Econometrics Allow Us to Value What is Truly Priceless

            Greetings, readers! We continue our discussion of valuation in Environmental Economics.

            Economists have developed several methods to value nonmarket goods, like clean air and water. These include “direct use value—the value derived from the direct use and exploitation of the environmental good, the ecological value—defined by the benefits that environmental goods provide to support forms of life and biodiversity, and the option value—related to future use opportunities of the good. Non-use values are composed of the existence value—the value that individuals give to environmental goods for their mere existence—and the bequest value—the value estimated by individuals when considering the use of goods in the future by their heirs” (https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7178272/).

Taking clean water as the example, we calculate the value of water by totaling all of its many forms of value, including the value of all agricultural, manufacturing, construction, and utilities output as these industries require the direct use of water to function. In 2021, California’s manufacturing sector generated $397.26 billion, its agricultural sector generated $41.96 billion, its construction sector $90.57 billion, and its utilities sector $35.28 billion (https://www.statista.com/statistics/304869/california-real-gdp-by-industry/).

But truly, when we consider that fact that ALL economic output is generated by humans, all of which are water-based life-forms, it becomes clear that water is the most valuable resource on Earth, sustaining life itself primarily and our complex economic system secondarily. The true value of water is astronomical, incalculable. Even recognizing that salty ocean water is not suitable for human consumption, we can still value the habitat, or perhaps value the $253 billion global sea food market (https://www.statista.com/statistics/821023/global-seafood-market-value/). Everything the planet provides for us is valuable and although the dollar is a crude metric, it is one we all understand.

Similarly, we might calculate the benefit of clean air by comparing it to the saved heath care costs associated with reduced instances of asthma, heart disease, premature mortality, and other cardiovascular health complications. A 30-year analysis drafted in 2011 indicates that the benefits of the Clean Air Act (i.e. the Cross-State Air Pollution Rule, the Utility Mercury and Air Toxics Rule, the Industrial Boiler Rule, and the Cement Kiln Rule) will result in $612 billion in direct benefits as saved health care costs as well as indirect benefits such as increased worker productivity and environmental benefits like improved visibility and increased agricultural output (https://www.edf.org/sites/default/files/saving-lives-and-reducing-health-care-nov2011.pdf).

A brief health-related aside: particulate matter from fossil fuel combustion and wildfires can lodge itself deep into our lungs and arteries, even reaching our bloodstreams (https://www.health.ny.gov/environmental/indoors/air/pmq_a.htm). Heck, apparently, we even have microplastics polluting our veins (https://www.smithsonianmag.com/smart-news/microplastics-detected-in-human-blood-180979826/). As a reminder, plastic is a petroleum product, another symptom of our addiction to fossil fuels. We consume fossil fuels faster than nature can regenerate them, and we produce plastic waste faster than nature can break it down and recycle it.

When we poison the environment, we poison ourselves. For our immediate health and for our long-term climatic viability, we simply must harness forms of energy that are not dependent upon combustion. Our planet is far too valuable for us to keep spoiling and igniting it.

“Anything else you’re interested in is not going to happen if you can’t breathe the air and drink the water. Don’t sit this one out. Do something. You are by accident of fate alive at an absolutely critical moment in the history of our planet.” – Carl Sagan.

Anyone at any point can choose to protect and cherish our beautiful blue marble, our speck of dust in space. Our existence is in and of itself a miracle more precious than currency can consider.