Accounting for the environment

BIBWOSCENE

It was with tgeat reg-et that we learnt of the death of Aaron Wildavsky on I-C September Aaron’s own contributions

to our understanding

1993.

of budgetary processes have been enormous and

of fundamental importance for appreciating the functioning of resource allocation processes in modem organizations. Always a great enthusiast for new knowledge and insi@tts. Aaron had long been an active supporter of Accounfing, Orgatrizaliotrs and Sociep. He was a founder member of the Editorial Board. a contributor

of several important

papers and a frequent reviewer.

He even

used to offer the Editor unsolicited advice on what should ha1.e been said about a few published papers! An enthusiast and a scholar. Aaron will be truly missed.

ACCOUNTING

FOR THE ENVIRONMENT’

AARON Universi~

WILDAVSKY'

01 Cal#nvzia, Berkeley

A Review

Wow. R, .4n rllmast PbnctfculStep toud Pearce. D . -a

A & Barbrr.

Sustdnab~li~

E.B.. Blwprh~

of (U’ashmg~~n. DC kwurces

/or a t.imen lhnomy

for the Future. 1992)

( London. Eanhxan

Puhbcauons.

19fl9) Gn).

R

H

Thp Gl~ening

PubLcahons.

oJ .4ccountunq

l3e

hJessf4m

a/h

Pearrp ( London

Cetied

AccountxotS

I 990 )

Anderwm. \’ , AI&muttta

E c-onomk

lndkauns

(London

Roudede;e. I99 I ).

the World Econom. T(hEarhcan Publicauons I99 I ) Adams. J G . London’s Gown Spaces lthat Are %y U’o*tb~ (Friends of the Eat-h and The London Wldhfe Pearce, D (ed.). Blueprint Trust September

1 Grwntng

I989 )

Barde. J & Pearce. D (eds I. ~‘ululng the Enrdnmmen~

SLx Case Stdk

(London Earhscxn

Publicauons.

1991) Elom. P. Hihnan.

M & Hu~chu~um. R. 73~ Gala .4i&as oJGmen

Double Day, 1992

Owen.D

Ecwnom la

(New

York

Anchor Books-

1

(ed. ). Grppn Reporting

.4rcountanqand

the Challenge oJUW NtnMes

( London Chapman & Hall.

1992)

Accounting is a prune subject for the social construction of knowledge. Based largel)

accounting principles and practices that would support their preferred cultures (or ways of

on conventions coming down from historical experience. institutionalized as rules flowing

life). Invoking the social construction doctrine. though I agree with it as far as it goes. however.

from accounting boards, passed on as tacit knowledge from one accountant to another, it is subject to a great deal of discretion. In its

does not resolve usefulness.

historical development in capitalist economies. accounting for private tirms has been designed to secure economic growth by encouraging the bidding away of resources from less produc.

matters

of

evidence

and

Though all knowledge is socially constructed. not every social construction is equally valuable for every purpose. lfscience and technology are constructed so as to be at great variance with the way the world is. not merely an alternative

the to more productive firms. It is not surprising. therefore, that those who wish to live a life motivated by narrow and steep hierarchies or

formulation of that way. what is supposed to happen will not happen. I might mention Mao Tse Tung’s backyard steel furnaces. In the same

bj. greater equality of condition would reject the accounting that they rightly suspect of

way. behavior at wriance with one’s preferred culture certainly can be undertaken. but not

upholding competitive

without

individualism

. I have taken this ude from chapter

4 oi Blwprfnt

this subject

-- Dr W’ddavsk) died in Scplember

in favor of

1993

/or n Gwen

signiticant penalty. The egalitarian who

Ecorromv

IO sqnVj

that one can take a dleerenl

\I-’

of

says that nature

is cornucopian.

so there

is

firms in the llnited

States and Europe

have

always more. and the individualist who believes that nature is fragile. so regulation is required. will find these views destructive of their social

discovered to their dismay in recent years. The truth comes out nevertheless because. regardless of artifice in construction. under capitalism

relationships.

you can run on empty only so long.

i.e. culturally

irrational.

Perhaps the most striking example of social construction running counter to the way the

The in\.ention is a high mark

world really n.orks is the one effort in our time

because It enabled owners to discover their true

to craft an economy, with its accompanying accounting principles. antithetical to capitalism

financial condition. should they wish to do so. and obseners to look in on the company should they wish a clue to its current financial

the Communist command economy. The command economies. which operated by negrive selection

m which

the economicall~~ least

valued projects were subsidized the most. resulted in inesorable economic decline. Strong toward their external and internal enemies. but weak toward their own units. the Communist

condition.

of double.entry in the history

bookkeeping of capitalism

It is a good question as to whether

the construction of double-entry bookkeeping was made by capitalists to further their enterprise or facilitated the rise of capit.alisLs a.ho wished to further such enterprises. Either way. unless they were connected to economic values. as understood in the time of their use. these

parties who ran the command econom!’ b) administrative fiat were unable to eliminate the

accounting conventions would not have survived

worst projects. thereb), running afoul of the principle that states. “no failures, no successes”.

NOVS they are under attack for failing to account for environmental values. Whether modem

linable to oppose the capitalist vstem with an alternative economic design that eliminated the

capitalist accounting should ( I) be eliminated because it does not and cannot reflect envwonmentalists’ values. or ( L ) be modified to include

worst. the command economies collapsed (Clark & U’ildavsky. 1990. I99 I ). Along the way. bemg immensely inefiicient. using several times the energy and material per item of production employed in capitalist countries. the command economies also produced much greater pollution. A cleaner environment is. in a significant way. a function of economic

efficiency.

How far would the social construction of accounting devices take us, I ask. if these constructions did nor comport at all well with the financial condition of the companies involved? Because companies can and do run out of money. I presume that the gap between construction and capital would sooner or later. probably sooner. be revealed. Of course. it is possible to Lie. cheat. steal. and obfuscate the numbers. But days of reckoning do come. I do not mean to suggest that the financial well being of companies is evident from their tinanc~al statements. That may or may not be true. If insiders are determined to hide the real numbers while projecting phon) numbers. even external accountants are going to have difficulty tinding out the truth. So some of the large accounting

such values. or (3) be left alone because imposing one set of values on another would render both less valuable. as I claim. is the subject of this review. lintil the modern era, I suspect. no one ever thought

that commercial

accounting

was

devised for any other than economic purposes The idea that accounting failed to reflect the many other values people have would have been laughed at. not because the proposition was false. but because no one ever thought it was supposed to do so. Where change in accounting may be sought because it is believed that the present forms misrepresent the economic condition of tirms and of the economy. change in political belieh about what oughr to be represented may also lead to a desire for accounting conventions lo mirror that more desirable state of affairs. So it is no1 surprising that. as environmentalism grows as a political movement. there are efforts under way 10 manifest its values in accounting so as to do n-ha1 we all wish IO do - namely. to hold others accountable for their impact on

FOR ME

.ACCOlNlINC

our cherished the

social

values ( Douglas. 19’8).

reflection

Because

of environmentalism

is

found in a desire for greater equality of condition among human being. as will become apparent. harm to the earth and its creatures being considered a consequence of human inequalities. proposed changes in accounting to include environmental values do not occur at random but are intended to move in a singular egalitarian direction. Otherwise. one would not know what to make of the fact thar practicall! every. other sentence at the Rio environmental summit jumped from forests and the life.forms in them to demands for large international transfers of income

EMlRONMENT

their legrimacy.

i63

Given the ditliculty of convert-

ing those values not priced

in markets

into

common units of currency. the task is not an easy one. One method. which we shall come across in the revithat follows. is to use the costs of complying

with governmental

regula-

tions as the cost of reducing harms from technology. The diBicu1t-y. of course, is that environmentalists tirst fight for those regulations and then claim the resulting “defensive expendi. tures”

as those

followed children

industry

might

avoid

if it

their precepts. The story about the who murder their parents and then

plead the mercy of the court as orphans comes to mind Nevertheless. in modiljmg rather than rejecting national economic accounts and conven-

The changes sought in accounting are also premised on factual beliefs about the vast harms done to the natural environment and life-forms

tions.

of all kinds by modern technolom. lf these beliefs are unwarranted. the case for accounting

methods of accounring has been made. Environmentalists themselves are divided over whether

change

cost-benefit

collapses.

