A Critique of Conventional Environmental Accounting

It has been argued, "The American economist William Nordhaus was the first to attempt to apply cost-benefit analysis to the greenhouse effect .." Nordhaus believes, "My best guess, surprise free scenarios show that in 100 years, in high income countries, the impact of climate change will be negligible, in the aggregate. The winners will be happy; the losers will be miserable." But, according to stephen schneider, "To his credit, Nordhaus reacted to his critics by extending his study to include a broad spectrum of opinions on the value of damages from hypothesized global warming. .. he recognized that he had included nothing for so-called non-market sectors, such as the value of lost species, the value of lost wetlands from sea level rise, the costs from conflicts that might be induced by the creation of environmental refugees or any other nonmarket amenities."

"Frankhauser and Pearce compared Nordhaus’s estimate with those of two subsequent studies and reported a reassuring convergence on Nordhaus’s view that a doubling of CO2 is not very important. They said, "Despite differences in individual categories of damage, the three studies roughly agree on the overall result, with a doubling of CO2 damage of the order of 1-2% of GNP. Even when picking the most pessimistic figures for each damage category the total only modestly exceeds 2% of GNP." Overzealous attempts to slow the greenhouse effect would, they argue, retard the growth of gross world product by diverting resources from projects with higher rates of return."

Surprisingly, both the conservatives formulating new cost-benefit analyzes of global burning and the radicals opposed to this analysis, believe there will be a huge number of deaths resulting from global burning. However, the former do not believe this will incur much of a financial burden, "The economists who have embraced this cost-benefit approach acknowledge that, as a result of growing greenhouse gas emissions, there will be an increase, by some estimates, of tens of millions of deaths by the middle of the next century .. But, they argue, these will cost less overall than curtailing our fossil fuel habits."

Given its personnel it was none too surprisingly the wg3 concluded that global burning would not cause a substantial level of economic damage and that there was no financial case for implementing major policies to combat the threat .. "it seems impossible to escape the conclusion that, even under pessimistic assumptions, the annual cost to the world as a whole of global warming associated with a doubling of CO2 concentrations is likely to be almost negligible by comparison with the value of world output over the period in question. Such estimates as have been made of the overall effect on the world economy of a doubling of the CO2 concentration suggest that world output or income would be reduced by about 1-2%."

The global commons institute (gci) pointed out some of the wg3’s other assumptions, "The difficulties of placing a monetary value on the damage which is likely to be caused by global warming are legion. In spite of this the wg3 team for the "social costs" of climate change attempted to put a cost figure on the damage global warming might do .. The team’s summary assessment of the global damages consequent on climate change is that monetary losses will equal 1.5-2% of gross world product. This is an estimate for a single, unspecified, year - the year when CO2 equivalent concentrations will have doubled. They assume that this doubling will happen around 2050 or 2060. The team also make the following assumptions:-

1. the global economy will have progressed from the present to the year 2050 on a "business-as-usual" path;

2. global mean temperature will have risen by the ‘mean’ figure of 2.5C by that year;

3. it is useful to give policy makers a "snapshot" of that single year’s damages i.e. one divorced from a cumulative assessment of damages for the period between the present and 2050."

The ncba was also used to assess the economic costs of the human fatalities caused by climate change. In order to do this it worked out the economic value of the average person for each country around the world. This led to the obvious conclusion that the economic costs of fatalities in rich countries was far greater than the economic costs caused by fatalities in poor countries. This statistically neutral conclusion was then rapidly translated into the more controversial view that third world people were worth less than people in the over-industrialized nations, "Global warming and the costs and benefits of climate change are now assessed by them in these monetary terms. Part of this exercise, they assert, entails giving cash values to human lives. They accept that there are going to be hundreds of thousands of deaths worldwide as a result of global climate changes. The logical conclusion of global-CBA is reached in a recent CSERGE (the social and economic research of the global environment) publication. In the document, (it is concluded) that in global climate negotiations countries with different gross national products have different values attached to their citizens. Therefore the ‘statistical life’ of a citizen of the European Union or the USA is worth $1.5 million, whereas in China it is only $150,000." In turn, this view implied that the over-industrialized nations didn’t need to introduce policies to moderate, let alone reverse, global burning since most of the damage would occur in third world countries where, because human lives were cheap, the economic costs would not be substantial. In other words, the over-industrialized nations could continue to destabilize the Earth’s climate because the economic cost of the deaths of millions of people in third world countries would be less than the cost of the measures the over-industrialized nations would have to implement to stabilize the climate.

