The Price of Nature
According to a recent estimate, “the global ecosystem” (roughly, all of nature) provides humanity with $125 trillion worth of goods and services each year.1 Debates about such estimates tend to focus on whether they are too large, too small, or whether money is a fundamentally inappropriate means for quantifying the psychological, moral, or spiritual value of nature. However, in this blog post I will make a different point: that using the standard economic definition of monetary value, it is logically meaningless to say that nature in its entirety has a monetary value. It is therefore a simple category error to ask whether we have “enough money” to save the global ecosystem from total destruction; if it’s physically possible, then we have enough money.
It’s worth emphasizing that I am not making the moral claim that nature should not be assigned a monetary value (though I do agree with this claim). Nor am I arguing that nature has no value: far from it, as we shall see. Nor am I arguing that no parts of nature can be meaningfully assigned monetary values — one can certainly, for example, put a price on a piece of wild-caught fish. I am merely claiming that as a matter of logic, if one accepts certain reasonable empirical propositions and the economic definition of value, then the whole of nature cannot be assigned a monetary value.
For everyday commodities being freely traded, monetary valuations make sense. When we say that a chocolate bar is worth a dollar to Alice, what we (or at least economists) mean is that Alice is indifferent between getting the dollar and getting the chocolate bar—because without the chocolate bar, but with an extra dollar, Alice could buy something else that would give her equal amounts of benefit or utility as would the chocolate bar.
Implicitly, the above story assumes a few things that are fairly reasonable in their context: that without the chocolate bar, there still exist some other things that Alice would like to buy; and that without the chocolate bar, Alice’s money actually has purchasing power to buy things.
Now let us consider the claim that the entire global ecosystem is currently worth, say, $125 trillion yearly, to humanity. For that claim to be meaningful in any literal sense, humanity must be able, at least in principle, to exchange 125 trillion U.S. dollars each year for something that would give us as much benefit or utility as the entire global ecosystem—but without having a global ecosystem.
Perhaps the simplest problem with this picture is inflation. While economists do debate about exactly how the money supply affects inflation, most would agree that helicoptering an extra $125 trillion cash into the global economy would cause an instant and catastrophic devaluation of the currency. For reference, the U.S. Fed’s largest expansions of the money supply have totaled only about $10 trillion over more than a decade.2 However one allocated an extra $125 trillion, there would simply be vastly more money chasing whatever amount of goods and services were available. Unless the total quantity of goods and services also expanded dramatically, prices would rise and each dollar would simply have less value in terms of actual goods, without contributing much to anyone’s wellbeing.
On the other side of the balance sheet, it is worth reminding ourselves that having “no nature” (to the extent that we can even comprehend such a statement) would mean widespread and catastrophic drought, since evapotranspiration from forests is responsible for 40 percent of rainfall over land on average, 3 but also flooding and massive loss of topsoil, due to the loss of wild plants, fungi, and microorganisms that form and stabilize the soil.4 It would likely mean few food crops or livestock. In this scenario, humanity would be paid $125 trillion per year to live (albeit probably briefly) in a world with precious little to purchase for $125 trillion per year — and certainly no chocolate bars, since cacao thrives only in the shade of other tropical trees, as part of a complex agroforest ecosystem.5
Faced with such dreary ecology, economists sometimes become, shall we say, optimistic, about how technology might substitute for natural goods and services (“We don’t need topsoil because we have hydroponics!”). However, it is worth bearing in mind that we are not asking what the global ecosystem would hypothetically be worth if humanity had achieved the breakthroughs needed to implement economically and politically feasible alternatives to the entire global ecosystem (which we have not). That would be an irrelevant question, one that is even more fanciful than asking what a chocolate bar would hypothetically be worth to Alice, if Alice had revolutionized her socioeconomic system, overcome her political dysfunction, and invented a new way to make several dozen billion kilograms of real chocolate per year without cacao trees.6
Realistically, an additional $18,000 per person per year, or however much currency, could not compensate humanity for having lost our global ecosystem. In economic jargon, our money would have insufficient purchasing power. Most of the goods that we sought simply would not exist, the amount of money pursuing the few remaining goods would be vastly increased, devaluing the currency to virtually nil, and it is unlikely that any marketplace would exist in which money could be exchanged for anything at all. Having lost the entire global ecosystem, there would be no way for us to exchange our money for something which gave us as much benefit as the clean air and food and water and shelter that we had lost.
It is therefore simply meaningless to say that the entire global ecosystem is worth some amount of money — not because the global ecosystem is not valuable, but because without the global ecosystem, money would have no real value. This stark conclusion has an encouraging corollary: if it is physically possible to save the global ecosystem from total destruction, then we necessarily have enough money to do so.
Footnotes
https://www.statista.com/statistics/1121416/quantitative-easing-fed-balance-sheet-coronavirus/↩︎
There are literally dozens of mechanisms by which trees cause rain and rain causes trees Ellis et al. 2016↩︎
Global average topsoil losses are already 6 tons per acre per year, largely due to unsustainable farming practices and climate change which are destroying natural micro-ecosystems. This has already caused declining crop yields in Ukraine and other breadbasket regions. Handelsman. A World Without Soil. Yale University Press, 2022. Quoted in Kolbert, 2022. “The Waste Land.” New York Review of Books. Vol LXIX No. 3 p. 6.↩︎
https://nationalzoo.si.edu/scbi/migratorybirds/research/cacao/greenberg.cfm↩︎