Environ Resource Econ (2007) 37:1–6 DOI 10.1007/s10640-007-9115-6

Introduction to the special issue in honour of David W. Pearce: environmental economics and policy Ian J. Bateman · Edward B. Barbier · Scott Barrett

Published online: 16 May 2007 © Springer Science+Business Media B.V. 2007

Claiming and disputing the origin of an idea or set of concepts is a favourite academic pastime and many entertaining hours can be whiled away in heated argument about who said what first. However, beyond the realm of academe it is the practical implementation of ideas which is most valued; actions are always more important than words if the latter go unheard. Given this yardstick it is easy to see that the contribution of David Pearce to the field of environmental economics is unique. Indeed, at least within Europe, his impact has been fundamental enough to convert the term ‘environmental economist’ from oxymoron, or a source of puzzled incomprehension, to a job description for a sought-after lynchpin of modern policy formation and decision-making. In short the contribution of David Pearce has been to define a profession and increasingly move it toward a place at the heart of government. The essays specially commissioned for this collection pay tribute to this legacy. David Pearce exhibited many laudable attributes, one of which was a prolific ability to write some of the most lucid and accessible texts within the field of environmental and resource economics. The resulting voluminous library of contributions is difficult to summarise in this brief introduction. However, a few central themes can be highlighted:

I. J. Bateman (B) Professor of Environmental Economics, Centre for Social and Economic Research on the Global Environment (CSERGE), School of Environmental Sciences, University of East Anglia, Norwich NR4 7TJ, UK e-mail: [email protected] E. B. Barbier John S. Bugas Professor of Economics, Department of Economics and Finance, University of Wyoming, PO Box 3985, Laramie, WY 82071-3985, USA e-mail: [email protected] S. Barrett Professor of Environmental Economics & International Political Economy and Director of the International Policy Program, Paul H. Nitze School of Advanced International Studies, Johns Hopkins University, Washington, DC 20036-2213, USA e-mail: [email protected]

123

2

I. J. Bateman et al.

•

Economic theory and its practice provides an important perspective for both understanding and addressing most environmental challenges, of which a transition to “sustainable development” is the most fundamental; Economic analyses of natural capital alongside human and built capital provide a key measure of sustainability; Environmental harm is generally not caused by greed, indifference or malevolence, but by the attributes and services of the environment being under (or indeed zero) priced; The true opportunity cost of resources can be incorporated within decision making through the application of market based instruments (taxes, tradable permits, etc.) generating incentives for efficient yet sustainable behaviour; Many environmental externalities (both benefits and costs) can be valued and incorporated within economic analyses. Valuing and addressing complex environmental externalities—from deforestation to climate change—will often require inter-disciplinary collaboration among economists, ecologists and other scientists to model and analyse the links from changes in natural systems through economic impacts to the costs and benefits experienced by humankind.

• • • • •

David Pearce applied these clear guiding principles to a breathtaking array of real-world environmental and resource issues ranging from headline grabbing topics such as climate change and biodiversity, to the more mundane topics of house building and landfill. In every case his clarity of thought and communication made his analyses immediately incisive and accessible. It was this role as the great communicator, which brought the lessons of environmental economics into the focus of attention at so many levels of national and international decision-making. David worked for a bewildering array of organisations. Within the UK these included the Environment Agency, the Department for International Development, the Department for Transport, HM Treasury and most notably the Department for the Environment and its subsequent reincarnation as the Department for Environment, Food and Rural Affairs. Internationally his long-standing association with the Organisation for Economic Cooperation and Development complemented work with various European Union and United Nations bodies including the Global Environment Facility, UN Economic Commission for Europe as well as the Intergovernmental Panel on Climate Change and World Bank. This unique track record of work at the very centre of real-world decision analysis produced a series of milestone contributions, which have profoundly influenced the global policy debate regarding the environment. Arguably David’s most influential contribution came during the late 1980’s when he was appointed Personal Adviser to Chris Patten, the UK Secretary of State for the Environment. Although his advice received a cool reception in other areas of government (where, for example the Treasury railed against the possible inflation consequences of a carbon tax), David and his two colleagues at University College London (UCL), Anil Markandya and Ed Barbier, produced the best-selling environmental manifesto “Blueprint for a Green Economy” (Pearce et al. 1989). Breaking out of the confines of academia to even reach the best-seller list, this publication set out the principles of environmental economics in a highly accessible manner. In so doing it moved economics to centre stage in the policy and public debate on the environment, being hailed by tabloid and broadsheet alike as a “political event of the first importance” (The Guardian). This concise and persuasive statement of the key contributions that economics could make to the reform of environmental policy set out David’s main themes of sustainability, valuing environmental effects, and making use of market incentives. The long-term impact of this work can be seen in the focal role of economics within a long list of subsequent national and international environmental policies. Subsequent policies such

