The challenge is that real interactions are very different from a free market, and human agents are far from rational (for any operational meaning of rational that isn't tautological), unless in very narrow settings.
Economics doesn't have an answer to that, which is understandable, because it is a hard problem. The annoying things is when people pretend that there is nothing missing, and that everything is fine and dandy with economic metrics and tools. (EDIT: Economics is nowhere close to the physical sciences in its level of empirical rigor. Comments implicitly comparing economics to the sciences only serve as proofs illustrating my previous sentence.)
This is not true at all. There is no conflation between "how much you want it" and "how much it costs the world to let you have it". Even the models taught in introductory undergraduate courses on economics are capable of addressing the "problems" you're describing.
Unfortunately, this is par for the course for HN comment threads about economics and economic policy.
As someone who does have a degree in economics, it's as frustrating as sitting and listening to someone talk about why chemistry is broken because the Bohr model is incomplete and electrons don't inhabit shells.
forests are like annuities (small payments forever), rather than lump-sums, but our brains respond vastly more to lump-sums. this bias is also why terrorist attacks lead to action, while vehicular deaths, which kill way more people, don't.
we have ways to objectively (if imperfectly) value things like forests, but we just don't intuitively believe in that number. for example, the concept of a carbon tax makes objective sense, but this kind of bias is its achilles heel.
(this subject came up in a number of my business school classes, which i found quite useful for learning how to think about such things)
GDP only measures standard of living. Various economists have proposed scales that are more weighted towards quality of life.
The problem is when money is your only hammer, the only nails are things that can be measured in money.
Impact investors are also starting to look into "ESG investing" -- making their investments not on profits alone, but incorporating standardized Environmental, Social, and Governance metrics as well.
I have a project which map the gift economy onto web-of-trust style key distribution. Moving the value from a numerical token, to relations between people, seems like a step in the right direction. https://www.wired.com/2014/07/document-coin/
This is a different kind of problem than you think. It's not that we don't value it, it's that the value is diffuse. Every person in the area values the forest an average of $100, there are a million people in the area, therefore the value of the forest "should" be a hundred million dollars.
The problem is that the government has to fill a budget hole and there is a logging company that would pay ten million dollars to log the forest. The government could also get the same money by reducing the defense budget, or replacing some government employees with less expensive contractors, or replacing corporate income tax with VAT so international corporations have to pay their taxes, but all of those groups have better lobbyists than the public at large. So the public (and the forest) loses.
But the problem wasn't that we couldn't calculate the value, it was that knowingly destroying ninety million dollars in value in order to have ten million somewhere else is a thing that happens when you have a collective action problem like that, because the value destroyed is spread across a million people and none of them have enough incentive or power as an individual to stand up and stop it.
So the problem isn't the valuation, it's how do we solve the collective action problem?
I’m not sure exactly what the rules for this shared resource currency would look like but I think there is room in the design space to integrate the shared resources available to humanity into a pricing model that would be more explicit and coherent than what we have now. I'm imagining a monetary system which includes a diffuse resource value for all resources -- with transaction rules updated so that trade/consumption became a two dimensional exchange involving two private parties, and the diffuse account. For the transaction to be legal, it must preserve the 'value' of the world's 'diffusely owned resources' either by not consuming anything or by the issuance of a 'debit' from the defuse balance of one of the parties (no creditor for that -- it just disappears, but the point is that the party has to have sufficient diffuse value credit to be able to destroy the required amount of diffuse value) ... I think the design space of rules governing production/inflation/transactions of diffuse value units could yield a lot of flexibility for helping to encourage that actuarial optimization over the transaction space be likely to efficiently produce broadly meaningful uses for resources -- perhaps more so than the setup we have now ...
The greedy could still act in their own self interest but would by design be more constrained in how they harm the rest of us and the relative amounts of harm of different practices would be more easily discernible as part of the public record and understanding ...
Setting explicit prices may help in theory, but there are two major problems. The first is that the price is inherently subjective. There are no market transactions to look at to see what "forest continues to exist" is currently trading for. It's the existing state and self-perpetuates without anybody having to do or pay anything until such time as someone actively expends resources to change it. So at best you're speculating, and choosing the wrong value -- whether too low or too high -- is costly. Too low and we haven't solved the existing problem, too high and we can't have a transportation system because no one can mine steel to build trains or cars or ships. So accuracy matters, but accuracy is expensive. Getting the valuation right is a detail-oriented labor-intensive process.
