Page 173 - Environment: The Science Behind the Stories

An approach such as the GPI that attempts to monetize
and account for all costs and benefits is an example of full Costa Ricans achieve an excellent
quality of life, with a below-average
cost accounting, also called true cost accounting. A variety ecological footprint.
of full cost accounting indicators have been devised. The 70
Index of Sustainable Economic Welfare (ISEW) gave rise to
the GPI. Net Economic Welfare (NEW) adjusts GDP by add- 60
ing the value of leisure time and personal transactions while 50
deducting costs of environmental degradation. The Human
Development Index assesses standard of living, life expec- Happy life years 40 Latin America
tancy, and education. 30 Western world
Middle East
Critics of full cost accounting complain that the approach Sub-Saharan Africa
is subjective and too easily driven by ideology. Proponents 20 South Asia
respond that making a subjective attempt to measure pro- 10 East Asia
gress is better than misapplying a more objective indicator Transition States
such as the GDP to quantify well-being—something it was 0
8
4
6
never meant to do. 0 2 Ecological footprint (hectares per capita) 10 12
In recent years, attempts to measure and pursue happiness
(rather than economic output) as the prime goal of national FIguRE 6.18 The Happy Planet Index assesses nations for
policy are gaining ground. In 2012 a global conference on “sustainable well-being” by measuring the happiness of their
this topic was hosted by Bhutan, a small Asian nation that has citizens together with their prospects for future happiness.
pioneered this approach with its measure of Gross National The HPI takes the average number of years of happy life a nation’s
Happiness (GNH). citizens experience and divides that by the nation’s per capita eco-
Another recently devised indicator is the Happy Planet logical footprint. The overall pattern among 151 nations—a curve
Index (HPI), which divides the number of happy years of life that rises steeply and then levels off—indicates that increases in
for the average citizen of a nation by that nation’s ecological resource use at low levels enhance people’s well-being greatly, but
footprint. The HPI thus measures how much output (years of that once ecological footprints are high, further resource consump-
happiness) we gain per amount of input (resources used) we tion does not buy more happiness. Data from new economics foundation,
invest. By this measure, Costa Rica was calculated to be the 2012. The Happy Planet Index: 2012 report. nef, London.
top-performing nation in the world (FIguRE 6.18). See whether you can find the data point for the United
Today the World Bank (p. 196) is driving an interna- States on this graph; the average U.S. citizen has 61.5
tional effort to promote full cost accounting and the valua- happy life years and an ecological footprint of 7.2 ha. How does
tion of ecosystem services. In 2010 it launched the WAVES the average U.S. citizen differ from the average Costa Rican citizen
program (Wealth Accounting and Valuation of Ecosystem in these two factors?
Services). Costa Rica is one of five nations whose gov-
ernments are working with the World Bank in this pro-
gram from 2012 to 2015 to implement full cost accounting how much economic benefit the nation’s forests, national
methods. This collaboration will address questions such as
parks, and other natural amenities generate for local com-
munities and for the nation through tourism and watershed
protection.

FaQ Does having more money make Markets can fail
a person happier?
This age-old question has long been debated in the realm When markets do not take into account the environment’s
positive effects on economies (such as ecosystem services)
of philosophy. In recent years, though, social scientists have or when they do not reflect the negative impacts of economic
conducted serious scientific research on the issue. So far, activity on people or the environment (external costs), econ-
studies have found a surprising degree of consensus: In gen- omists call this market failure. Traditionally, we have tried
eral, we become happier as we get wealthier, but once we to counteract market failure with government intervention.
gain a certain level of wealth, attaining further wealth no longer Governments can restrain corporate behavior through laws
increases our happiness. Apparently financial security allevi- and regulations. They can tax environmentally harmful
ates normal day-to-day economic worries, but once those activities. Or, they can design economic incentives that use
worries are taken care of, our degree of happiness revolves market mechanisms to promote fairness, resource conser-
around other aspects of our lives. Such research may help vation, and economic sustainability. Paying for ecosystem
us guide our own decisions, but it also suggests that trying services represents one way of deploying economic incen-
to enhance a society’s happiness might best be achieved by tives toward policy goals. We will examine legislation, regu-
raising many people’s income up by a little, rather than by rais- lation, green taxation, subsidies, and market incentives such
ing some people’s income up by a lot.
as cap-and-trade permit trading in Chapter 7 in our discussion
of environmental policy.
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