by David Boyle
Patten described Pearce as ‘my green guru’, and as a special adviser he could safely suggest ideas publicly which could be disowned if necessary by ministers. He could and did suggest taxes on carbon and pesticides, or tradable permits to pollute the air or cut down forests. He could and did suggest that the cost of saving the African elephant, paying off ivory traders and equipping game park wardens might be in the order of $ 100 million a year. He was sufficiently independent to fly in the face of Conservative philosophy in public, telling the press that ‘unfettered free markets will not solve environmental problems. They will make them worse’. This was anathema to Mrs Thatcher – but then Pearce had never voted Conservative. He still hasn’t.
But the public seemed to respond. A Gallup Poll issued in response showed that people would overwhelmingly be prepared to pay more to protect the countryside. The Independent newspaper published a short version of Blueprint, looking at how we could measure the value of a diverse range of animals, forest or ancient woodland. A cabinet committee was set up called MIS C141, chaired by the prime minister herself, and an environment white paper was promised within the year. It all seemed to be going well.
IV
The first sign that something had gone wrong came only five months later. A speech by Patten raised the possibility that some of these new methods of measuring, and their accompanying taxes, would be postponed until after the general election. The truth was that Patten was facing stiff opposition, as expected from the Treasury – but also from other cabinet colleagues. Transport secretary Cecil Parkinson was trying to push through a massive expansion of road building. Energy secretary John Wakeham was afraid that energy taxes would raise fuel bills in the run-up to the election. And when the civil servant in charge of the whole operation had sent a questionnaire to every ministry asking them about their environmental impact, many of them were livid.
When the white paper was published in September 1990, it was a pale reflection of the hopes laid out in Blueprint. There were 356 recommendations, but none of them would change much. Pearce sent a memo to Patten which said simply: ‘Is that it?’
Who had spiked the idea, asked the papers? There had been a trickle of damaging leaks from the cabinet, but most fingers pointed at the Department of the Environment permanent secretary Sir Terence Heiser – the equivalent of Sir Humphrey Appleby in Yes, Minister. He was said to have taken one look at the book and decided that Blueprint would have to have its claws drawn. In fact, the cabinet committee had agreed unanimously that nothing should be done until after the 1992 election, and specifically ruled out a carbon tax or more duty on petrol. They even dumped the simple idea of using more recycled material in government offices. It was a frustrating and disappointing moment.
Pearce was already criticizing the government in public for moving too slowly. Mrs Thatcher was ousted at the end of the year and Patten was promoted to be chairman of the party in the run-up to the election. Pearce concentrated on developing the theory. Blueprint 2 looked at global threats to the environment in the run-up to the Rio Earth Summit. Blueprint 3 set out the costs of road transport in Britain. He calculated the real costs, including accidents and pollution, at between £23 and £26 billion – or about twice as much as the road tax brought in.
By 1994, there had still been no action from John Major’s embattled government and Pearce was in open revolt. The British government’s inertia was ‘pathetic’, he wrote in Blueprint 3:
I am highly sensitive to the argument that giving a higher priority to protecting the environment can cost industry money. But the government has done no work on how much it would cost, or how it could be paid. It has simply dropped the idea … Scandinavia has forged ahead and has demonstrated that it has saved money for industry by introducing environmental levies. The best the UK can do is point to one such measure in the past five years and a glossy pamphlet telling us what a good idea such taxes are.
By Blueprint 4 – dedicated to the memory of his cat Dill – he had extended his criticisms to the environmentalists. Without doubt their pressure had brought about the agreements in Rio in 1992. ‘Also without doubt, a great many constructive and effective ideas have been ignored or played down because of their desire not just to win but to win in their own way.’
The problem was that Pearce was fighting his battle on two fronts. Governments and industrialists were suspicious of change they simply didn’t understand. The Australian miners who threw beer cans at him at one lecture accused him of being ‘balmy’. The environmentalists were objecting to the idea of measuring the value of the earth in terms of money. The problem was the idea of ‘willingness to pay’ or ‘willingness to accept compensation’ – known to the cognoscenti as WTP and WTA. This meant that you could measure the value of something – whether it was grizzly bears or big-horn sheep in America or Amazon rainforests – by asking people what they would be prepared to pay to rescue them.
Using WTP and other measuring techniques, Pearce had come up with a figure of greenhouse damage of twenty dollars per extra tonne of carbon. Cutting down primary forest cost between $4,000 and $4,400 per hectare, said the environmental economists. People seemed to be prepared to pay between $40–48 per person to preserve the entire species of humpback whales – or $49–64 after seeing a video of them.
He and his colleagues were introducing a whole new jargon – bequest values, total user values, option values. Or existence values – what people are prepared to pay for the continued existence of things they may never see – like the Grand Canyon. Grizzly bears seemed to be worth twenty-four dollars per person, under this system. The Grand Canyon’s existence he calculated at $4.43 a month.
