Externalities

How can you know what the true value is?

A product that returns high revenues on a short term basis,

 

but does not account for the degradation in the environment

 

does not value the product at actual cost.

Methods for alternative valuation:

                Environmental economists have tried to assign monetary values to ecosystems services.

Surveys: determine how much people are willing to pay to protect or restore a resource

            Money, time, effort people expend to travel to parks for recreation

Inferring the dollar value of landscapes

            Viewsheds, peace and quiet

Costs required to restore natural systems

          The biosphere provides at least $44 trillion (2009 dollars) worth of ecosystem services per year

Ecolabeling: tells consumers which brands use sustainable processes

            A powerful incentive for businesses to switch to better processes

            “Dolphin safe” tuna – Socially responsible investing in sustainable companies

 

 

True Value is ultimately measured in QUALITY OF LIFE

 

Sustainability can be defined by identification of a

                Standard of Living below which no citizen of the global community should be expected to live below

 

 

Products and Raw materials not valued at actual cost because environmental costs are often not considered

 

External Costs/ Externalities: Costs unaccounted for in the transaction; Hard to identify and eradicate

Human health, Property damage, Declines in desirable elements, Aesthetic damage, Stress and anxiety,

                Declining real estate values, etc. etc.

 

 

Examples of External Costs
borne by someone not involved in a transaction

•Human health  •Property damage •Declines in desirable elements •Aesthetic damage •Stress and anxiety •Declining real estate values

 

  

Techniques for providing alternate monetary values

Environmental and ecological economists have tried to assign monetary values to ecosystems services.
 
–Surveys: determine how much people are willing to pay to protect or restore a resource
–Money, time, effort people expend to travel to parks for recreation
–Inferring the dollar value of landscapes, views, and peace and quiet
–Costs required to restore natural systems
 
Government through subsidies and tax credits is involved in the economics of true produc and service valuation
–Green taxes: penalize harmful activities
–Economic incentives to promote conservation and sustainability

non-market values

 

 

The biosphere provides at least $44 trillion (2009 dollars) worth of ecosystem services per year —

more than the gross domestic product of all nations combined (2009 data)