Daphne wysham suggested this conclusion is a type of rights by income .. "a growing consensus within the world's richest countries to use cost-benefit analysis to minimize enforcement measures agreed to in the Climate Convention. All put forward the same basic argument: that income determines whether human, plant and animal lives have "value" - and "value" determines what action should be taken. This "rights by income" approach means that those countries with higher incomes will continue to determine what action, if any, will be taken to halt the effects of climate change, while the poorest countries will suffer disproportionate consequences."

2: A Critique of the Radical Cost-Benefit Analysis of the Car.

There are three types of cost-benefit analysis - the old, the new and the radical. This work has criticized the old, and the new, cost-benefit analyzes. In order to give an example of the inadequacies of all types of cost-benefit analyzes this section presents a revised and updated version of an article from Terra Firm no.7 ‘Geocentrism and the Car’ which criticizes both the department of transport’s cost-benefit analysis of the car and that by radical cost-benefit analysts.

It is a common belief amongst motorists that they pay more money in taxes than the government spends on them - primarily through providing more motorways. This view is reinforced by conventional cost-benefit analyzes. Over the years, however, a number of radical commentators have refuted their analyzes of the car. They claim the car imposes a huge number of externalities on society so that, in effect, society, including many non-motorists, are being forced to subsidize motorists. But, it is possible to extend these anti-car arguments to show that something even more fundamental is involved than who pays for cars. It is argued the massive externalities of the car boost economic growth - thereby, inadvertently legitimizing the conclusions reached by conventional analysts. Ultimately, these imposed social costs benefit both motorists and non-motorists. Most externalities are destructive but some are not - thereby proving once more that the profitability of capitalism derives from its destructiveness. The losers are car accident victims (some of whom are motorists, some are not) and, of course, the Earth and its Biodiversity. The following arguments focus primarily on britain but they are applicable in all countries.

A number of critics have argued that in britain the dot’s cost-benefit analysis of the car (which concludes there is a need for a continual expansion in the number of roads) is grossly inadequate and that there is a need to take into consideration a huge range of hidden subsidies given to motorists. They try to incorporate an increasingly wide range of factors in their critique of the conventional analysis of the car. It seems as though the more factors they include, the greater the disparity between the government’s income from, and its expenditure on, motorists. They conclude that government expenditure on cars is far in excess of the revenue raised from motorists.

Police costs include the amount of time spent on dealing with the theft of cars, theft from cars, thefts using cars; traffic offences, traffic accidents, patrolling motorways, etc; taking the cases to court, etc, "The cost of policing and use of traffic wardens is about £330 million a year. This does not include the very considerable use of police and court time in dealing with the theft of vehicles and other crime relating to cars." As an example of the amount of time police spend on dealing with car thefts, "A total of 585,503 vehicles were taken without consent last year, a slight rise on the 581,901 of 1991. Police forces spent a total of nearly 6,000 days organizing anti-car theft events."

"The cost of car and associated vehicle use are far greater than the taxation paid by motorists. Cyclists and pedestrians in effect subsidize motorists, not the other way around." He argues the costs of motoring are between £35.1-£87.6 billion per year, "It should be repeated that this does not include costs such as the loss of agricultural land, greenhouse gas emissions, defence costs for protecting oil supplies, and various adverse social effects. One of the biggest costs could be loss of working hours and health care for people suffering bad health (from cancers and other problems caused by pollution) which have not been costed here."