It is standard

u-t the books

an

important

concession

to standard

analysis is the work of the devil or

reviewed that these alleged harms are real and growing and immensely dangerous. It is also

whether a more environmentally concerned form of cost-benefit analysis is desirable. One

standard that they are taken to be true without further investigation I believe that social

side

scientists evidence

who base their case on scientific have an obligation to review that

evidence. Whether we are talking about getting cancer from asbestos in building or from trace

(color

them

dark

green)

claims

that

environmental values are. in essence, priceless and that it would be morally wrong and perhaps tactically unwise to play the cost-benefit game They reject net benefit as the criterion of choice

exposures to tiny amounts of chemicals or destruction of forests by acid rain. I believe

on the grounds that it would encourage industr) to do more harm and trivialize their moral stance. The other side (color them light green )

horn study

realizes that objecting

that these alarms are unjusttfied.

some being entirely

false. others merely

vastl)

to cosr-benefit

per se is to leave environmentalists

analysis out of the

exaggerated ( W’ildavsky. 1988, 199 I. I99i ). That debate cannot be carried on here. But the

economic

reader

to raise the cost side of the equation and therefore lead to decisions more acceptable to

must

understand

that

the

case

for

the inadequacy of existing accounting forms depends crucially. in the words of its advocares. on the extent to which claims about harm to the environment accepted as gospel in these text5 are true. A major dticulry in devising new forms of accounting for environmental values is how to cost harm to the environment so as to fit within national income accounts and a ftrm’s balance sheet. lf anything goes. so that costs can be whatever the proposer wishes. rampant subjectivity will rob the new forms of accounting of

game altogether.

They are interested

in taking account of environmental

values so as

them lip to this point. I have not made a sufficient distinction between changing national accounts and changing the specific prices that people face. Changing the national accounts. by themselves. might not have much effect on either private or public decisions To be more precise: changing the “environmentally insensitive” bookkeeping convention under which the consumption (more precisely. rransformation into other goods) of man-made capital, say manufacruring

plant. is reflected in a depreciation charge but the depletion of God-given capital. say a coal seam. is not, might be a matter of inditrerence. The cost of the depleted resource does not enter

happiness, treatment

of anitnals -

are inappro-

priate. Because the value of these accounts lies largely in their accuracy in recording economic

into price. any more than the cost of the man-

activity. going up the hill so as to come down again. providing it is paid. is not double

made equipment used up in producing output. These sunk costs do not determine price. but

counting; whether or not you or I should march up or. once up, march down, is beside the point.

are determined

Our objective should be a clean set of economic

by it; the value of the coal seam

is determined by the price of coal (at least if the market for coal is reasonably bee and the

accounts. supplemented. by additional data on

price is not administered anything may happen).

environmental conditions rather than to try to incorporate the several dimensions of our common conditions in one general. but

-

in which

case,

No one has claimed that replacement cost accounting has, or would. change prices. and depletion accounting might not either. But there may be exceptions

to this proposition.

If the tax

for specific purposes. social. cultural, and

necessarily less precise set of accounts. Ahvays there are opportunities foregone.

became

Clearly. we are less knowledgeable than we could have been: we’ve done less to develop

deductible. that might make a dilference hlanagement decisions might be a5ected if the new

our human resources than we might have done; we’ve been less productive than we might have

accounting rules made it appear that there were less income. Accounting has a double function - it not only informs potential users but also,

been. These undoubtedly

code

were

changed

and

depletion

through its effects on stock and capita) markets. may indirectly aBect management decisions. Perhaps these indirect elfects are what supporters

are losses. But should

we account for these hypothetical losses b!, assigning them monetary value and subtracting them from our balance sheets and income accounts? Likewise, why should the use of

of environmental depreciation aim at Obviously. in order to affect prices. bookkeep-

natural resources be a minus rather than a plus? Without human intervention there are no resources. only lumps of stuff.

ing changes must be tied either to governmental policy or to profit and loss statements in

lf environmentalists want to improve accounting by charging depreciation for depleted

company accounts. Though neither .Solow nor the other authors whose work is reviewed here

resources. then they cannot escape the require-

explicitly

lost -

say so. their collective

recommenda.

tions make more sense if they expect firms to depreciate environmental costs in their balance sheets so as to require them to charge higher prices. Otherwise. environmental accounting would be Much Ado About The temptation IO make GNP or Net National Product into the great moral plan for living the good life should be resisted. W’e have imperfect but useful measures of economic actbit),. Mixing them with non.market (shadow ) prices that even more imperfectly measure values of environmentalists does a disservice to both purposes. National accounts are economic documents. That is their only proper function. Efforts to extend their use into other realms the moral worth of a society. its level of

ment to counter this charge with oppwtrrniries

the groath

A complete

prevented by restricting use. accounting would compare the mo

charges and hold responsible those who made decisions in cases a-here opportunities lost were larger than the resources saved. Of course. both computations are ridiculously subjective. but if you mant a complete accounting. this IS it: “double entry” The traditional accounting method shortcircuits these subjectivities by saying. in effect, if you paid for It and if its economic value can be estimated ( that is. ifthere are willing buyers). depreciation can be deducted. There is no objection to depreciating coal and oil reserves. This is not the same as estimating damages hypothetically arismg from the use of the same asset. W’ithout estremely detailed knowledge of

ACCOUNTING

FOR THE ElmlRONMENT

uses and users. the value of foregone opportunities, and a good knowledge

of cause and effect

-exactly the kinds of knowledge that command economies tack and markets provide-we can’t tell whether the damage caused is less or greater than the good done. We do know “for a fact” that health rates in industrial democracies have evidenced spectacular with economic growth.

improvements

along

I shall set the stage for this review by going over in detail a talk given to Resources for the Future

recently

by

a

Nobel

Prizewinning

economist, Robert Solow, because he states more clearly than I have found elsewhere the conditions applicable to what he, following environmentalists, calls “sustainable growth”. For it is this environmentally sustainable growth that is the objective of those who wish to alter accounting conventions. By beginning with Solow. I can indicate the extent of my agreement with how this complex of issues is presented as well as my disagreement

with how it is resolved.

65

slogan or expression of emotion, Solow says, “it must amount to an injunction to preserve productive

capacity for the indefinite future” (p.

’ ). This is a more precise and usehtl definition than others I have come across. Wishing to go beyond the emotive style in which sustair&iBty becomes the synonym for unhappiness with high rates of consumption, Solow states that what is to be conserved is “a generalized capacity to produce economic well being” (p. I4 ). To him, as to the tradition

of neoclassical

economics, natural resources are not desirable for what they are but for what they do: “it is their capacity to provide services that we value”.

usable

goods

and

In Solow’s view, A sustainablepath tix the economy

is thus not necessar*

one that conserves every single thing or any single thing It Lsone that rcplace5 whattier it takesfrom its inherited natural and produced environment, its material and mrellectual endowment

What

matter5 is not

the

particular form that the replacetnem takes, but only its capacir) to produce the thing5 that posterity wiJl enjoy Those depletion and Investment decisions are the proper focus(p

AN ALMOST

PRACTlCAL

15)

STEP TOWARD I agree. though mentalists will.

SlISTAINABILlTY’ In his lecture, Robert Solow joins forces with

I’m not sure many environ-

Environmentalists’ desire to “correct” markets, that is, to replace them with regulations, comes

those concerned with improving national economic accounts so as to include environmental

Born a belief that they do the job Solow wants

values. He recognizes that gross domestic product or gross national product have their

them to do (produce the things that posterity will enjoy) all too well.

uses in evaluating the demand for services and goods or for studying fluctuations in

!&low wants to correct market prices by treating “environmental quality as a stock, a kind

employment.

of capital that is ‘depreciated’ by the addition of poUut.ants and ‘invested in’ by abatement

Just as net national product

takes

into account the depreciation of tixed assets, however, so he wants to charge “the economy

activities”.