There were many environmentalists who objected to the idea that you could put any money value on a species at all. Destroying the ozone layer, flattening the rainforest, killing whales was immoral and that was all there was to it. Their loss was of incalculable value, and anyone who said otherwise was immoral too.
The argument between the idealists and Pearce’s pragmatism went backwards and forwards. The following year it came to a spectacular head at the international negotiations on climate change. The issue was how to put a price on human life.
V
Pearce now had a bigger team behind him at University College, known as CSERGE – the Centre for Social and Environmental Research on the Global Environment. Their biggest task after the Rio Summit was to put together an economic basis for negotiations to tackle the greenhouse effect. That meant writing a policy paper for the Intergovernmental Panel on Climate Change that would put a dollar value on every possible damage from the greenhouse effect. The trouble was that they valued a human life in the rich developed countries at 15 times the life of someone in a poor country – from $1.5million for Americans down to $100,000 for the poorest peasants. And their ability to pay was similarly lower. A hectare of Chinese wetland was worth just 10 per cent of a hectare of Western wetland. It wasn’t what people wanted to hear.
The storm broke over Pearce’s head, co-ordinated in an effective campaign around the world by a professional violinist. Aubrey Meyer never looked like an international negotiator, with his trademark pigtail and white T-shirt, but his London-based organization, the Global Commons Institute, successfully drummed up signatures of protest from all over the world. ‘Why, if one spotted owl equals one spotted owl, doesn’t one human equal one human?’ he asked. Even Sir Crispin Tickell criticized the idea. Pearce’s adversary John Adams described it as ‘the economics of genocide’. Meyer attacked cost-benefit head on as ‘racist economics’: ‘Willingness to Pay embodies the ethics of the protection racketeer,’ he wrote. ‘It has no place in civilized debate.’
Could you really measure the value of something according to how much people would pay to keep it, they asked? What if they had no money? What if they were poor? Had the researchers travelled across the Third World asking people what they were willing to pay? How can people’s rights to a clean environment be proportionate to ho
w much money they had? Surely species have a right to exist even if people are ignorant of them?
But the calculation was simply the basis of an agreement that might work, said the CSERGE team. ‘We won’t be revising it, and we have no intention of apologizing for our work. This is a question of scientific correctness versus political correctness.’
But Meyer had won. When the representatives of world governments met in Berlin in April 1995, they carried with them a letter from Indian Environment Minister Kamal Nath rejecting the analysis as ‘absurd and discriminatory’ and urging other governments to do likewise. When they reconvened in Geneva three months later, all the delegates were greeted with a copy of the lead story in the Independent on Sunday the previous weekend with the headline ‘One Western life is worth 15 in the Third World, says UN report’. As the delegates convened, the Guardian in London carried a picture of Meyer playing his violin in the park with the caption ‘Who says life is cheap?’ Following furious exchanges during the negotiations, delegates threw out the CSERGE analysis.
In Montreal three months after that, the two sides were still yelling abuse at each other. This time, delegates threw out the other figures as well. ‘Being alone does not make you wrong,’ said Pearce, sadly. Ironically, Kamal Nath’s high moral tone was blunted later by his resignation after serious bribery accusations.
VI
It looks like a clear open and shut case. If Pearce was really measuring the value of views, species or human beings according to what people were prepared to pay to protect them, there was no moral defence. And although not everybody is an economist, everyone is an expert in morality. A cursory list of prices shows how bizarre this would be – an Albanian orphan costs £4,000 and a reasonably-sized house in the St John’s Wood neighbourhood of London costs over £1 million. Life would be intolerable if people actually behaved as if prices meant real value. But it wasn’t quite as simple as that.
‘It is a result of poor communication by economists,’ says an unrepentant Pearce today. ‘Because we were used to using shorthand when we were talking about the value of an elephant, we knew what we mean by it – but it isn’t the intrinsic value of an elephant. It’s just what someone’s willing to pay. We’re just measuring people’s preferences. But a lot of the opposition was based on sheer pig ignorance. People who couldn’t be bothered to read anything or learn anything, thought that in five minutes they can pick up 200 years of economics. To an economist there’s no surprise about what’s being said. But if you want to discredit it, you don’t have to be a master of the media to do that.’
What Pearce and his team were trying to do was to measure the way of the world. It may have looked pragmatic – and that’s exactly what it was – but it was designed to create an agreement based on real exchanges of resources. It was just what everyone does in their own homes: ‘The rights of individuals are not separate from costs,’ he says, and one glimpse around the world shows that, sadly, he’s right.
The greenhouse effect negotiations remain bogged down over exactly how the idea of tradable permits will work – nearly a decade after the Earth Summit first carved out the basis of an agreement. So to that extent, Pearce was right too. ‘It doesn’t necessarily follow that just because you can stand up and shout morally about global warming and all those wonderful phrases, it doesn’t mean any of it is correct. One shouldn’t be surprised that the rate of deforestation is much the same as it was thirty years ago. Where’s the great power in this moral argument? To change something, people have to be better off under the new situation than they were under the old one. If you can’t devise a policy which means all the stakeholders are better off, it won’t happen.’