The subsidies given to motorists are nothing unusual. Around the world, governments of all persuasions are routinely handing out vast subsidies to Earth rapists. Pharmers are the biggest Earth rapists of all so it is not surprising they get the most subsidies, "Consider, too, the massive underpinning of farmers' incomes via the EU's Common Agricultural Policy. Thanks to taxpayer subsidies, there have been milk lakes and butter mountains. And the taxpayer pays again to store the excess food and even to get rid of it. In Britain, the taxpayer forks out at least pounds 350 per year in agricultural subsidies, and stumps up a further pounds 200 in increased food prices (plus environmental costs, such as pollution of water supplies through pesticide and fertiliser wash-off, and degraded landscapes). Subsidies in US agriculture are just as whimsical: one government agency subsidises irrigation for crops that another agency pays farmers not to grow at all." The global scale of what norman myers calls perverse subsidies (ie, subsidies to industry’s that damage the environment) is gigantic, "Such subsidies worldwide now total $1.5 trillion per year, so they are highly distortive of our economies, while their capacity for environmental mayhem is spectacular." Myers argues, "Subsidies in the five sectors (agriculture, fossil fuels/ nuclear energy, road transportation, water, and fisheries) total around $1,900 billion per year, and perverse subsidies $1,450 billion. Perverse subsidies foster unsustainable development. The total of almost $1.5 trillion is two-and-a-half times greater than the Rio Earth Summit's budget for sustainable developments - a sum that governments dismissed as unthinkably huge. The total is also larger than all but the top five national economies, and larger than the top 12 corporations' annual sales put together. It is twice as much as global military spending per year. Were just half the world's perverse subsidies to be phased out, half the funds released would enable many governments to abolish their budget deficits, engage in a fundamental re-ordering of fiscal priorities and to safeguard their environments more than through any other single measure. " There may be some typos in the original quote but the conclusion is clear.

The dot’s cost-benefit analysis classifies car accidents as a boost to economic growth i.e. a benefit. Critics regard this categorization as absurd and argue the financial consequences of road accidents should be subtracted from cost-benefit analyzes in order to give a more accurate reflection of costs of motoring. The inadequacies of radical cost benefit analyzes of the car can be seen from the fact that even if the financial consequences of road accidents are registered as a cost and subtracted from gdp, in the real world they would still boost economic growth. The unpleasant truth is that car accidents stimulate the circulation of money and thereby boost to economic growth - just as the traditional and new cost-benefit analyzes assume.

Car accidents boost economic growth in many ways:-

* the call out of emergency services;

* the care provided by medical staff for car accident victims;

* the repairs made to damaged vehicles, damaged motorways;

* the disposal of wrecked cars;

* motorists’ acquisition of new cars to replace those damaged;

* in the case of car fatalities the necessity for coroners, morgue attendants, funerals;

* the payment of insurance claims .."road crashes generate forms of economic activity (such as in the important insurance sector) and can therefore appear on both sides of the cost-benefit balance." Insurance companies ... "derive a great deal of their revenue .. from road crashes.";

* the police and court officials who administer and adjudicate on accidents, etc.