He

wishes

to use the

economic

for the consumption of its resource endowment”. Arguing correctly “that talk without measurement is cheap” (p. 7). Solow explores what he

analysis of capital so that it becomes “an ordinarily done thing to consider environmental

considers

the

the

right

way

to correct

national

accounts for what he and many others call, I believe incorrectly, non-renewable resources. lf “sustainability” is anything more than a

’ I wish IO thank Anthony de Jasay. StanI

kbergott.

and capital assets as ‘equally real’ and subject to same scale of values,

bookkeeping

conventions

indeed

. . . Deeper

thinking might be aBected” (p. supplied). Indeed they might.

Baruch kv.

13.

the sume ways of emphasis

and UWliam Niskanen for their comments on this

section If d19 did not succeed UI setting me straight. the huh Is all mine

Acknowledging that his proposal “cb~wnbs ongnirnp tie Snabow.Mces

(p. 21) yywcvi~-

mately right”. Solow hopes they will be based on careful research. But, as I shall show in the reviews that fo1low. the invitation to subjectiriq. so as ro impose one’s \.alues on the marker _soit produces environmentally correct outcomes. ati

be irresistible. lf national accounts

sere to be amended to accommodate environmenral impacts. shouldn’t t.bey al-w be amended (M-ii CDUY.Sr, ihs ‘IS ‘n-l-pm~irirr‘, ‘ID l&r ‘ml0

assumption that production will still be carried on Pfnfhrnip.Trhs asunpi.~or~ P;ti’Dr 3xi~alrb by the massive introduction of administered prices, in my estimation, without endowing the future with greater. or as great. resources than n’e har.e non. .Solow proposes

“a deduction

for

the net

depletion of exhaustihle resources” (p. IO). I &im that singiing out certain resources as non-

tilnal JX~#I~ +K VtlRK~

renewable IS a fimdarnental category error Wf.rim fnr uabiimn d nrcdm5Sxd rcmtmixs. ‘Wnrtirr a rrxmcr ‘15rrnwdri~r bqxnbs’re5s UT.bmai W&Ck,is Ghvit *.%AWAkhUW%A iqpuiy;

in the national accounts? After all, look at I’ugoslar?a. What about 1or.e and friendship? Where does one draw the line? People tend to

When property rights are clearly specified and enforced, and markets are ahowed to operate, scarcity has yet to wn a race with creativity.

aiccomn evrp va!&u~~ S&i&S;\

dram. it. once

otie)e~ ‘muu-@rite 53X+& v&&0%

the constraints

are

lifted.

to

include the causes they tIrhink worthy and to e x-&&e &rose &r
to go about “finding

the true net

u’

Consider. for instance, the availability of oil. bar-e all heen subjected to cries ahour hoa.

&-i-e n&k+ R;;L) rutiwkig uuz. Buz he 3m4xmz c/i oil available is a product of what is above ground. XQtSn we c%n coum

rettwxtw~

WeR. w’.ntn is

below ground. which we can only approximate. future prices. which are very hard to predict. future technoloa. which is largely unpredictable, and the availability of substitutes. which is not predictable at all ( Wlda~sky & Tennenbaum. 1981 ) %%at abut salad oils Oil.bearing plants can be groan. What is renewable at which price is a matter of human ingenuity. One might better ask. “what would you like to be renewable?”

product of our econom)” ( p. 8 ). Solow proposes reconsideration of intergenerational equity. He

W,hen we use oil or coal. the value is not used up. for it bring a return. Why. then. call the

also considers it appropriate

resource non-renewable? Can we not devise *Snrmaiwis ‘j;)us~ -3sSnt~5~4 ‘1s ‘ti Snem;riw 1~

tub vziwr’~lswPiiarr

for each generation

mwr’rh@~

tian-in~artiina~

succeed it. but not too highly. And he thinks of this %s a concession to human weakness” (up. >Oj. 1 dotil. Each generalion owe5 iU successors good institutions. These institutions will enhance prospects of creating generalizable ;mb r4r_sourcrs - wrSn!n. Snhrmaimn. rnrrp. organizational capacity. This is real wealth that can be used to craft what future generations want if, as. and when they want it (W’ilda4cy. 1988). Giving them the fixed resource endoa.ment of the kind environmentalists favor does esactlj. ahnt they. accuse the rest of us of doing. that is. trying to control the future from the present. Solow bases his proposal on the

mail systems) and will not new technolotg enable us to extract more or to make better use 0%what n-r haw w 1i1 &isct~ver rnwe? ‘Wnm WI industrial

planr

has outlived

its usefulness,

perhaps old and decrepit. it may be beyond ‘Irpiis Bu’l l!nr capiti fna pur rtusrb Ynrstz plants and helped construct them. the science and technology. the human capabilities. these may be replenished without end. If. as Solon says. “What matters is not the particular form that the replacement takes”. then human capacity to prw+de replacements grows along with the econom) Solow’s startmg premise sustainabilig

ACCOLITVITNG FOR THE EMlRONMENT

amounts “to an injunction tive capacity for

to preserve produc-

the indefinite

future”

-

is

reasonable. On his own premise, however. there is no general environmental problem. The ratio of average labor compensation rates to a price index of raw materials has increased for almost the whole period for which there are data. In other words, labor, not “depletable resources” is the increasingly scarce resource. Of course, this

conclusion,

like

neoclassical

economics

itself, depends on a belief that market prices reflect genuine scarcities. This, exactly this reliance

on

markets

as reflecting

values, is what environmentalists

legitimate

v&h to change.

46’

marked. even astounding century.

Who

degree in the past

can imagine that in the next

century life expectancy, educational attainment. and income will all rise together as substantially as they have decade by decade in the past century - without benefit from environmental clergy? At the outset the authors recognize that what would be deemed sustainable as well as what constitutes development is about different visions of the good society. For them sustainability

“places emphasis on providing

for the

needs of the least advantaged in society (intragenerational future

equity).

generations

and a fair treatment

(intergenerational

of

equity)”

( p. 2 ). Thus. Pearce and his collaborators define BLLEPRINT

FOR

A GREEN

sustainable development to mean greater equalir) of condition at the present time and in future

ECONOMY

The importance of the Pearce Report (done for and approved by the U.K. Department of the Environment revised

Economy)

and published

in somewhat

a% Blueprint for a Gwen lies in its measured, informed, and

version

sophisticated

application of principles

of cost-

benefit analysis to environmental problems. The authors. division between man-made and natural capital lends itself

nicely to efforts

to revise

times. Their inherit

goal, that “future generations must not less environmental capital than the

current generation inherited” ( p. 3 ). is premised on the proposition that “economic goods and services themselves ‘use up’ some of the environment”, hence “the market price for goods and services does not therefore reflect the true value of the totality of the resources

national income and company accounts. vl’hereas.

being used to produce them” (p. I54 ). This

before Pearce, interested publics were left with the choice of dismantling what existed without

their basic postulate. Consider in this connection

knowing what to put in its place, on the publication of this book they were led to hope

“trace gases ‘use’ the atmosphere and troposphere as a ‘waste sink’ . . ” (p. I54 ). True. but

that adjustments

not all the truth. Ozone is produced by natural processes that will continue to operate. “Waste”

to the cost side of the ledger

would enable capitalist markets to reflect environmental values. When Rob Gray writes that after Pearce it v+as all different. that is a signal compliment to the impact this book has had. No doubt this impact was deserved. MJ question ln

the

is whether

it is desirable.

sustainable

universe

envisaged

h)

