Patchwork Design Lab

May 5, 2010

Valuing the Commons

Filed under: Human Ecology, System Dynamics & Culture, Systems Ecology — Tags: , — Lonnie @ 7:33 am

President Obama’s recent remark that we will repair the damage caused by the recent oil platform explosion and subsequent, ongoing oil hemorrhage off the gulf coast no matter what the cost is interesting to me. First of all, what is the cost of such an operation? Can he even know this? Certainly he has at least a vague idea that it must be in the billions of dollars. Second, is such a thing even possible? There is a difference, after all, between cleaning up the spilled oil and actually reversing the damage done to the local economies and to the ecosystems of which they are a part and upon which they depend. The movement of money in an economy carries information about the value of goods and services. But to whom do you send a check in payment for the work done by a forest as it contributes to annual rainfall, the ongoing supply of fresh air, and the building of fertile topsoil? Who receives the payment for actually producing the fish that are harvested from wild fisheries?

The fact is that since we simply help ourselves to these services and send no check to any theoretically external agency for these benefits, the circulation of currency carries absolutely zero information about the value of these services. So in the most literal sense, President Obama has no way of knowing the cost of his promise. Furthermore, there are legal limitations on a corporation’s financial liability in these cases. A corporation can be held accountable for immediate damages to property and local businesses, but as I understand it is exempt from accountability for the long term health, economic, and environmental consequences of its screw-ups. So whatever the full cost of remediation may be (to the extent that it is possible at all), the lion’s share of the burden falls upon the shoulders of the taxpayer.

This situation shouldn’t be at all surprising; it arises quite naturally from two archetypal system-dynamic traps. These dynamic patterns underpin the contemporary global economy to such an extent that once you understand how they operate, you begin to see them everywhere. They are called the Tragedy of the Commons, and Success to the Successful. The tragedy of the commons is a dynamic by which rational decisions made without ill intent but with a view to maximizing one’s profit cause one to take actions whose benefits accrue only to oneself but whose negative consequences are shared by all. Because you receive all the benefit but only a portion of the cost, you perceive the action to be quite reasonably taken. You perceive the odds of a major catastrophe to be low and take the projected long term effects to be purely hypothetical. And your increased income provides you with insulation against many of these consequences. Further, your perception of them is tempered by how dearly you value what has been lost. Clearly, the CEO of a company like Exxon or British Petroleum will not view the damage to coastal ecologies in the same light as will an Alaskan fisherman or Louisiana shrimper.

The second dynamic pattern, Success to the Successful, functions, effectively, to institutionalize the Tragedy. In a game where it takes money to make money, the wider your profit margin, the more quickly it grows – a classic case of exponential growth. Conversely, the slimmer your margin the greater the struggle required to maintain it. Those with a wide and rapidly expanding profit margin have disposable wealth which they can use to reinforce the circumstances that enabled them to succeed. They can influence legislation through lobbying. They can influence opinion through media ownership. They can even sway the types and quality of goods and services available to all by sheer volume of consumption. McDonald’s is a case in point. McDonald’s demand for a consistent product worldwide has so influenced the way beef is produced that it effects what is available even to those of us who never set foot in one of their establishments.

Accountability is a good thing. Everyone says so. Yet we exempt from accountability to any significant degree those people and organizations who have the greatest power to do harm. It’s not difficult to see how this comes about, given the dynamics at play, but it’s puzzling, sometimes, that remarking on the irony of the situation seems to be a public taboo. I guess such an observation is lacking in nuance.
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2 Comments »

  1. I don’t mean to be “negative”, as I would really like to explore the possible “positive” actions to change this situation. And I appreciate this article. But, just one comment for now, as I read on….

    Unfortunately, the fact that “President Obama has no way of knowing the cost of his promise” is nothing new. What politician really does?

    But, I guess the gist of this article might be HOW to attach a cost…One. And two, hopefully in the future this new potential threat of expense will make “the cost of doing (this type of) business” just too great. e.g. This catastrophe should AT LEAST put one large insurance company out of business ! Not to mention causing a major hit on its stockholders. Maybe they will think of other places to invest. (I realize this sounds “foolishly positive”.) But, three…how do we make it economically attractive to invest in alternative energies? Especially when it seems the market is “all sewn up”, so-to-speak.

    Comment by Kevin — May 7, 2010 @ 10:21 am

    • No politician really does. The problem is not that he doesn’t know; it’s that he doesn’t know that he doesn’t know. If his advisers can’t tell him, no doubt a specialist can. But specialization follows categorization, and the categories into which we divide things reflect our own priorities, economic and otherwise, more than they do the real world.

      I agree that it would be desirable to invest in renewable energy sources. And, in my opinion, the lack of ongoing investment in our petroleum oriented infrastructure due to the low profitability of such investments is a system-level signal that the petroleum society is entering into its sunset years. It also seems likely to me that this lack of investment, given the age of the oil industry and its attendant hardware, may be partially to blame for the catastrophe in the gulf. But even if we could replace oil with some combination of renewables, and even if these renewables were just as cheap, just as portable, and just as high quality as oil, (which they are not) we would still face limits to growth in other areas.

      The ugly truth is that the way we do everything has to change. That change and the rationale behind it are the main obsessions of this blog.

      There are ways to estimate the environmental costs of this type of catastrophe; the problem is knowing where the effects stop, where to draw the line. That is not so easy.

      Comment by lbrw — May 7, 2010 @ 3:03 pm


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