When professional medical treatment is given to car accident victims this is counted as a boost to gdp because gdp measures the provision of health services not the cause of people’s ill-health, etc. This implies that the more people injured in car accidents, the greater the boost to economic growth. The carnage on british roads, the killing and injuring of hundreds of thousands of people each year, is a significant boost to british economic growth. All other factors being equal, a country without car accidents would be poorer than one with car accidents, and the more car accidents that occur the richer the country becomes. An accident-free country would mean fewer people employed in servicing car accidents i.e. doctors, fire brigade, police personnel, mechanics, insurance people, etc. This would mean fewer people would be able to buy cars in which they, in turn, might help to boost economic growth by sacrificing themselves in car accidents. Is it possible that the road rage so often seen on the roads is not caused by motorists who are self centred, hyped-up, and macho, but by people with a powerful altruistic streak who desire to sacrifice themselves for the greater economic benefit of society? It is only countries with high levels of car accidents that are rich enough to employ people to deal with car accidents because car accidents provide jobs for people who then buy cars, causing more car accidents, further stimulating economic growth. In britain, car accidents should not be seen as random, chaotic events but as a commercial institution producing huge profits - one of the country’s biggest industries. No matter how repulsive it might seem, it is a fact that countries get richer through car accidents. Car accidents are the modern, industrialized form of ritual slaughter - people who whip themselves into a frenzy of road rage and appease the gods by spilling their own, or other people’s, blood in a car accident. The only way in which societies would not profit from road accidents is if damaged cars were immediately shunted off the road so that traffic could resume as normal - the dead or dying remaining inside the crumpled cars thus serving as impromptu coffins. If the injured are helped by volunteers this would not boost economic growth but if any professionals becomes involved this would do so.

In conclusion, matter whether the financial transactions precipitated by car accidents are treated as a benefit in an old or new cost benefit analysis or a cost in a radical cost-benefit analysis they give a real boost to economic growth. It seems, therefore, that conventional/new cost-benefit analyzes are more accurate than radical cost-benefit analyzes. It could also be argued that it would be better to leave the compilation of gdp as it is, rather than count car accidents as a reduction in gdp, because it gives a more accurate indication of a country’s potential for providing medical facilities for those involved in car accidents.

Engwicht has gone further than other car critics by insisting that radical cost-benefit analysis should count urban sprawl as one of the car’s costs, "Spreading cities not only end up with worse traffic problems; they are also terribly inefficient, costing increasing amounts to service with water, electricity, sewerage, drainage and roads. Residents are forced to pay an increasing share of their income to maintain the city." He argues that urban sprawl forces people to pay higher gas/electricity/water/sewage bills so these financial transactions should count as a cost in radical cost-benefit analyzes.

The fact is, however, that urban sprawl is a huge boost to the economy and gdp. Firstly, it gives a huge boost to the construction industry thereby boosting economic growth. Secondly, once again, many people faced with higher bills caused by motorists will decide to work harder to maintain their chosen lifestyle. This is not so much a form of wage slavery as social slavery - being forced by other members of society to pay for the consequences of their choices. Once again, it seems that conventional cost-benefit analysis is more accurate than its radical counterpart.

Increasing numbers of children are being ferried to school in cars instead of walking or using public transport/school bus. Once the number of parents ferrying their children to school reaches a certain point, other parents feel forced to do the same, "School traffic presents one of those vicious cycles which feeds upon itself. Parents drive their children to school because it is dangerous for them to walk. This increases traffic, forcing other parents to drive because it is now too dangerous for their children to walk." As a consequence, "In 1971, more than 80% of seven year olds were able to walk to school. By 1990, the proportion was down to 9%. "In less than 20 years", says Dr Mayer Hillman of the Policy Studies institute, "we have, as it were, transformed our children from the free range birds they need to be into a species of battery chickens."" It has been estimated that the cost of ferrying children to school is now in the region of £26 billion per year.

The dot regards ferrying children to school as a benefit in its cost benefit analysis whilst those promoting radical cost-benefit analyzes classify it as a cost. But, even though it makes sense to regard ferrying children as a waste of human time and resources which ought to be classified as a cost, it also boosts economic growth. It doesn’t matter how the activity is classified, as a cost or a benefit, it still causes a real, actual, boost to economic growth. Once again, conventional cost-benefit analysis seems to be a more accurate reflection of economic growth than its radical counterpart.