Pearce and his co-authors. outcomes will be such “that real incomes rise. that educational standards increase. that the health of the nation improves, that the general quality of life is advanced” (p. 2 ). Except for the usual disagreements about the quality of life. it happens that each of these desired improvements in income. education. and health have taken place to a

is

their view that

is as much part of the earth as the land and the seas. If the current depletion experienced over larger areas of the Antarctic turns out to be part of a periodic

Buctuarion.

nothing has changed

If it turns out that CFCs (Ruorochlorocarbons) are depleting ozone to such an extent that lr\‘B radiation increases. thereby threatening human. animal. and crop health, countermeasures are available. The cry goes out that in a better society this would not have happened. False arrest! CFCs on earth are among the most useful and benign chemicals ever invented. They are virtually inert. At the time they were introduced they had great advantages over all known

alternatives viewed strictly from a health and environmental perspective. linless someone

to the level increase” (p.

wishes to argtue that their form of political economy will rule out unintended consequences. there would have been no way to anticipate or

defensive expenditures in everyday life. Life is full ofpains as well as pleasures. hence of moving away from the disagreeable; when middle-class

cost these particular consequences. The best that could be done is what had been done -

I enjoyed prior to the tratlic 105). There are multitudes of

blacks and whites Bee inner cities. is that not a

to build up funds of resources so as to cope

defensive expenditure? When others move back to cities to escape what Marx called the “idiot)

with adversip

of rural life.” is that not a defensive move? Noa

if. as. and when

it occurs. The

authors are mistaken when they say. in talking

some might say that was an improvement

about irreversible

their n.elfare, while others might say it degraded the welfare of those left behind. while still others

(feasible)

damage. that “there are no

technologies

for reconstituting

the

layer once it is ‘holed’” (p. 8). Nature does that vet-~. well without our help. The authors’ level of economic

understanding

is far greater than

their acceptance of poor information about the scientific aspects of darnaBe to the environment that

nevertheless

constitutes

basis of their claims In stating their preference anticipating

future

them if the), occur.

the

ineluctable

for preventing

danRers over

reacting

might have different

in

views. To whom are these

costs to be assigned? Classifications

like these.

which are treated as fixed. are actualI}. movable boundaries which anyone who wants to shift a cost to anyone else can claim are “defensive” (Dot.@as R Hull. 1992 ). To say that a rate of growth of the proportion

bl

esperienced

to

U’ar cannot be sustained indetinitely is Etllacious. It is trivially, [rue that a specific resource at a

the authors omit entirel)

the problem of false positives which plagues this

certain

endeavour.

proportion

It is as if it didn’t matter how man!’

since the end of the Second W’orld

time

cannot

be used in ever gtreater

indefirutel~~. But who wants to3 Our

times and at what cost one misapprehended future developments. They do sa)’ that delay.

experience is full of substitutions in material. processes. and preferences. W’ith different com-

accompanied by research. might provide better informatton and more effective future solutions.

binations of these. economic growth - if that is what is named. for I hold no brief for growth

but they do not discuss the likelihood that the future will turn out differently than expected.

per se -could

In my view. the world works mostly the other

go on indefinitely.

What is there

to stop it except human decision? But that would not be a natural limit. n.ould it?

n’ay around. Planning is alwa!,s an act of desperation. One is aln.ays smarter in the future than in the past. Only those projects that cannot be delayed because of long lead.times, and whose future COSLSare known with reasonable probability

to mount

rapidly

in the

future.

should be undertaken non’ Let me put this another way: who has ever anticipated anything important in our Itfetimes. be it the rise of environmentalism. femuusm. communism. Nazism. the computer revolution. whatever? Pearce and company make major use of socalled defensive expenditures. “If I double glaze my house when there is an increase in road traflic in the street”. they write, “the exp
THE GREENLNG OF ACCOLiNTAN
for its

intelligence. its lucidity. its directness - is Rob Gray’s .Iccorrnlnnc)~. Gray’s quarrel is with the theory and practice of capitalism Blaming capitalism for depriving future generations of their resource endowment. for pollution that harms people’s health, and for harming other life-forms, he thinks it only right that neoclassical economics should be part of the solution of the problems it has created. Because he believes that “our methods of accounting are implicated in (and may even contribute to) the present

KCOLNTING

state

of environmental

crisis.

FOR

it is clearly part

of our duty in the ‘public interest’ to attempt to to the reversal of that crisis . . ” (p.

ME

EN\lRONblENT

he puts

469

it. rather

more

prettily

than

usual.

“amended”.

61 ). If there is no such crisis. it follows there is

Recognizing that there will be disputes over which habitats are critical and which not, Gray,

no such case. Taking his lead from the Pearce Report. Gra)

(he would like to do away with them. but can’t

contribute

fastens upon its “notion that capital needs to be split

between

man-made

capital

and natural

recommends

altering traditional

balance sheets

yet tigure out quite how) so as to include depletion of natural capital and preservation of

capital in order to recognize the substitution of one for the other to maintain interRenerational

critical capital. Thus he straddles the dark-green

equity”

positions.

(p.

2 ). Among

his many suggestions.

such as providing activity centers with environmental budRets and requiring to pa!’ hi#ter

nem’ investments

rates based on environmental

hurdles. he wants accounting reorganized so that it recognizes distinctions between critical capital.

man-made

and natural capital. Critical

capital is presumably

that for which substitutes

presemationist

and

critical

the

lightggreen

resources

meliorist

helongting to the

former. natural capital to the latter. Gra), gi\.es a Rood account not only of the hypothetical advantages but of the h)-pothetical difficulties emironmental accounting incurs What

ought

to count

as an en\.ironmental

espendtture?

Which expenditures

for ordinary

business activity

are incurred

and which

for

are not available. Classifying capital as critical (or shall we say, endangered ) would presumabl)

protecting the environment? An experienced accountant. I think, would say that this depends

decide

on which

the

matter.

Claiming

that

the

price

system. which recognizes only that which is valued in markets (which he speaks of as based on as “unfettered

property

rights”. p. 96). leads

to vast abuse. Gray argues that “ecosystems. habitats. hiodiversity and many basic resources (e.g. the ozone layer) are NOT renewable or substitutable”

(p.

with the attendant be amended involves

23 ). Therefore propeq

rights will have to

to a recognition

stewardship

-

“ownership

that ownership

the responsibility

care for and maintain (what

we currently

to call )

definition

will

income.

Among

governments.

income. allocated

to

units

with

current

it will benefit future generations

way

to

absolutist

statements

demands when Gray claims. Hence we hear cannot possibly happen substitutable”) in which in the name “of the race, future generations” - a demand that property

and

gives

coercive

makes environmental of many thing that (“NOT renewable or case he feels entitled other forms of life and

formidable array - to rights be sacrificed or. as

so funds are

best

economic purposes

and therefore

over many )ears. Then

per share look better. Considering

practicalities.

Gray urges acquiescence:

the

“Thus.

given that accounting has no agreed conceptual framework and one can therefore find a theoretical justification for virtually anything it seems politically

His subtlety in talking about accounting

con-

be capitalized? If a proposed expenditure is deemed desirahle. its proponents can claim that

earning

that just@

the

prospects. Should spending for environmental

and future generations” (pp. 9-98). to the contrary not withstandmg)

decreases diversity, would accounting practice?

creativity

and to claim efficiency.

is subject to amortization

prove more adaptahle than some currently think. and industrialization increases as well as

the lowest

level of reported

sists in using the same set of accounts to plead poverty. so subsidies are given hased on loa.

assets on behalf of the race. other forms of life But (Gra) if creatures

produce

level of taxes and the hi#test

appropriate

tion of environmental

to allow capitaliza-

expenditures”

(p.

I I ‘).

