A complex systems approach to environmental value

A theory of sits at the core of every school of economic thought; it is the philosopher's stone of economics. The translation of the notion of is essential for describing the ways in which humans relate to our surroundings and hence, to the way much of our world functions. The classical conceptualisation focussed on supply. It was also objectivist, locating the origin of in the things from which objects were made, such as land or labour. The modem neoclassical conceptualisation is much more general, incorporating a convergence of supply and demand that produces an equilibrium or market-clearing price. Value originates in the minds of individuals, revealed through their subjective preferences, and is determined by markets, not accounts. There are two main issues that arise when considering the application of this theory to environmental goods and services. First, the modem theory is only really theoretically general. Practical complications caused by imperfections of information must in effect be assumed away. Goods or services for which markets do not exist, for example, those coming from ecosystems, further complicate the current approach to determining value. This results in economic techniques to impute value, as in contingent valuation or shadow pricing methods. These methods merely extend and adapt the market model of to fit the specific circumstances of imperfections. Value is still the outcome of interactions between supply and demand, but these are now virtual rather than real. Second, the starting point of the subjective preference theory of value¹ is 'the individual endowed with tastes and talents and who calculates actions so as to maximise personal welfare or utility’ (Cole, Cameron & Edwards 1991, p. 7, emphasis in original). The goal towards which goods and services are judged as having is that of individual utility maximisation. This is the instrumental goal of modem neoclassical economics, and this is the basis upon which many resources are allocated. Environmental goods and services have considerable non-market aspects in the conventional conceptualisation. They are also crucial to current and future productive capacity in that they sustain and maintain ecosystem functions and the operation of social-ecological systems. The value of such resources is the source of much contention in environmental and ecological economics where attempts are made to understand how natural and human systems interact and how resources can be allocated in a way that satisfies both human wants and needs and the requirements of ecosystems themselves. The subjective preference theory of leads to the economic valuation of non-market aspects of natural resources for the purpose of market allocations that are economically efficient. The adequacy of this goal and theory for allocating such goods and services is here questioned. At the basis of this questioning is a rethinking of the foundations of the economic notion of as it applies to environmental goods and services. This is based on the conceptualisation offered by complex systems science. There are 'two distinct elements...involved in the problem of value: an intrinsic quality of the object of and a subjective evaluation by the user' (Georgescu-Roegen 1968: 237). The complexity perspective suggests that there is scope for an alternative theory - a systems theory of - that can enable the incorporation of a concept of natural that interacts with the conventional understanding of as subjective. Value is created in the mind, but this experience is preceded by the existence of certain objective elements and capacities that, together, enable value. In this systems theory, is conceptualised as a system of connections, made up of elements and the connections between them. Value is located in the structure - connections - of this system, being the chemical relations between the components of ecosystems and the connections made by an individual when they relate a good or service to being able to satisfy their want or need. Alongside this systems theory of sits an instrumental goal that is logically consistent with this theory and with the complexity perspective of social-ecological systems. This goal, in contrast to that of individual utility maximisation, is that of survival through overall system health. Interesting and useful insights about the health of systems comes from a range of different disciplines and theoretical perspectives based on complex system science. Theories of economic growth and development as based in evolutionary economics, as well as network theory and resilience theory explore ways in which complex systems and their dynamics can be usefully conceptualised and analysed. In the exploration of the goal of system health and how it can be understood, a set of criteria by which resources and options can be judged in terms of their effectiveness in contributing to this goal are developed based on insights from these different approaches to complex systems. These criteria are applied to a case study of a marine park in Indonesia called the Bunaken National Park. The implications of this theory for the practise of environmental and ecological economists and for mechanisms of resource allocation are substantial and this is the fundamental question here: what are the implications of the complexity vision for problems of environmental resource allocation that would usually be solved via recourse to the theory and techniques of economic valuation? ¹This term was coined by Cole, Cameron et al. (1991, p. 7).