See Two extravagant ideas on global warming and cooling Holland, 2006-12-14
Dutch: Brief aan het bestuur Stichting Natuur en Milieu, 2004-11-28

Economics and the Environment


I am not an environmental economist, only an economist who has some comments on the work of other economists who discuss environmental issues.

Also, my main advice is that democratic nations adopt a constitutional amendment for an Economic Supreme Court - see DRGTPE or, if you are in a hurry, see the earlier working paper in html that is improved upon in DRGTPE.

Having an Economic Supreme Court makes that science gets a level playing field with political management (and economics is the science of management of the state). Having an Economic Supreme Court makes that we have a better decision making structure, to settle complex issues.

DRGTPE takes unemployment as the key example of how the absence of an Economic Supreme Court causes a socially worse situation. But the environment seems to be another example. 

For the environment, there is the original analysis by Roefie Hueting dating from 1974 that national income is measured in a wrong manner. When environmental functions become scarce, they get a price, as, for example, there are abatement costs. In the standard measure of national income, these costs are regarded as income. In the proper measure of national income, we however should also substract the loss of welfare due to the fact that we have lost the free use of those environmental functions. For example, if a car pollutes the air, and we have to install a catalyst in order to return to the previous healthy air, then the sale of the catalyst generates a flow of income for who produces that catalyst, and the change from polluted air to clean air is an improvement, but it would be wrong to measure only this. For, the overall situation is that the quality of the air has not changed from the original situation, and the additional work to make the catalyst should be substracted from the benefits of using the car.

See the papers below for more discussion of Hueting's analysis. In general, policy making has neglected his work.

In Summer 2001, Bjorn Lomborg published his book "The skeptical environmentalist", as an update of an earlier Danish version. Unfortunately, he does not refer to Hueting's work. Lomborg relies on the argument "national income has to grow before one is rich enough to care for the environment" - but this is precisely the fallacy that Hueting warns for.

Lomborg is a statistician, just like Hueting, and his book has many good qualities. So we can hope that the 'meeting of minds' will produce a beneficial result. My reason to create this internet page is to encourage Lomborg to consider Hueting's analysis indeed. See this longer discussion for my "reaction to Lomborg".
 

Thomas Cool, September 25, 2001
http://thomascool.eu
 
 

Literature


Cool, Th., “Roefie Hueting and Sustainable National Income”, a translation from “Roefie Hueting en het DNI”, included in the series ‘Key Figures in Economics’, Economisch-Statistische Berichten 24-8-2001, p652-653, NEI, Rotterdam.

Cool, Th., “The seminal contribution of Roefie Hueting to economic science: Theory and measurement of Sustainable National Income”, draft November 2000

Cool, Th., "The choice on sustainability: information or the meta-SWF approach 
 to a shift of preferences", Report TC-2000-06-01/21

Cool, Th., internet page on Uncertainty and Risk

Ierland, E. van; J. van der Straaten en H. Vollebergh (eds), “Economic growth and valuation of the environment: a debate”, E. Elgar 2001, to appear by the end of September 2001

Lomborg, B., "The skeptical environmentalist", CUP 2001

This is a page that was critical on the original Danish version of Lomborg's book.