This is not exactly a ringing endorsement. WI) legitimate deception5 The grounds he Rives. I think, are misleading. That one can devise an argument to cover almost any Raw is true enough. But surely some arguments are better and worse than others. This sort of nihilism suggests any numbers will do. and that is not so. Should there be accounting recogtnition of

4’0

A

WILDAVS~

continued liabilities in regard to future emiron-

and are

mental costs as distinct

economy. A figure like GNP per capita obviousI!

from any other future

in

any

event

outside

the

formal

costs? Gray sees no difference. What I see is that if contingent liabilities are detached from

does not tell the same story

conventional means ofcost accounting. they can

it does about those where income distribution

mount so high as to dominate all other considerations. And this, some environmentalists

is highly unequal. And he makes the point that if human activity damages environmental assets,

would say, is exactly what should happen. To his credit, Gray recommends experiment-

about countries

where income is relatively evenly distributed

both the damage and its repair would

as

add to

ing with di6erenr forms of accounting that might

gross national product. His conclusion is that doubling of GNP would not indicate a doubling

be considered. environmentally

of human welfare. All this is well done and. I think, unexceptional. as long as one understands

to use the current cliche. sensitive. It is to such etirts

that I now turn.

that GNP measures the quantity not the quality of life. The difficulties

ALTERNATR’E Another

ECONOMIC

splendid

Anderson’s

INDICATORS

book comes from

clear-headed effort

single indicator

(with

Victor

to craft not a

which he cannot come

up) but multiple indicators that might take the place of gross national product or gross domestic product.

His strategy is to appraise many

indicators

but choose a select few that would

“measure

the real progress

of an economy.

instead of the illusory ‘progress’ often represented by growth in GNP” (Introduction). Agreeing with

the various

cases that have

been made for limits to growth. essentially that higher and higher rates of economic growth are unsustainable in view of the earth’s Enite resources.

Anderson

believes

that ecological

demand will greatly exceed ecological supply. My view is that this will happen if but only if supply is limited by environmentalist fiat. He also gives more than lip service to bringing pro-growth

arguments

which

of his position

become clear

when Anderson writes that GNP growth does not necessarily mean welfare “because its initial

in

are essentialI)

GNP per head included a high proportion

of

necessities, whereas its new double-level GNP per head includes a high proportion

of goods

and services which could easily be dispensed with without any significant loss to people” (p.

31). During the great increase in oil prices of the ’70s, I recall a speaker trying to tell me that I should stop heating my pool. I swim bur I don’t drink. so I suggested stopping liquor production. A desirable feature of markets is that they limit some individuals coercion of others. A signScant

part of the value of Anderson’s

book lies in his searching skepticism about what others presume would be advances in national income accounting. Consider the aforementioned proposal for deducting quantity called “environmental

born GNP a depreciation”

(p. 36). It may not be possible, he writes. to reverse harm to the environment or depletion of resources.

lf reversal

is possible.

then the

that sustainability ought not be achieved b) making everyone poorer so they cannot deal with such environmental problems as actually emerge.

costs may not be knowable or quantifiable and their economic value to human beings may be zero but not their value to other species. Anderson especially wishes to avoid the implica-

Anderson explains that his objection to GNP is not directed to all its uses but largely toward its emplovment as an indicator of how well an economy IS doing Then he supplies a variety of examples in which labor is undertaken, say in

tion that a sufficiently large increase in productlon can overcome irreparable damage to world ecology. For excellent reasons. furthermore. Anderson opposes subtracting various forms of intermediate output - goods desired for other purposes. such as threats to national defense on the grounds that they do not add to welfare.

the home, but is not compensated 6nancially. Many transactions. he notes, are done as favors

ACCOlNTfNG

FOR THE

4-i

EMIRONMENT

for itself but for some other purpose. I cannot

species. . . ” (p. 6’). he notes that “there are no reliable figures even for the total existing

Eault his conclusion:

number of species” (p. 68). Having written

on

this

no

As he says, almost everything is desired not only

such a reformed

“The

whole structure

natlonal

would move further

of

income accounting

and further

to state

that

beyond I992 ).’

wise not to rely on indicators of desertification not only estimates

p. 40). In short.

environmental depreciation is not a good proxy for finding whatever level of national income is supposed to be sustainable. Anderson suggests seven desirable

like

Anderson shows good judgment in denying indicator status to species extinction. He is also

which would generate a wide variety of results for adjusted national product born dilTerent sets and assumptions”(

I would

evidence exists of species extinction one a year. None (Simon & Wldavsky,

away from any

observable real pricestoward an increasingly abstract economists’ theoretical construction,

ofdefinitions

subject,

because of his realization are extremely inaccurate

that the but also

because recent studies suggest that in the Sahara deserts are retreating rather than expanding (Monastersky,

charac-

I99 I ; Tucker

The environmental poses are “rate of

teristics of good indicators. They should be easy

et al.. 199 I ).

indicators Anderson pro-

to lind and cheap to use. They should be simple to understand. They must deal with something

bwpical defistation in square kilometers per year” ( p. 66). “carbon

measurable. To

dioxide millions

be an indicator

rather

than a

mere statistic, a measure should be important in and of itself. The time lag between the

emissions of metric

born fossil fuel use (in tons per year)” (p. ‘0)

“average annual percentage rate of increase in

availability of the indicator and the conditions

population”

to which

nuclear reactors” ( p. ‘2). and “energy consumption in metric tons of oil equivalent per migions

it refers should

be short.

Indicators

should facilitate comparisons among dilTerent people and areas. And there should be a single

energy intensity

of

operable

power

or

or CO2 be used as negative

indicators? The hundreds of reactors operating in the western world for the past 30 years have

their use, Anderson prefers objective indicators international

-) I ), “number

of dollars of output” (p. ‘3). Why should growth of nuclear

set that can be used internationally. Finally, though subjective reports of happiness may find so as to facilitate

(p.

comparisons.

the best safety record of any form

of power

These are, in my estimation, a helpful set of criteria with which to wade through the

generation, with almost no fatalities. They might

literature on this subject.2 I shall begin my discussion with two potential

cause grave damage in the future, but that has to be compared to the substantial known harm

indicators

from coal and oil production. Outside the former command economies, where resource

that Anderson

would

like to have

included but does not for lack of data. Though

intensity

he begins by stating the common belief among environmentalists that “the world is currently living

through

a period of mass extinction

‘Because lhis review Is concemrd witi environmental mdicators.

But the reader m&h1 be inrerested

for @IS ( 2) Ner primary school enrollmem rate of unemploymem

(6)

Avenge

access to sak drinkins

aakr

(8)

of households

by thaw received

divided

of

I shall

accounting

no! discuss further Anderson’s slews on social

in his Lisaof possible indicators

( I ) Net primary

rallo for boys ( J ) Female illlreracy

calone supply as a percentaRe

Telephones

has been pushed way beyond eco-

nomic efficiency for ideological reasons, growth in electricity consumption is highly correlated

of requirements.

per thousand people. (9)

by Ihe bottom

20 percem.

Household

rile. (‘)

school enroilmen~

( 4 ) Male Rlireracy Percentage

rate

rauo

(5 ) The

of the population

with

income received by the lop 20 percem

( IO) infam mortalID

rate (

I I ) llnder~iive

mortalby

rate (p. 64) ’ “Evidence”

means ( I

) a consis~em

defuwion

of species: (2)

For a criuque

Bean. and Edaard

,Vew York Times (25

0

Wlson.

a reliable counr of abundance

al earlier times. ( 3) a reliable

of our position see the Letter IO rhe Edilor by Dawd Wilcove

search suegesung exuncllon

May 1993)

p A 12.

and Michael

with almost every good thing one can think of. One might examine the case for sa)ing that electrical consumption per capita is a Rood proxy for quality of life. Anderson’s discussion of carbon dioxide is poor. partly because modest increases n.ould have positive effects as fertilizers

and reducers ofdemand for water. and

partly because ofdoubts about whether substantial global warming will actually occur. Recon. sideration

of

the

question

reversal of the earlier

has also caused

position

that aarming.

by false assumptions about the political bias of Blueprint [ 11 mainly. it seemed. because ad\.ocacy-basedenvironmental policy was taken to mean advocacy of free markets. This is an inexcusable interpretation” ( p 3 ). Why would “advocacy of free markets”.

the only

knonn

economic system that combines liberty prosperity. be considered “inexcusable”5 In further

reaction to criticisms

with

of Bltreprirtl

for n Gree?r Economy, Pearce observes that economic thinking does not value the environ-

unless it were very great indeed, would lead to flooding of coastal areas. It is likely that marming

ment per se but rather human preferences.

m.ould lead to groath

environment hi@tly. Pearce thinks that can be reflected in nem’ processes of valuation that

in a’ater vapor that would

increase precipitation that would fall in arctic areas as snow and not inundate oceans. Lf one were concerned about the build.up

of carbon

dioxide. as many others have noted. one might not wish to reject nuclear power out of hand. In his general conclusion. looking at his

lf

people are saying that they value aspects of the

would show up in national income accounts, in corporate balance sheets. and hence in prices. But ifhis critics mean that environmental values are outside the realm of economic values. then

measures of overall well-being. Anderson finds considerable social improvement o&et b}.

it aould not be possible to compare one set of preferences with another. Perhaps his most telling remark is that it is not only industrialists

comparable

who pollute but rather that “we are all polluters.

esample”. threatens

environmental

degradation.