Moralists believe it must be done by regulation, and regulation that has to hurt the baddies, claims Pearce. ‘The trouble is that the more expensive you make regulation by doing that, the bigger the built-up of hostility to your next piece of regulation. But if you can make a bargain, the Brazilians are better off, we’re better off, the world’s better off and we’ve done it more cheaply.’
The greenhouse numbers are one of the best examples of the crisis of counting. It is morally indefensible to work out the money value of human life – especially when it is different according to where you come from. Doing so makes an international agreement politically impossible. Yet without trying to count the real cost, it will be very hard to reach a real bargain.
Still, it may not be impossible. Aubrey Meyer’s contraction and convergence model counts human lives equally. You do have to count – the important thing is to realize that you can’t succeed in measuring the real value of anything.
The difficulty with cost-benefit analysis is that it claims to be a science when it is actually an art. Take the particularly knotty issue of discounting. Goods you can buy immediately are worth more than those you have to wait for, so economists reduce their value by a percentage – the opposite of an interest rate – for every year you have to wait. The British Treasury usually uses 5 per cent a year as a yardstick – but not always. Sometimes they use 7 per cent, sometimes they use 3 per cent. It depends. The truth is that, by changing the discount rate, you can have a dramatic effect on the result. In fact, you can prove almost anything like that. Yet there was the government lording it over road protesters at motorway inquiries, and refusing to let anyone question either their cost-benefit analysis or their resulting forecasts – because they were ‘science’ and beyond dispute.
There is the problem of actually measuring WTP. About a quarter of people asked what they would be willing to pay to preserve bald eagles, woodpeckers, coyotes, salmon or wild turkeys refuse to reply on the grounds that you can’t put a price on such things. And of course you can’t. And a Frankfurt woman called Frau Kraus discovered in 1989 that she had a veto over a proposed new skyscraper they wanted to build next door, and refused to play the game at all. She turned down a million deutschmarks, then she turned down 10 million. ‘Not even if they were to offer me 20 million would I change my mind,’ she told the papers. ‘It would block out my sunlight and spoil the place I was born and bred.’
Then there is the usual problem of measuring. Cost-benefits will always have a problem valuing the intangibles. This mixture of careful measuring of the things that can be measured and a vague rule of thumb for the rest led John Adams to call the process a ‘horse and rabbit stew’. The rabbit is skinned and dressed with great care. The horse – size unknown – is just tossed into the pot with no preparation at all. ‘It is an ethic that debases that which is important and disregards entirely that which is supremely important,’ he says.
Valuing ‘horses’ creates the most peculiar effects. One Washington economist valued the world’s population of elephants at $1 million on the grounds that it was an easy figure to remember. The world’s largest pharmaceutical company, Merck, actually bought the rights to Costa Rica’s entire genetic diversity – plants, seeds and soil – for $ 1 million plus royalties. It’s strange how the figure of $1 million comes up when people don’t actually know what something is worth.
Yet cost-benefit analysis is on the increase. Ronald Reagan insisted on an analysis of all major projects within weeks of taking office in 1981. All over the world, the technique is seen as a way of controlling politicians – taking the politics out of decisions. When the Exxon Valdez spilled its oil off Alaska in 1989, they had to work out the cost of the damage so that the tanker’s owners could pay it. When lorry drivers took to the streets to protest against fuel prices, we needed to have a better idea of the cost of using the roads (probably twice what the tax was raising).
That’s the heart of the counting crisis. Measuring is often impossible, but sometimes you have to try anyway.
Bizarre units of measurement No. 11
Median Lethal Dose
(Part of the US Food and Drug Administration’s search for measurable standardization. This led to the notorious LD50 test for drugs, which meant new compounds had to be tested as a poison at a concentrat
ion which would kill large numbers of experimental animals.)
* * *
Number of people in the UK visiting accident and emergency departments after accidents involving tea-cosies (1997): 39
Average time gallery visitors spend in front of each painting (1987): 10 seconds
Average time gallery visitors spend in front of each painting (1997): 3 seconds
Chapter 11
The Bottom Line is the Bottom Line
‘The other ambassadors warn me of famines, extortions, conspiracies, or else they inform me of newly discovered turquoise mines, advantageous prices in marten furs, suggestions for supplying damascened blades. And you?’ the Great Khan asked Polo, ‘you return from lands equally distant and you can tell me only the thoughts that come to a man who sits on his doorstep at evening to enjoy the cool air. What is the use, then, of all your travelling?’
Italo Calvino, Invisible Cities
Surely there is something unearthly and superhuman in spite of Bentham.
John Henry, Cardinal Newman
I
The man Keynes designated his successor didn’t like cost-benefit analysis much either. It is ‘a procedure by which the higher is reduced to the level of the lower and the priceless is given a price,’ wrote E. F. Schumacher in Small is Beautiful. ‘It can therefore never serve to clarify the situation and lead to an enlightened decision. All it can do is lead to self-deception or the deception of others.’