123

Introduction to the special issue in honour of David W. Pearce

3

as Britain’s Landfill Tax, the EU’s Emissions Trading Scheme, and the various mechanisms for international pollution offsets in the Kyoto Protocol, as well as many other international agreements, all adopt the market-based principles advocated by Blueprint. While David Pearce’s policy impact is one of the most fundamental within modern environmental economics, he also made an indelible contribution within academia. He was Director of the Public Sector Economics Research Centre at Leicester University (1974–1977), head of department at the University of Aberdeen (1981–1983) and then UCL (1984–1988) before becoming Director of the International Institute for Environment and Development (1988– 1990). In 1990, he set up an MSc programme in Environmental and Resource Economics at UCL; the first of its kind, and later widely imitated. The graduates from this programme are now in positions of responsibility in environmental ministries and other organisations in many countries throughout the world. In 1991, together with academic partners at the University of East Anglia (UEA), he established the ESRC-funded Centre for Social and Economic Research on the Global Environment (CSERGE) jointly based at UEA and UCL. The Centre drew together a lively group of young researchers, building a substantial international reputation for environmental economics research, which continues today. Throughout this long and distinguished career David also directly helped so very many colleagues start out and develop their own careers. The Guest Editors are typical examples of this positive influence and like so many others, owe David a great debt, which will never be forgotten. David’s achievements brought him wide recognition. He was included in the United Nations “Global 500” Roll of Honour in 1989, was awarded the OBE in 2000, and in July 2005 was the first recipient of the Lifetime Achievement Award of the European Association of Environmental and Resource Economists (EAERE). Sadly, just 2 months later and after a very short illness, he died. He is greatly missed and will always be remembered with tremendous affection by his large group of friends and colleagues from around the world.

1 Contents of the special issue In planning this special issue the Guest Editors have attempted to satisfy three constraints: that the invited papers are drawn from areas which David personally found of interest; that authors should be include some of the leading lights of the field; and that where possible they should be drawn from those who worked directly with David. In the event these constraints were easy to satisfy. David found almost all aspects of environmental and resource economics of interest and personally produced papers spanning a bewildering array of subjects. In particular the central Blueprint themes of sustainable development, making use of market incentives and valuing environmental effects, are reflected in the invited papers and resultant structure of the special issue. Similarly, David’s exceptional personal and academic qualities readily drew the cream of the field to work with him and resulted in lifelong friendships. All this meant that invitations to submit papers were readily accepted. However, as contributing authors will know to their cost, all papers were rigorously reviewed and revised and not all invitations resulted in accepted papers. The Guest Editors are delighted with the resulting contents of this special issue of the journal, which we hope readers will find both interesting and a suitable tribute to mark David’s lifetime of achievement. The special issue is structured into five sections, the first of which introduces the special issue through this paper and reviews David’s life and work. Frank Convery,1 former President 1 Full references to each paper are given at the end of this Introduction. All papers in this collection were

published in 2007.