“For

he writes. “growing desertification current improvements in calorie

supply; pollution

will threaten current improve.

W’e the consumer send signals to industry as to v..hat it is we want to buy. Our demands therefore contribute

to the ‘pollution

protile’ of

ments in health” ( p 91 ). He is wrong both on desertihcation and on pollution. Moreover.

the economy” ( p. 9 ) What Pearce wishes to do is to intervene within the price mechanism so

only by considering carbon dioxide emissions (which he does not note are declining steadily

that environmental

as a proportion

of

production

in

capitalist

countries) as a siRn of environmental harm. can he reach a negative conclusion. Again. estimates of what is happening to human heahh. to other

values are rated much more

highly. and then reflected in prices. and thus send signals to markets that these costs must be reduced Pearce wants the richer nations to pay twice. once for the environmental harm they have

animal species. and to the natural environment are critical m determining whether one nants

caused on their path to growth.

to

do n.hat their predecessors did. He is opposed

engage in

nem’ forms

of

envtronmental

to “no growth” policies because that would hrst reduce standards of living. thus violating his criterion of sustainability at no net loss. and

accounting.

BLliEPRlNT

and a second

time to subsidize poor nations so the!, will not

2: GREENING ECONOM

THE

W’ORlJ3

In this volume David Pearce continues his efforts to demonstrate how and why “economics can and should come to the aid ofernironmental policy” (Preface). He complains bitterly that “some potentially sensible critiques were marred

make tt far less likely that mtemational transfers of resources from rtcher to poorer countries would take place. He wishes to design an incentive system that would lessen depletion of the ozone layer. decrease “the possibilig, of global warming” (p. 12). maintain existing biok.@cal diversity. uniquely wonderful

and prevent “the loss of environmental assets such

.ACCC)lilriT1NG

a~

tropical

forests” ( p. 12). Though

FOR

only a possibilir).. for instance.

Pearce

argues

that the prospect

hrture

generations

of harming

“a precautionar)

approach” (p. 13). On this basis. western civilization could be the first fo collapse b) virtue of its insurance burden. Making public policy

on the ground

of dire imagining.

used to object

during

the Cold

full

4’3

costs (and

environment”

(p.

benefits)

of ‘using’

IO-L ). by modifying

the

national

accounts as he thinks should be done in rich countries. because the poor ones lack the information and the resources. His concern is that the value of products in poor countries is

the

worst-case scenarios to which the same sort of people

EM-IRONMEM-

the

he deems

global warming

justifies

THE

W’ar.

too low to encourage the kinds of conservation practices he would like. linder these conditions. what sense can it make fdr him to talk about very long-run

considerations?

The alternative

would lead to vast instability as well as huge waste of resources. Replacing Pascal’s wager

would be for these countries to go on the path to substantial economic growth. which requires

with the environmentalists’

capitalism. But as that is considered the source of pollution. his account peters out into

wager depends on

a false assumption no harm if the wager is false. great benefit if it is true.’ A point of agreement

between

us is that subsidies to cattle

fmers to clear areas of Brazilian destructive. Changes

in

accounting.

then.

forests are depend

on

agreement about scientific knowledge and about how to treat doubts about that knowledge. The dependence of environmental measures. such as carbon

taxes. on knowledge

about whether

global wamling will occur, how soon. and at what level. is near total. Thus Scott Barrett’s

suggestions that project appraisals be altered so as to make distant benefits more important

lf.

as Pearce shows in his chapter on Population Growth. the introduction of market incentives greatly lowers the growth of population. improved

productivity

in China

as the

and Malawi.

among other places. despite their huge populations and population densities. shomx. then we would also have to agree with him that “Man) other factors generate resource degradation. especially misdirected policies concerning land

desire to take action depends on his belief that

tenure and prices. whilst poverty functions in a

carbon dioxide

‘disabling’ role” (p. I33 1. It is good that Barbier’s chapter on Tropical

“persists in the atmosphere

for

a long time” ( p. 3 I ). lf instead of staying upstairs for 200 years (as many climate models assume)

Deforestation

contains

numerous

cautions

its residence time turns out to be much shorter, it would take a lot longer for COr to gron. in

about the actual extent of the phenomena. One would think that sentences beginning

the atmosphere.

“Whatever

V(ben Amarkandpa

there is substantial

agreement

says “again

that the use of

CFCs and halons has led . . to an increased incidence of skin melanomas. cataracts and related diseases”. I believe the opposite is more nearly correct. At a minimum. if the ozone la!.er thins for a few weeks over the Antarctic. thereb! increasing

ultraviolet

radiation

in those areas.

one cannot get sick in London or New York. The sheer gullibility of similar reports in these books is remarkable In a useful overview of environmental -leterioration in poor countries, Dan Barbier B .‘S against trying to”correct market prices to rellect

’ For a subsmmive

analysts of Ihe precautionaq

pnnclple. see

the actual

figure” (p.

l-13)

would

give cause for doubt. Instead. we are treated to a disquisition on values that other people won’t pay for. like “existence value”. and “carbon credits” to slow d0w.n global warming. There is helpful discussion of how now-degraded land might be put back into use as well asalternatives to agriculture

based on slash-and-burn methods;

in the end. Barbier’s down

to

richer

recommendations

peoples

subsidizing

come poorer

peoples. By now the reader knows full m.ell that I do not agree with Tim Swanson’s view that “the

global

the las chapter

loss of

biological

of \a ddavsk) ( 19%

I

diversity.

or

‘biodiversity’,

is currently

one

of the major

problems facing the world” (p. I81 ) because the estimates on which it is based are invalid. Though

Swanson is aware

that “extinction

is

Garcia-L.orca’s prologue to The Butterf7y’s EM Spell. “Tell Man to be humble. In nature, all things are equal”. This is hardly the competitive individualist

picture of nature red in tooth and

itself a natural process” (p. 184 ). he prefers to dwell on mass extinctions where “there is a

claw. Socially constructed views of nature are used by partisans on all sides to defend their

potential

way of life. But that need not end the matter.

threat

fo the entire

(p. 18-i ). He does pick called Net Photosynthetic is supposed

to

reflect

global biology”

up a new measure Product (NPP). that total

value

from

an

ecosystem. Using figures from L’itousek. Ehrlich. Ehrlich and Matson, he concludes “that we reduce NPP a full IO percent, more than twice whar we consume. in terms of pure wastage” ( p. 18’). Is this true? Consider the example he Rives

immediately

thereafter:

“This

[waste]

results most dramatically when good soil is paved under for a road. but also occurs when a