And in theory we already have this. It's supposed to be the job of our representatives in the legislature to do this. Which brings us to the second problem, which is that because the value is subjective, we still have the collective action problem. The logging company lobbies to have the value of the forest set low, the diffuse general public doesn't strongly object, and we're back to square one.
One of the strong options to solve at least some of this is to require all budgetary issues to be put up for public referendum. Not just "entire government budget, yea or nay" but at the line item level. The government proposes to sell the forest to the logging company for ten million dollars, yea or nay? Then the public votes nay and the legislature has to come up with the money some other way.
Naturally that isn't very popular with lobbyists because then the public tends to vote down the harmful but politically expedient revenue generation methods, so there is always strong lobbying pressure not to do things like that, and we're back to the collective action problem. It also has the general direct democracy problem of people not having enough time to evaluate issues carefully, but in principle there shouldn't have to be that many different or complex revenue generation methods. The existing tax code is unnecessarily complex and people could plausibly make time to understand a much simpler one -- which would also remove a large number of the existing harmful carve outs for groups with strong lobbyists.
What do you propose to use instead?
I think that's a shame, because externalities can be measured (not perfectly, probably much less accurately than current economic measures -- but something is probably better than nothing). And people care about them -- arguably, today people are more concerned politically with externalities than traditional economic growth. But the dialogue regarding these externalities is generally driven by emotion rather than facts, because no one is really incentivized to do thorough objective research on them at a really large scale (tragedy of the commons)
This “barks” toy example is definitely not the precise idea I want to capture and not at all fully fleshed out — but suppose a more developed version where there is a mechanism for estimating the externality costs of any transactions and where there are different rules that apply when paying for the “externalities cost” vs paying for its dollar price ...
I think the issue with this system is that generally the groups imposing the externality are more organized, and often wealthier, than the groups who suffer from it (tragedy of the commons again). Getting the trees cut down may be priority #1 for the company, and opposing it might be priority #30 for a few hundred people. Priorities that low are effectively zero, since most people dont even have time to handle their important priorities
I feel like your idea could potentially tip the balance in the favor of the "commons" by imposing a higher upfront cost to the creator of negative externalities, but I can't really put my finger on whether that is true.
It was about about unsustainable fishing on a large trawler that could set out about a million fishing hooks a day, and catching everything.. large tuna, sharks, etc. They then projected globally; this is the dominant way we go about fishing, and with it halfway this century our oceans will be empty of fish.
Then they brought the example of - I believe - Irish fishermen, who some years ago and seeing hugely diminishing returns, decided on a different system whereby scientists would determine beforehand the minimum shoal size that would lead to sustainable growth of the fish population. The fishermen would then be free to catch the remainder of the population, and divide it amongst themselves based on stake in the game.
This 'share' determines their yearly quota. If next year the total shoal population had grown, their 'share values' had increased. This modern fishing method apparently worked perfectly, and every year they have bigger returns, catching almost as much as in 'old times'.
If we wasted less and took better care of the environment around us, the costs to society would be less, this could be measured as a decrease in spending and a shrinkage of the GDP. You wouldn’t buy new clothes as often if you could maintain your existing wardrobe, and you wouldn’t buy electronics or appliances as often if you could extend the lifespan of your current electronics. Basically there wouldn’t be as big a drive for consumerist spending patterns and this could be measured, by a decrease in the GDP which would of course cause financial markets to panic.
My thoughts on this are far from complete, but that said, I don’t think our market system is really all that efficient from a tangible resource allocation perspective. It might be highly effective from the perspective of the financial and insurance industries, but the assets they hold are intangible, and the market is probably over-optimized for allocation of intangible resources simply because there is more money to be made there. That is still an optimized market for the allocation of resources with the highest rate of return, but maybe it is time to ask ourselves if that is still to our benefit?
I am meaningfully richer and have a more fulfilling life because I don’t have to do those things. Why don’t you think it makes sense to incorporate them into measures of societal wealth?
The idea that hard currency is a universal lingua franca is deeply flawed and you've hit on a very good example of one area that is starkly apparent.
There are a lot of people doing work in this area under all sorts of different terms, but trying to tie in those missing qualities. Terms that might yield interesting reading are: loop economy, circular economy, doughnut economics, sustainable economics (though that seems to be slowly fading as a term..)
https://evonomics.com/ is not a bad place to read to at least start getting some introductions to some of the people trying to push a rebuilding of our basic economic suppositions.
I know some people are uncomfortable with placing a monetary value on nature. But it's a useful exercise because it forces us to be explicit about what we consider important rather than discussing vague platitudes.
Read this article for insight into what's wrong with exactly that approach: https://www.ribbonfarm.com/2010/07/26/a-big-little-idea-call...