123

4

I. J. Bateman et al.

of EAERE, provides a detailed, insightful and at times funny review of David’s career and contribution, which also considers the wider question of the extent to which environmental economists can influence policy. This is complemented by Jean-Philippe Barde’s reflections upon David’s longest-term institutional relationship, his work with the OECD. With the basic ground covered, the following section addresses what in many ways was David’s central theme (and a term which he made his own): Sustainable Development. This opens by extending one of his most famous publications, that with co-author Giles Atkinson, in which the first cross-country estimates of savings rates adjusted to reflect depletion and degradation of the environment were presented (Pearce and Atkinson 1993). In the present paper, Giles teams up with Kirk Hamilton to consider recent developments in the measurement of genuine savings and hence sustainable development. A longer perspective of this area of research is presented by Karl Göran Mäler who considers the history of wealth as a welfare measure and celebrates David’s original and farsighted contribution in recognising that sustainable development requires saving productive resources for future generations. Bengt Kriström and Per-Olov Johansson further extend the theme of savings and wealth by disentangling this from substitution effects within a general equilibrium model and showing the relationship of such a model with the Environmental Kuznet’s Curve (EKC). A novel application to time series data supports David’s sometimes sceptical view of the usefulness of the EKC for policy purposes. The section concludes with David Simpson’s review of David’s defining contributions to the application of economics to the issue of biodiversity conservation. This both reviews the “total economic value” taxonomy which David introduced and popularised and which underpins much of the work on valuation considered in a subsequent section of this collection, and also provides an ideal introduction to the paper by David Pearce on biodiversity which concludes this collection. The next two sections provide differing yet complementary approaches for the practical implementation of a sustainable development strategy, both of which are key features of the Blueprint legacy. The section on Economic Instruments opens with a consideration by Lori Bennear and Robert Stavins of the characteristics of situations in which the application of multiple as opposed to single instruments may be appropriate. In the following paper two close colleague of David from his UCL days, Stephen Smith and Joe Swierzbinski, consider the role of what is arguably becoming the policy makers instrument of choice, permits trading, to another issue of particular interest to David; emissions of greenhouse gases and consequent climate change. This focus is retained in the last paper of the section where Alistair and David Ulph contrast policies emphasising the development of new technologies (what they term the “US position”) with those promoting emissions reductions (the “EU position”). The paper considers the optimal balance of such strategies showing that this depends upon the strategic context within which such policies are set. As many have observed, David was a great fan of numbers, believing that their impact within the policy arena was crucial to the acceptance of environmental issues as justifiable policy goals by key decision makers such as finance ministers. Nowhere was this fascination with quantification more evident than in David’s championing of techniques for the valuation of preferences for environmental goods and services.2 The section Valuation and Cost Benefit Analysis opens with a paper from a longstanding friend of David. Richard Carson was invited to visit CSERGE in its early days and these visits continue to the present day. Here he teams up with Ted Groves to fully revise a paper which even in its draft manuscript 2 Notice that we shy away from terms such as “environmental valuation” or “valuation of the environment”. Although a number of David’s books use titles similar to this, in later years David expressed some dissatisfaction with such terms feeling instead that the valuation of preferences for environmental goods was a more accurate description of this area of research. We agree wholeheartedly with this view.