Vi%ere is the evidence that poor but equal in society is more environmentally benign than rich but unequal? Just as the German Green Party has been split between the “realos”. represented by the authors of this book. and the “fundis”. the quote born Garcia-Lorca might be representative of deep ecologists who view their environmental values as priceless. which Pearce argues against. Thus the advocates of environmental

accounting

find

fo

themselves placed between those who would abandon market economics, and those who

produce a common commodity such as corn” ( p. 18’ ). I wonder whether Pearce agrees with

would make substantial changes in capitalist accounting and its prices so that it produces

this. It is redolent

outcomes

natural

forest or pasture

is plowed

under

of those reports that say the

world is losing valuable agricultural land while. outside of civil wars and droughts, we see

prefer

more

the

surpluses. I should think that, to an economist,

adherents improving

the idea that paving over soil is unproductive must be mind-boggling. A lot more of this will

economy.

go on if economic

considerations

by ntive preservationism. The excellent chapter Economics

and Ethics,

on

Environment. Turner.

provides an informative discussion of difIerenr modes of environmental thought. Within the environmentalist camp. he writes. The essential contrast. then. is between a modified CBA [costand

sustainability

paradigm

conservationisr -

favorable ecology

to them. side

I rather

because

its

do not pretend to be engaged in markets and understand better, I

think. that they want a quite difIerent

political

are replaced

by R. Kerry

benefit analysis] approach-the

deep

. . and the

preservationisr bioethics paradigm. which expands the objective.function to be maximized to instrumental plus intrinsic values” (p 22 I ). Speaking for the other authors as well. I take it. Turner argues. “for the modified economic paradigm ;ls a means of integrating economic etliciency and intergenerational equity”( p. 222) because ir protects the poorest communities as well as “the environments of sentient nonhumans and non-sentient things” (p. 222). The book ends with an epigraph from Federico

LONDON’S GREEN SPACES: Wl+AT ARE THEY WORTH? Thus I have more sympathy than might be imagined for John Adams’ report for the Department of Transport on behalf of Friends of the Earth and the London Wildlife Trust. In his report Adams offers a critical

evaluation

of

whar he considers rhe very low value the Department of Transport places on open spaces it would acquire for its road-building schemes. The Department. he argues. does not follow the economic doctrine of opportunity cost, which it claims to follow, as illustrated by the fact that several cemeteries sold at absurdly low prices were picked up by private developers who subsequently sold them at much hlgher prices. Of greater interest for this review is Adams’ criticism of Pearce’s position on sustainable

ACCOlNTlNC development. Report space

He acknowledges

placed and,

much

that the Pearce

higher

therefore,

FOR IHE

that

ENVIRONMENT

(pp.

34).

By invoking

values on open

existence

the

whatsoever

usual

road

4’5

option

values

and

values, it seems to me, any value could

be put

on environmental

transport schemes would tail their cost-benefit

preservation.

analyses. His objection is that “in advocating the placing of money values on the environment it

In order to show that valuation is possible, the authors discuss indirect measures of willing

[the Report 1evades crucial problems of evalua-

ness to pay for certain aspects of environmental

tion, and so doing paves the way for a consistent undervaluation of the environment” ( pp. 9-10 ).

quality. One of these methods, contingent valuation, seeks to create artificial values by

Pearce’s substitution

asking people what they would be willing to pay under various hypothetical scenarios (p. 5).

of willingness

to pay for

willingness to accept compensation, Adams contends, ignores the consideration that willing

There

is now considerable

ness to pay may be based on available funds. but

legitimacy

of contingent

willingness

practised.

Daniel

to accept

may be quite

“The pursuit of cost-benefit

diRerent.

analysts of every

dispute

about the

valuation as currently

Kahneman

has shown,

instance. that if the same content

for

is placed in

man’s price”, Adams concludes, “is corrupting. It used to be accepted that people ought to hold

questions that are phrased in ditferent ways, wildly ditferent answers emerge. An important

certain

criterion

things, the most valuable things. above

price. lfthis is less true today it is a result of the increased acceptance of the cost-benefit ethic” (p.

12).

He concludes

that the “only

secure

[of London’s green spaces] lies in a

defense

of rationality

lost (Kahneman

-

transitivity

-

is also

& Knetsch. 1992a.b; Kahneman

et at.. 1993). At the same time that they insist upon both the possibility and the meaninghtlness of valuing

public consensus that they are too valuable to

aspects of the natural

be sacrificed to the convenience

Barde and Pearce claim that these measures cannot be like the physical sciences because

of motorists”

(p. 13 ). Without presuming to have an opinion on this particular matter. I think Adams’ view would

do less damage to public

placing

specified

objects

off

economy

limits

than

by by

altering national income and firm accounts. and hence prices.

environment,

however,

they are part and parcel of human behavior.

lf

being like the physical sciences means a lack of reliable

measures, then we are back to square

one. In regard to an eftbrt to monetize mental

damage

due

to

air

environ-

pollution,

soil

contamination. and noise and water pollution, the authors write that “It cannot be claimed that the values of the data . . . correspond

VALUING THE ENVIRONMENT: SIX CASE STUDIES In their introduction.

Jean-Philippe

some natural scientific

Barde and

David Pearce introduce concepts that in their view would make protection of what they consider

environmental

assets more

addition to use values in conservation

likely.

In

areas, they

measurement

exactly to of valua-

tion” (p. 34 ). lf there are reliable measures. we need to know about them. Placing very high value on protecting

the environment

for its own

sake, which is what the argument is about in the lirst place. would render neoclassical economics and its central doctrine

of opportunity

wish to add option values( future uses that might

costs (a good is worth what one has to give up

be made of this area, though no one contemplates them now), existence values (the value

for it) useless. One of the authors’ case histories consists of estimating the costs of “defensive expenditure” (p. 32) for mitigating environmental damage. These costs are estimated to have grown to somewhere between 5 and IO percent of GNP

to those for whom the mere existence of an area in its natural state. though they never expect to visit or use it, is worthwhile), and indirect values that the protected being viewed

area might

enhance

as part of an ecological

upon system

(p. 32) for Germany.

Whether

these expendi-

tures are based on reasonable measures of harm or whether they are the result of political power in enforcing regulations on industry is an important question to answer. The authors acknowledge that cost-benefit analyses are themselves

expensive

several years to prepare. Quite difiiculty of ftnding appropriate

and

take

apart Born the costs to enter

also means reducing the Rap between and within societies” ( p. 33 ). Criticizing both communism and capitalism for their “extreme inequalities of wealth” while brin@ng “humanity to the brink of environmental

bankruptcy”

(p. ‘6 ). their claim

“that we need a radically new economic rationality ” comes as no surprise. The best I can d&cover of what this means is that their new ecolo@al

the

economics “subordinates economics to the pro-

rat ionale for spending this money rests squarely

cesses of life. rather than. as has been the rule so far, placing life at the service of economics” (p.

into on

national

income

estimates

of

and Brm accounts.

environmental

damaRe.

dealing with other environmentalists.

In

Barde and

I 1). They do see that if inequalities

of power or

Pearce note that “time and again, cost-benefit

other resources are p;reatly reduced, the market

analysts are confronted with the question as to why phenomena such as the dying of forests and

might be “a wonderful democratic mechanism” (p. ‘2). Their efgalitarianism is up bent.

the pollution of the North and Baltic Seas. which are so obviously undesirable, should require any

Green Economics is full of false charges about harm to life and the environment. I shall choose

economic-costs

calculations

or calculations”

or

just one: “The Earth’s atmosphere

is warming at

“be tainted by an association with money” (p.

an unprecedented

‘2 ). Outside of this community

is larBer than at the time of the death of the dinosaurs some 65 million years ago ” (p. 8).

of true believers.

however, evidence has accumulated st.ron& aginst the thesis either that there has been the

( Waldsterben ) or that acid

feared forest-death

rain from industry is responsible decline

Proponents frustrated

rates is preposterous.

of the global warming by their inability

theory

are

to find what they

of acid

call the traces or fingerprints signilj+ng that the earth is warming substantially. The maximum known rate of warming in the past hundred years

That

huge

devastatingeffectsdoes much lower amounts western

The claim about extinction

rate

in eastern Europe and Russia have

exists.

