Integrating Economics and Ecology: Reflections from the Sackler Colloquium

Greetings Pine Tree Republic readers! This past week, I had the good fortune to attend a conference of the National Academy of Sciences called the Sackler Colloquium. This particular conference convened economists and ecologists to discuss how the disciplines could combine forces to attack some of our most pressing global sustainability challenges, including climate change, biodiversity loss, and the health impacts of pollution.

Besides serving as a welcome respite from frigid New Jersey (who could resist spending three days in Southern California in January?), the Colloquium inspired several interesting discussions on the frontiers of each discipline, and what kind of questions they could better address together.

As a way for myself to think through these themes, and hopefully share some of the most interesting discussions in academia on these topics, I’d like to use this post to summarize just a few of the questions that continue to rattle around in my mind since coming back. I’ll keep any specific attributions to work that is already in the public realm, and otherwise focus on high-level themes and my own questions. As always, feedback and insights are most welcome on any of these!

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The view (in January!) from the National Academy of Sciences’ backyard.

Governing across Scales: Is Local Management of “The Commons” the Most Effective Way to Address Global Environmental Challenges? 

The question of how to govern environmental resources underpinned many of the presentations at the Sackler Colloquium. One framework that has informed the work of both economists and ecologists is Elinor Ostrom’s Nobel Prize-winning “polycentric governance” model, which proposed that institutions are generally more effective when they include active roles for local stakeholders for a shared resource (e.g. the people that live around a lake, or farmers and hunters around a nature preserve). Among many other benefits of local involvement, Ostrom states that local community members are embedded in a web of different relationships that make it easier for them to establish shared values and practices for using the resource. While a national government could impose a fine for over-hunting, its impact typically pales in comparison to a hunter who is ostracized by his or her neighbours.

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Source: news.mongabay.com

The research presented at the Sackler Colloquium seemed to confirm the power of local involvement in governance. For example, the Natural Capital Project, led by environmental economists Gretchen Daily, Steve Polasky, and others, works with governments to estimate the value of benefits that we receive from healthy ecosystems, e.g. access to clean water, recreation benefits, the inherent value of preserving species, and many others. Working with the Chinese government, this program has enjoyed some initial success in paying villagers to restore and maintain this “natural capital”. Northwestern economist Seema Jayachandran presented her work on a similar project in Uganda, where researchers have demonstrated that paying local residents to preserve ecosystem services (e.g. by not cutting down trees) leads to a richer natural environment.

Meanwhile, the Stanford ecologist Paul Ehrlich recently published an intriguing and very sobering research paper on biodiversity loss. He demonstrates that only looking at the numbers of species that go globally extinct every year, while already alarming, isn’t capturing the full extent of the populations that we are losing in specific regions.

All this research indicates that “going local” is the key to protecting the environment. Yet, it is unclear whether a lot of local efforts around the world, even if successful, will be enough to protect global environmental resources. For example, local governments that are concerned about migratory species (e.g. birds, bees, and butterflies) must necessarily coordinate across national boundaries if their conservation efforts are to bear fruit (pun intended).

More generally, how can governance systems can best incorporate both local and global coordination, especially when different regions of the world value ecosystems in different ways? I recently finished reading Sheila Watt-Cloutier’s The Right to be Cold, which details the Inuit people’s close relationship with the Arctic ecosystem, and the challenges that climate change pose for their way of life. While she worked with many environmental groups to raise awareness of how climate change was affecting her community’s livelihood, she often came in conflict with some environmental groups concerned with conservation of polar bears and seals, and campaigned for a moratorium on hunting these animals. Yet, many Inuit communities rely on this hunt not just for food, but also as a way to pass on traditional wisdom and maintain social cohesion; furthermore, they believe they are in the best position to judge the health of these species. This latter position seems to be in line with Ostrom’s polycentric model and may ultimately lead to a better-informed international perspective. But, what happens when local cultures and values are fundamentally in conflict with international environmental goals?

 

Utility and Fitness: How Will our Behaviours Adapt with Increasing Environmental Stress?

At their foundations, economics and ecology each seek to explain the behaviour of individuals through slightly different lenses. Economists describe individuals’ behaviour as maximizing their “utility”; that is, the relative enjoyment that they receive from spending limited time and money on things like food, material goods, and entertainment. Ecologists describe individuals’ behaviour as maximizing their “fitness” levels, which relates to their ability to efficiently acquire food and shelter, avoid threats from predators, and reproduce in the particular environments they inhabit.

In theory, utility and fitness should be closely related – our preferences should generally align with what makes us healthier and more adapted to our environment. In practice, there are several apparent exceptions to this link, e.g. our penchant for smoking and eating unhealthy foods. (The Minnesota ecologist David Tilman gave a fascinating keynote talk on what it will take to feed a world of 9 billion people, and how healthier diets that focus on plants, fruits, and fish could do wonders for both the environment and our individual health.)

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The Animus River in Colorado after a mine waste spill. Source: Jerry McBride, Zuma Press, Newscom

It would be useful to explore how these two models of individual behaviour interact with each other. When do they predict the same thing? Under what conditions do they differ? And how might they change? For example, these two models could help give a more complete picture on how we value the environment. Several presentations at the Sackler Colloquium focused on methods for valuing ecosystem services, often in the context of evaluating the costs and benefits of environmental protection policies. While it might seem cold-hearted to put a dollar value on the environment, in practice it can help guide governments on how to allocate limited budgets to several worthwhile social goals, including conservation but also education, poverty reduction, etc.