123

Introduction to the special issue in honour of David W. Pearce

5

form has already received great attention within the valuation field by highlighting the vital importance of strategic incentives within stated preference methods such as contingent valuation. This is complemented by a second paper by Brett Day, Ian Bateman and Iain Lake considering a contrasting application of the revealed preference, hedonic pricing approach to the valuation of noise reductions. This work expands upon Brett’s PhD research which was the last thesis supervised to completion by David. A third approach to valuation is provided by Thomas Eichner and Ruediger Pethig. Using an intertemporal general equilibrium analysis the paper shows that excessive land use and biomass harvest is an expected result thereby providing a strong argument that such problems should be addresses, for example via corrective tax-subsidy schemes. This paper provides an excellent example of the type of inter-disciplinary work that David advocated; where economists learn from ecologists to produce a co-integrated model of an ecological–economic system. The section is concluded by one of David’s most long standing writing partners, Kerry Turner, who extends from the topic of valuation to consider the wider role of cost-benefit analysis within environmental policy and the likely limits to such an approach. The collection concludes with a swansong, bringing together all of the original Blueprint authors. It is opened by Ed Barbier who focuses upon the development aspect of sustainability, arguing that only by integrating all sectors of their economy and improving resource management will developing countries address ingrained problems of low growth performance. Anil Markandya and co-author Suzette Pedroso-Galinato address one of the central themes of the weak versus strong sustainability arguments of Blueprint by asking just how substitutable natural capital is. The paper presents an empirical investigation the results of which provide some support for the substitutability argument underpinning weak sustainability. Finally and appropriately, the last word is reserved for David Pearce himself providing a typically rumbustuous insight regarding one of his favourite topics; biodiversity.3 Asking the question “Do we really care about biodiversity?” David argues that while there is a plentiful supply of words regarding concern for the destruction of habitats and extinction of species, this contrasts sharply with the evident lack of real action and financial commitment. Clear yet controversial to the last, this provides a wonderful conclusion to the special issue. Acknowledgements The Guest Editors wish to thank all of the contributing authors for their marvellous efforts in producing such high quality papers within a tight timetable. With regard to the present paper we also wish to thank Frank Convery, Brett Day, Jonathan Fisher, Ece Özdemiro˘glu, Stephen Smith and Kerry Turner for assistance and conversations.

References Atkinson G, Hamilton K (2007) Progress along the path: evolving issues in the measurement of genuine saving. Environ Resource Econ 37(1):43–61 (this issue) Barbier E (2007) Frontiers and sustainable economic development. Environ Resource Econ 37(1):271–295 (this issue) Barde J-P (2007) Harnessing the political economy of environmental policies: David Pearce’s contribution to OECD. Environ Resource Econ 37(1):33–42 (this issue) Bennear LS, Stavins RN (2007). Second-best theory and the use of multiple policy instruments. Environ Resource Econ 37(1):111–129 (this issue) Carson RT, Groves T (2007) Incentive and informational properties of preference questions. Environ Resource Econ 37(1):181–210 (this issue) 3 We fondly recall David coming to UEA to give a talk to a mainly non-economist, environmentalist audience

which he provocatively entitled “Why Environmental Economics is the only way to save World Biodiversity”. He played to a packed house!

123

6

I. J. Bateman et al.

Convery F (2007) Making a difference–how environmental economists can influence the policy process–a case study of David W Pearce. Environ Resource Econ 37(1):7–32 (this issue) Day B, Bateman IJ, Lake I (2007) Beyond implicit prices: transferable welfare values for noise avoidance from a hedonic property price model. Environ Resource Econ 37(1):211–232 (this issue) Eichner T, Pethig R (2007) Harvesting in an integrated general equilibrium model. Environ Resource Econ 37(1):233–252 (this issue) Kriström B, Johansson P-O (2007) On a clear day, you might see the environmental Kuznet’s curve. Environ Resource Econ 37(1):77–90 (this issue) Mäler K-G (2007) The history of wealth as a welfare measure. Environ Resource Econ 37(1):63–75 (this issue) Markandya A, Pedroso S (2007) How substitutable is natural capital? Environ Resource Econ 37(1):297–311 (this issue) Pearce DW (2007) Do we really care about biodiversity? Environ Resource Econ 37(1):313–333 (this issue) Pearce DW, Atkinson G (1993) Capital theory and the measurement of sustainable development: an indicator of weak sustainability. Ecol Econ 8:103–108 Pearce DW, Markandya A, Barbier E (1989) Blueprint for a green economy. Earthscan, London37(1):91–109 Simpson RD (2007) David Pearce and the economic valuation of biodiversity. Environ Resour Econ 37(1):91– 109 (this issue) Smith S, Swierzbinski J (2007) Assessing the performance of the UK emissions trading scheme. Environ Resour Econ 37(1):131–158 (this issue) Turner K (2007) Limits to CBA and environmental policy: retrospect & future prospects. Environ Resource Econ 37(1):253–269 Ulph A, Ulph D (2007) Climate change – environmental policies and technology policies in a strategic context. Environ Resource Econ 37(1):159–180 (this issue)

123