There is a common agreement amongst the dot, the business community, and motorists, that congestion should be treated as a cost. Business leaders claim they lose billions of pounds’ worth of business every year because of traffic congestion. The dot regards congestion as a major cost. In the United States, "Congestion annually causes over eight billion hours of worker delay on Interstate and other principal highways, costing over $34 billion in the nation's 39 largest metropolitan areas alone. Billions are also added to the cost of interstate commerce."; "According to a study conducted by the Federal highway Administration urban freeway congestion results in 6.9 billion hours of delay each year and 1.3 billion gallons of wasted fuel."; In the US it has been estimated that .. "traffic congestion causes annual delays of some two billion hours and two billion US gallons of wasted fuel." In the u.k, "Congestion was costing firms £15 billion a year, said Sir John Banham, chairperson of the Confederation of British Industry."; The Confederation of British Industry (CBI) .. "estimates that present traffic congestion problems could cost the UK economy as much as £24 billion each year .." Even those promoting a radical cost-benefit analysis regard congestion as a cost. The only difference between them is that conventional analysts do not deduct congestion costs from gdp whereas radical analysts would do so.

The fact is, however, that whilst traffic jams cause employers/employees to lose money (an actual reduction in gdp) they also boost economic growth by consuming petrol - although perhaps not as much petrol as would be used if there were no traffic jams. The ‘waste’ of petrol could be conceived as having a negative impact in a cost-benefit analysis but in the real world it boosts profits in the oil industry causing a real boost to economic growth. Just as keynes argued it was beneficial to the economic well-being of a society to employ people to dig holes and then to fill them up again, so commuters might just as well turn around once they’ve got to work and go home because they’ve already carried out a substantial economic activity Traffic delays also cause non-commuting motorists to use more petrol than they would otherwise have done. This could be conceived as a waste and thus deducted from gdp but it is also an actual boost to economic growth. In conclusion, motorized eco-nazis have transformed congestion not merely into a triumphant display of humano-imperialism but a vast economic activity.

Whether commentators believe that government expenditure on road construction produces economic benefits often depends on their cherished economic theory. In the 1980s whilst thatcherite monetarists contended that government expenditure could not boost economic growth, socialists believed it could. In fact the differences between the two were ideological - for what thatcherites actually believed was that government expenditure on projects-they-did-not-approve-of would not increase economic growth whereas expenditure on projects they approved of would, magically, create economic growth. Both reagan and thatcher denounced public spending and yet both presided over huge increases in government expenditure primarily on the military and police/prisons. Few politicians are against public expenditure; they are only against expenditure on activities beyond their political prejudices.

Despite environmentalists’ criticisms, the economic case for building roads is overwhelming. The more roads which are built, the bigger the boost to economic growth - within inflationary limits. Government expenditure on roads has helped to create jobs and boost economic growth ever since the creation of the first motorways, "The world's first motorways were built by the third reich to bring Germany out of the depths of recession." Over the decades, in this country alone, millions of jobs have been created by the road construction/repair industry. Most environmentalists support the construction of railways in the belief that they reduce pollution and boost economic growth more than road construction. However, whilst it is relatively easy to prove the construction of roads boosts economic growth, it is more difficult to prove that roads do not increase economic growth as much as railways.

Historically, the road/car/oil industries have increased property values far more than they have decreased them. In general, the construction of new roads generates a huge increase in the value of the surrounding land, "The suburbanization of the American countryside was made possible, in large part, by the invention of the automobile and the creation of a highway culture. The new high-speed form of individual transportation helped spawn a massive shift in population out of the cities and into the surrounding countryside. Today, 60% of all metropolitan residents live in suburbs." Whilst cars and roads cause some costs e.g. decreasing house prices in some areas, on the whole they create a massive increase in property values which results in an overall increase in economic growth.

In the past children used to play in the streets. Today, they have to be ferried to recreational areas. The radical cost-benefit analysts of the car insist this should be treated as a cost .. "parents may record four extra trips a week driving their children to sporting activities. But is this a benefit when ten years ago these same children played in their own street or at a neighbourhood park?" Just like the ferrying of children to school, it is classified as wasteful behaviour that should statistically count as a cost in cost-benefit analyzes. But even if it is counted as a cost in cost-benefit analyzes, and deducted from gdp, all this would do is distort gdp as a measure of economic growth since in the real world it stimulates economic growth.