One fascinating, if tragic, example of this work is Chicago economist John List and others’ work on valuing the environmental damage caused by the BP oil spill. Another interesting example was Iowa State economist’s Dave Keiser’s work on the costs and benefits of water quality regulations. This latter study presents an interesting dilemma: even though we intuitively “know” that improving the quality of our rivers is worthwhile, the impacts on housing values near these rivers seem much lower than we would expect. So, what are we missing?

Exploring the interaction of utility and fitness might provide some answers. The current valuation methods evaluate the utility of the environment to humans by asking questions such as how often we use the resource for recreation, how much would we be willing to pay to keep it pristine, and what other health and wellness benefits we derive from it. However, I’m not sure even these comprehensive surveys fully capture the benefit of a healthy environment for our long-term “fitness” as individuals. Like all organisms, we adapt to thrive in our specific environments by evolving certain physical traits, patterns of living, cultures and social relationships in a process that takes centuries or millennia. If our environments experience rapid and significant change – either as a result of industrial pollution, climate change, or a combination of both – we necessarily experience a long-term loss of fitness, and it will likely take several generations to adapt to a new reality. Perhaps this is an additional lens that should be included in the evaluation of environmental protection policies.

 

Equilibria, Changes, and Cooperation: How to Move towards a More Positive “Status Quo”? 

One additional link between ecology and economics is the study of equilibria: a state of a market, ecosystem, or society that is stable over the long-term. It is often what we think of as the “status quo”. Both disciplines investigate the equilibria of various settings in which two or more individuals interact with each other. In economics, this is often called the “Nash equilibrium”: the point at which neither party has an incentive to deviate from the current level of cooperation, because their utility might decrease depending on the actions of the other party. For example, two students working on a group project together might decide on a certain amount of effort to give to the project. At the Nash equilibrium, neither student would want to reduce their effort (because they’ll both get a significantly worse grade), but neither student would want to increase their effort (because any increase in effort may not be matched by the other student, and would not lead to a substantially higher grade). Similarly, in ecology an equilibrium between two species occurs when any change in a given trait (e.g. a change in a plant’s height, or the degree to which a bird calls out to its neighbours) would not increase its fitness.

Crucially, these equilibria often don’t represent the best overall outcome for a group, or even the best overall outcome for each individual. When individuals in an interaction can’t be sure what each other will do, or when interests conflict, they may not cooperate to the extent that would yield the most benefits to each other. For example, the two students working on a group project would likely reap the most benefits if each contributed a high level of effort – but if they don’t know or trust each other, they will likely contribute less than this ideal. When we look at more complex forms of cooperation, e.g. an international treaty on climate change, countries almost always fail to fully cooperate because of these conditions. This contributes to the status quo situation, in which we are not reducing emissions quickly enough to meet the worldwide targets in the 2015 Paris Agreement.

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A stable equilibrium with positive societal benefits. Source: https://bio4esobil2011.wordpress.com/

Many of the conversations at the Sackler Colloquium focused on how to move from a less-than-ideal Nash equilibrium towards one that is more socially beneficial. For example, Columbia economist Scott Barrett’s economic experiments find that if players in a game are able to signal ahead of time whether they want to cooperate, and establish a minimum number of people required for an agreement to come into force, then there will be a Nash equilibrium at the point where there are just enough cooperators to meet this threshold – none of the players will have an incentive to deviate. This might carry some implications for how to design international treaties that encourage cooperation for an environmental goal, e.g. fighting climate change.

One way in which ecology could contribute to this discussion is through its study of equilibria and mutations. In ecological systems, species undergo a fairly constant rate of mutations in their DNA. Many of these are detrimental to an individual’s fitness and disappear as those individuals die off. However, a few may be positive, or are linked to other positive traits and take hold in the larger population. If such a change impacts an individual’s fitness level relative to others in its surroundings, it can change the “status quo” equilibrium, leading to a cycle of responses within a group or ecosystem until a new equilibrium is reached.

If we want to think about how to move away from unsatisfactory Nash equilibria, perhaps we should think about how we can direct this “mutation” process in social systems – e.g. through facilitating different forms of education (something that Princeton economist Avinash Dixit and ecologist Simon Levin have written about), or new relationships between different groups of people. One other source of “mutation” in a societal system could be technological change: Avinash Dixit presented an interesting study that explores how different rates of technological change could impact our decisions on how much to spend on combatting climate change today, vs. waiting for a new technology to emerge (spoiler alert: in almost any scenario, we should still be doing a lot more today than what we are currently doing).

 

Finally, perhaps the coolest thing I learned about was this online tool called readable.io. You can enter in any document or other text you’ve written, and it almost immediately rates the “readability” of your writing according to several readability scales. For fun, I’ll enter in my posts after I’ve drafted them to see how I’m doing, and hopefully it will help improve my writing over the coming year! For this week’s post, I earned… well, a D. But, at least it’s one letter grade better than the overview section in the Sackler Colloquium program!

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