Air Date: Week of October 29, 1993
John Greenberg reports from Washington on the trials and tribulations of building a Gross National Product that accounts for environmental change. Advocates of greening up the economic measure claim it is crucial to include costs and gains to natural resources when weighing our national wealth.
CURWOOD: This is Living on Earth. I'm Steve Curwood.
Putting up new buildings, harvesting crops, and gathering fish are all examples of economic activities that add to the gross national product, or GNP. Classical economists say more growth in the GNP means a better, more productive society. Or does it? Those economic activities also use up natural resources, and some economists now argue that the GNP should include the costs of changes to the environment. So earlier this year, President Clinton asked his advisors to recalculate the GNP with greener equations. From Washington, NPR's Jon Greenberg examines how the new greener GNP might add up.
GREENBERG: To get some idea of the intricacies of calculating a green GNP, consider these slimy, physically unattractive, delicious delicacies, as they make the ultimate contribution to GNP as we know it.
(Restaurant sound; Waitress: "What can I get for you?" Woman: "Umm, I guess to start I'd like half a dozen oysters on the half shell?" Waitress: "All right.")
GREENBERG: Now, the plate of oysters cost $5.75. Subtract how much the restaurant paid for them in the first place, the cost of the lemon wedge and horseradish sauce, and the remainder counts towards GNP. But there are economists who say there's something wrong with this picture. They say we can't figure out what's been gained by selling the oysters if we don't go back to the place where they breed.
(Sound of ocean waves, fades to gurgling sound)
GREENBERG: The International Institute for Ecological Economics sits on the edge of the Chesapeake Bay. Inside, Dennis King stands by a gurgling tub of oysters and lays out this hypothetical case. Say oystermen dredged up $2.5 million dollars worth of mollusks last year. We knew the value of the oyster beds at the beginning of the year; now, we go back to the beds and see what's left.
KING: If, at the end of the year, we looked at the bay and there was $2.5 million dollars' worth of oysters less than there were at the beginning of the year, we didn't produce anything. We mined it. We essentially mined our resource and reduced our inventory by that amount.
GREENBERG: In other words, we cut into the oysters' ability to make more oysters. That's a cost that has no place within the framework of traditional GNP. Using the standard approach, the oysters are considered gifts of nature and technically the supply is unlimited. But with green GNP, the oyster beds in the bay represent capital stock. In traditional terms, capital stock is something that lasts, such as machinery, and that you must have to produce whatever it is you are making. One long-time advocate of green GNP is Herman Daly, a senior economist at the World Bank. He offers a humble example of the consequences of using up capital stock.
DALY: As a householder, you don't want to, let's say, sell your house, and then count that as income for this year, run out and spend it all and have a good time and then next year you're homeless. That's living on capital, not on income. And so the main idea behind green GNP then is really this very, very conventional, conservative idea of not consuming capital, but living on income.
GREENBERG: In the case of the Chesapeake Bay oysters, there's no question that capital stocks have fallen. At the turn of the century, the bay produced 15 million bushels of oysters. Last year, the harvest was a thousand times smaller. The situation is so critical, state officials may ban oystering to allow the population to recover. Hundreds of people could lose their jobs. Supporters of green GNP believe that policy makers would pay more attention to the depletion of natural capital if the losses showed up in the one economic measuring stick politicians watch so carefully. But many people see problems in measuring natural capital. Carol Carson is the director of the Bureau of Economic Analysis, the government office that calculates GNP and is responsible for making it greener. One thing she's concerned about is sometimes it's unclear who owns the resource.
CARSON: Chances of your counting fish are pretty slim, just because the oceans are free and the fish that are attributed to any one country are very hard to measure. We feel that a good bit of thinking has to be done on the concepts of renewable resources.
GREENBERG: Carson plans to tackle green GNP in three steps. The first step deals with non-renewable resources such as coal, oil, and gold. She plans to publish, alongside the traditional GNP, a set of adjustments based on the non-renewable resources the economy has used up. The second step concerns renewable resources - oysters, fish, timber, and so on. Carson says it will be harder to come up with those numbers. There's no consensus yet on the basic ground rules for estimating their value. But if economists sputter over things like counting fish, the prospect of assessing the third kind of resources leaves many of them speechless. Clean water and air, the ozone layer, and wetlands are resources too. And human activity has begun to use them up. In economic terms, they are no longer free. However, there is a big, big problem in fitting these resources into the framework of GNP. We don't buy and sell them. So their value isn't measured in dollars. Things can get tricky. Let's go back to the oysters.
(Sound of bubbling water)
GREENBERG: When millions of oysters carpeted the Chesapeake, they filtered every drop of water in the bay every three to four days. As economist Dennis King explains, we know today that the oysters provided a valuable service.
KING: As there is more sediment and nutrients in the bay, because there's a lower oyster population and a higher load, the photosynthesis can't reach the bottom in as deep a water. So you wind up with less submerged aquatic vegetation than you would have had. That is habitat for rockfish, bluefish, lots of other fin fish.
GREENBERG: The question is, how could anyone put a dollar value on the invisible service the oysters provided? The same applies to water, air, and other environmental resources. Some economists say that no one can put an objective price on these things, therefore we should leave them out of GNP. The fans of green GNP say that's bad logic. Bob Repetto is an economist with the World Resources Institute.
REPETTO: I think it's a serious policy error to say that because it's difficult to measure a resource accurately, we should assume that its value is zero. Zero is a very precise number and it's a very poor approximation to the value of clean air and water.
GREENBERG: Repetto says clean air and water are worth something - and the information we have at hand could give us at least a high and a low estimate of their values. He agrees that many technical details remain. Repetto says Carson and her staff should take the easiest steps first, and come up with adjustments only when the data are readily available. Green GNP has its limits. The supporters of green GNP acknowledge that it is still only an economic measure and shouldn't be equated with the overall quality of life in the country. But in America, when GNP goes up, people have the habit of saying things are going well - and when it goes down, things don't look so rosy. In that light, President Clinton has taken on a difficult challenge. He has said his presidency should be judged on how well the economy performs. Rightly or wrongly, GNP is the yardstick people will use. And making GNP greener can only bring the numbers down. The first green GNP figures based on non-renewable resources will be out next April. For Living on Earth, this is Jon Greenberg in Washington.
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