NZIER (where I work) has just published a new Insight on the next steps for water policy. The Royal Society recently published an issues paper on ecosystem services. Natural capital and the value it creates for the economy is clearly topical.
It isn’t just a neat research area, either. I had an interesting conversation today with some District/Regional Council people, and they are grappling with ecosystem degradation. In their case, the amount of water available is declining, and the quality of drinking water is falling below international standards. If their ecosystem weren’t overloaded, then the aquifers would be recharging and the natural water-cleaning processes would be adequate. That’s not happening.
I’ve spent a little time on environmental/ecological issues. I keep coming back to the saying, ‘what gets measured, gets managed.’ If we want to manage our ecosystems, we have to measure the aspects of it that we think are important.
At the NZAE conference, Tim Harford had some interesting things to say about measurement. He pointed out that when we enact policies, we are in effect conducting experiments. We should take measurements just like we would in a laboratory. Often, though, the funding isn’t available to take measurements. We conduct experiments but let them go to waste. Sometimes, measurement is even actively avoided.
When it comes to ecosystem services, I don’t think we have that luxury. These are big, complex systems that we don’t fully understand. We need as much data as we can get so we can continue to enjoy New Zealand’s relatively clean environment and profit from it (depending on our preferences).
But we also need the right data, so there is an important role for economists. As the Royal Society paper points out, the value of ecosystem services is bound up in human activity. It is about the services provided to people, and how they value them. It isn’t just about water chemistry, or about how the chemistry leads to clean water, but also about what value people put on the clean water. So economists are integral to this work.
The NZIER and Royal Society publications are helpful additions to the discussion. I hope we can build on them.