More broadly, the problem with trying to be explicit about what we value is that any specification will almost always be broken, due to the "fragility" of value: https://www.lesswrong.com/posts/GNnHHmm8EzePmKzPk/value-is-f...
There are better ways of determining the relative value of nature than using the amount a rich man is willing to pay to save it as a proxy.
I think that parent comment is spot on in saying that value determination based on what people are willing to pay for it, does often come not even close to the real/potential value of complex resource systems. Of course all estimations are still grounded in base prices of less complex resources.
Some people want to be able to put things in purely economic terms to be able to relate the current situation to the past, some want language to reflect the current crisis of natural resources, and then the conversation gets side-tracked by semantics.
The semantics are important, but lens-crafting makes conversations difficult, especially when meta-comments like this one further detract from the goal.
Important note: insulting myself, not any of the posters above.
Sometimes we want to compare complicated but very different things, so we are motivated by need (e.g. politics) to collapse a thing with multi-dimensional values into a thing with a single-dimensional value, so it can be compared with another thing (e.g. via price).
We are willing to engage in commensuration in some areas of life (e.g. this mountain forest is worth $1.2B) but not others (my child is worth $X).
What's interesting to me is the space that is incommensurable--the values in life that we deem so important and so sacred that we are unwilling to bend or collapse the multi-dimensional value of a thing into a simplified "price". This is where economics fails to model life and value properly.
This non-associativity of commensuration seems like an example of a kind of valuation phenomenon that perhaps a two-dimensional pricing system could better approximate -- even in the presence of actuarial optimization ...
It's perfect for the purpose its used though: to justify policies that transfer more wealth and power to the rich, and to not give a crap about externalities...
>There is 0 value given to the experience of visiting a natural space or to forests which take thousands of years to grow which quite literally could not be reconstructed for any amount of money
If you have your own private island you don't care about some state park...
In all seriousness: It's not surprising that it's difficult to project human values onto a single dimension. This is an interesting concept, but seems very challenging -- it would take mass cultural change to take effect.
If you start at 1+0i and multiply twice by 0+1i, you end up at -1+0i. If you try to imagine this in the xy plane (where we pretend x and y are currencies) then this would mean that multiplying a positive amount of one currency (1x + 0y) by a positive amount of another currency (0x + 1y^2) would put you in debt (-1x + 0y). This would be a very strange property to have in your currency!
But there is definitely something lacking from reducing everything down to a one dimensional measure. For instance, there are many pieces of real estate improvements that ought to be torn down and replaced with new improvements (homes, commercial buildings, etc). But the economy rarely offers incentives or even the abilities to tear down and rebuild - despite the huge benefit construction is to an economy. For things like this, I conclude the economic system is not closed. It’s not creating a self sustaining relationship between all participants.
A lot of the confusion in this thread seems to come from people believing that the main idea of complex numbers is that they are just pairs of real numbers.
That is wrong -- pairs of real numbers are just pairs of real numbers. Complex numbers are pairs of real numbers with a particular multiplicative structure.
I should have added that it only becomes circular if you add the point at infinity. Otherwise it’s more similar to a plane. But yes, it’s not simply x,y numbers when you assume y^2=-1. The geometric interpretation of the complex numbers matters, and you have to do it correctly. Gets very hard to imagine quickly.
It's possible for there to be slippage between GDP and whatever metric you imagine, but they're well connected.
That said sick and dead people and climate change are typically not good for GDP.
But aside from economic theory, everyone who has ever cared for a sick relative should have the evidence to see that it doesn't raise GDP. Yes, you spend money on healthcare. That's good for the doctors you buy from. But you give up time at work, you give up vacations, you cut back elsewhere. Every cent that you spend on that healthcare isn't going to wherever else you would've spent it. This isn't a counter-intuitive finding. It's just common sense.
[0] 10 million or more people, by my current arbitrary definition of "large".
There is 0 value given to the experience of visiting a natural space or to forests which take thousands of years to grow which quite literally could not be reconstructed for any amount of money (for example) ... we need something more at a philosophical level from economics than we are getting. I’ve been pondering a two dimensional monetary system — dollar amount representing how much you want something and another number for representing how much it costs the world for you to have it ... the one dimensional notion of value claims to merge these things but it clearly does not — investment which produces growth by satisfying ever more wants _should_ hit a point of diminishing return far sooner than our current metrics are able to represent ... if we had a 2d monetary system where pricing models were segregated, actuarial efficiency could be arranged to mean something entirely more meaningful than the current optimization paradigms can ever hope for ...