors is indeed emblematic of the Indian landscape. Even as they acknow ledge the coercive powers of the State, the most committed of Indian social activists also (correctly) recognise that formal constitutionally-guaranteed institutions are fundamental to making India’s democracy work for its disadvantaged. As the various authors in the book point out, the hallmark of a truly deliberative democracy is the absence of any form of coercion. Public hearings conducted by state agencies in contemporary India will scarcely qualify as a truly deliberative process. Thus, while the framework provided by the authors is a useful point of departure, it is scarcely adequate in a maddeningly complex country like India. Communicative rationality, as Habermas and others have persuasively argued, can indeed transform individuals. However, we need a more nuanced theory of deliberative democracy when these “individuals” happen to be as diverse as giant corporations, a coercive State, or an adivasi community all operating under what must count as a successful electoral democracy.
Finally, one might make an ontological objection to how the authors in the book have tried to use Habermas and Dryzek to work out a programme of deliberative ecological economics. It is not clear how the deliberative approach to valuing nature is related to the fundamental ontological vision of ecological economics that sees the economy as an open subsystem of the larger ecosystem (in direct contrast to the neoclassical vision that sees the physical environment as one among the many sectors that constitute the economy). I do not believe the deliberative process can be abstracted from the underlying ontological relationship between the economy and ecosystem. In particular, one of the key features of ecological economics’ ontological vision is that it lends itself to the possibility of studying the economy-ecosystem interaction problem in a manner where nature is endowed with some rights. As philosopher and ecological economist Peter Brown has pointed out, we need an “embedded ethics” to study an embedded economy. Habermas’ communicative rationality, however, does not extend to nature (as acknowledged by Zografos and Paavola, chapter 6). This can be especially problematic in the Indian context, where disputes about nature are as much ontological as they are political. Our ecological disputes perhaps need to take an inspiration from a Gandhi, a Ganesh Devy, or a Maha sweta Devi to complement a Habermas or Dryzek.
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One must add here that no ecological economist has tried to do this better than Joan Martinez-Alier, one of the editors of the present series.
This is a book that poses more questions than it is able to answer – for me, the hallmark of a truly engaging work. Even while the relevance of the present work might be limited in the Indian context, I would recommend this as required reading for anybody (and nobody more than
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-economists) interested in understanding the complex landscape that is ecological politics in India.
Deepak Malghan (dmalghan@iimb.ernet.in) is with the Indian Institute of Management, Bangalore.
Notes
1 This idea is encapsulated in the two Funda mental Theorems of welfare economics. In environmental economics, Ronald Coase’s famous 1960
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paper, “The Problem of Social Cost” has allowed economists to logically separate distributional issues from concerns with allocation efficiency.
2 An allocation is said to be Pareto efficient, if it is not possible to improve outcomes for any indivi du al without making at least one other person worse off.
3 Space limitations do not allow a full summary of well-known practical problems with CVM. Key problems include inconsistency between willingness to pay and willingness to accept, and unstable preference maps. Behavioural economics and social psychology literature from the last decade have been able to provide a cognitive explanation for some of these inconsistencies.
4 Deliberative democracy has also been called “Discursive Democracy”.
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