Pollution from the road/car/oil industries causes widespread damage - to human health, to buildings, to natural resources, to crops, etc. Radical cost-benefit analysts argue that repairing this type of damage should be treated as a ‘cost’. It has to be acknowledged, however, that these costs boost economic growth. People who become ill because of pollution need medical treatment; the damage inflicted on buildings has to be repaired, etc. It is only the destruction of crops which does not promote economic growth - unless the crops are insured.

Radical cost benefit analysts believe global burning will impose considerable, and perhaps even crippling, financial burdens on society, "The Association of British Insurers puts the total cost of the 1987 hurricane at £1.2 billion. Estimates for this year's storms (which battered north western europe at the beginning of the 1990s) are £2.5 billion." Those formulating new cost benefit analyzes believe these costs will be minimal. Neither group seems to suspect that global burning will boost economic growth because of the repairs it will necessitate.

Those promoting radical cost-benefit analyzes want radical action to curb global burning. They support a massive increase in green technologies. In so doing they will boost both economic growth and global burning. The only way of combating global burning without triggering off further economic growth is to fence off huge areas of land and to allow it to rejuvenate. Natural Reforestation is the only way of combating global burning without boosting economic growth which will, in turn, enhance global burning.

The car is responsible for a huge amount of destruction - socially, environmentally, ecologically, and geophysiologically. Radical cost-benefit analysts believe this destruction should be counted as a cost and be deducted from gdp statistics. The externalities of motoring are colossal and far exceed the benefits. The costs are so excessive it would not be difficult to conclude that on economic grounds the car should be banned. But, even if destruction is counted as a cost in radical cost-benefit analyzes, it still boosts actual economic growth. Without cars and the externalities caused by cars, societies would be far poorer. What this shows is that the destruction wrought by the road/car/oil industries is good for the economy - even if it is bad for human health and the Earth’s life support processes.

The fact that the destruction caused by cars boosts economic growth and gdp is only a particular manifestation of the general rule that capitalism begets destruction which begets profits. Capitalism thrives on destruction. Activities which wreak destruction do not harm capitalism, they simply enable capitalists to reinvest and become even more productive. In this respect, the car is a major tool of capitalist destruction - no matter that they are driven by livestock who pride themselves on their individuality. The more that cars cause death and destruction - ploughing into pedestrians, smashing into shops, knocking over walls, etc., the more they bring about a real increase in economic growth. Correspondingly, any policy reducing car numbers will have a significant negative impact on economic growth not simply because less cars are being manufactured or used but because there will be far less damage to humans and the Earth.

Many radical cost-benefit assessments of the car emphasize the factors that should be regarded as costs and underestimate the revenue from cars. If revenues from the entire road/car/oil industries are taken into account it might be discovered there was a net income from cars. The fact is that the road/car/oil industries are a colossus in the world economy without which the over-industrialized nations would be entirely different - and far poorer - even if people were healthier, happier, had a higher quality of life and could enjoy a less polluted environment.

There is no advantage in using radical cost-benefit analyzes to justify policies to curb the car. Conventional cost-benefit analysts could respond to radical critiques by show the benefits of cars were much greater than had previously been estimated. Even if all types of cost-benefit analyses agreed the car incurred substantial costs, all this would do is highlight the fact that cars ‘costs’ are essential to economic growth. Robert davis is also dubious about the merits of relying on such an analysis to promote fundamental changes in transport policies, "Can we campaign successfully for the road safety lobby to mend its ways? Could we argue for cost-benefit analysis, for example, to fully charge their costs to motorists? I am dubious about such an attempt. .. we require a fundamental break from the ‘road safety’ tradition."

ADDENDA

1: The New Cost-Benefit Analysis of Global Burning.

2: A Critique of the Radical Cost-Benefit Analysis of the Car.

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