deposition

for whatever

rate and the extinction

amounts

not imply that the much. in the United States or

Europe are harrnhtl. On the contrary.

it now appears that acid deposition in small amounts acts as a fertilizer which accounts for the fact that trees in northern Europe are growing

and western

not only as well as usual,

is betieen

half and six-tenths of a degree, most

of which took place before l9W that is. before the great growth of industrial society and burning of fossil fuels ( Ellsaesser et RI.. 1986; Woodward & Gray. 1992; Hansen & Lebedeff. 198’). Equally off the wall is the claim that underlies the book’s

but taster than ever (Blank et al.. 1988; Mueller.

effort “to expose how much current economic

Dombois,

practice actually destroys more wealth than it creates . . ” (p. 8). The worth of this book lies

198’).

entirely in its transparency -false A GAL4 AI-MS

OF GREEN

ECONOMICS

BeBinning with such charming locutions as The Rapt of the Earth” (p. I-I 1, Paul Ekins. Mayer Hillman and Robert Hutchinson go on to state the wo objectives they ascribe to &green economics: “the elimination of poverty and the maintenance of the economy at its optimal ecologjcal size” (p. 33). For them, poverty is relative as well as absolute. so that it means not only enabling people to satisfy their needs. “it

belie& about

capitalism’s environmental damaRes. mixed with murky. notions about economics, seasoned aith a strong belief in an egalitarian way of life, make a heady concoction.

GREEN REPORTING: THE CHALLENGE

ACCOLNTANCY AND OF THE NlNETIES

There is more than a little p;uih in discussions of environmental accounting. Otherwise we

ACCOliNTtNG would

not

read

“Conventional

Dave

Owens’

accounting

lament

techniques

FOR IHE

that are

ENLlRONMEM

4--

members of his profession to undertake “a due) which

should

override

detrimental

mess we’ve got ourselves into” (p. 22). The chapter by Mike Geddes drives home the point

8s). An internal police will now replace external bodies. He advocates combining persuasion

with

its insistence

that the social audit move-

ment is not about marginal improvements directly

“attempts

but

to challenge the hegemony

of money over both the productive and society and the accountants nicians of money -

econom) the tech-

over economic. social and

with

activities

any environmentally

heavily implicated in the current environmental

legislation.

environmentally

of their

veering

employers”

toward

coercion

(p.

if

conscious companies begin to

lose out to those who do not follow their example. According to Clyde Wicks of the World Wide Fund for Nature. business contributions to the environmental movement should

political decisions” (p. 19). Dwen notes with approval the radical ecologists’ demand, not

include avoiding “the transfer of unsustainable

necessarily shared by Pearce and his followers.

and recently

that the quantity ofdemand on natural resources

bank loans “conditional on meeting targets for pollution prevention and resource efficiency”,

First World consumer behaviour to developing industrialized

nations”.

making

be diminished and the agreement among those holding such views “that the achievement of

and avoiding

such an end entails makin a sustained assault on the market system. the basic ti of which

mining activity in endangered prime ecosystems” (pp. IO-L105). The coercive, value-imposing

lies in its ineluctably

character of these recommendations

expansive tendency” (p.

20). No patching up neoclassical economics for them. A number of the chapters. written born different positions in society. are revealing. In ariting about “Green Awareness: An Opportunit) for Business”.

Janice Book straddles the fence

between reminding the environmental munity that it is only business that

comraises

standards of living and telling those in business that there is money to be made from environmentalism, but. if not. there are also severe penalties (pp. 35-38).

Alan Jackson’s account of”The

Trade Union as Environmental Campaigner: The Case of VL’ater Privatization” should remind

“any environmentally

audit movement lies in its commitment

environmental absence of

movement a socially

must share. In the

controlled

West” (pp. 23’-238). munist

governments

And I thought that comwere socialI), controlled.

meaning that politics controlled economics. Now we know where we’re at: capitalism is no more ecologically sound than communism. an appraisal of environmental

standing that the). needed a broad array of support, the unions Ershioned slogans that neatl) sum up their interests. “Keep Water Safe, Clean and Public” (p. 62). as if safe and clean were tantamount to public rather than private. On that ground. nationalization could again become popular. In explaining why the environmental debate should be of interest to accountants and accountancy bodies. Roger Adams invites the

economy.

environmental concerns are marginalized both in the Stalinist East and in the Capitalist

Obviously.

llnder.

to the

restoration of social and political control over the economy. This is a commitment which the

almost any purpose including

unions against the threat of privatization.

is hard to

miss. More forthright that most, Mike Geddes tells us directly that “the importance of the social

those unaware of interest group politics that concern for the environment can be used for defending trade

damaging

such statements cannot be based on outcomes in the

two systems. Discussing the practical implications reporting

for

industry.

Brian

Ing

of green advocates

demonstrations of pollution-abatement so as to “minimize green exposure in questioning” and “obtain a good profile with opinion-forming consumers vviU stock reader will persuasion The

so that the main supermarket chains us with confidence” (p. 280 ). The have to decide how much of this is and how much coercion.

premise

of Owens’

book. “that Green

Reporting provides the hmdamenral challenge facing accounting today” (p. xi), is modified by

aMowed IO devdop under its Former accounring rules or who would have benefited horn much

the author’s understanding

cheaper food from genetic engineering,

that almost any value

can be sought as an object of accounting.

He is

wiJJ not

realize what they have lost.

right to remind us of the dismal Failure of “inflation accounting” ( p. xi ). He is also right in

L wilt stipulate that there may be a daerent and better political economy than the one we

observing

now live under. and that this might comport with environmental vah~es. No end of history

that “unfortunately,

radical critique

[of present accounting practice J doesn’t extend to the elaboration of new ‘accounting’ systems

just yet. But, as of this moment

in time, no one

which would operate in such an economy” (p.

knows what such an economy would look like,

2 I ). Amen.

so there is no viable alternative to existing capitalism. As long as this condition remains constant CONCLUSION

The fundamentaJ

insight that contemporary

business accoundng accounts

and

are designed

-

longings

for

something

better

without being clear about the stipulate what that

national

ecunumic

to shore up capitalist

economy is correct Staying within this framework, changes in accounting may be sought to

is - improvement must be sought within the best political economy humankind knows how Co achieve.

i.e. capitalism.

Presumably.

chat is

why we are offered not a new kind of political economy but radical changes in the existing one.

produce beccer rest&s according co the canons

‘I’et this violates the fundamental insight of the critical accouncimcg movement chat accuunCing

a~neucl~&zal

ecc~nomi~~. 8uC Cltac is rtc3CwItaC

is nciciusc numbers or even accuface ~fufics ;md

those who propose altering national economic accounts and business accounting in order to

losses, but is part-and-parcel of the fabric of an economic system. Uhereas environment.alists

protect

;ue quick co point uuc, ;Lseach artcf every &ook under review does, that the ecological environ-

The

en5Wm.mertcal

results.

values ttaarr in mind.

I have argued, are likely to be

unfortunate. The larger the proportion of national product devoted to environmental Furpcises, the less wedch mill be genecrmxl. 7i%e national economies and tie people wirhin them

ment with which

they are concerned

forms a

system of elements that ought not to be cuttsicIerccf a5 seoarace parts but as an intercom-~ecred whole. tie!. do nor car? over tieir

will be made poorer, both in regard to the wealth they migJu have accumulated and in

insight to the capitalist system. Consequently. their efforts. if realized. wiU damage that

regard to their life circumstances.

economic system without enhancing anything o&r C&ut qfesenXiuniiic ermi7Jfurtert~ rzfues.

folicics wti sustainability

become

Democratic

more com%ctW

of democracy

will

and tie

be cast into

They should

take to heart the aphorism

they

greater doubt. At the same time, however. environments vi&Es Ocher *&n sheer preserva-

have adopted to the effect that no act does just one ch+A$.

tion will not be furthered. The reason is that cnuirunW#XG&S’arr !iS\&t&XS mWr &en thhan

The darkest green environmentalists want (0 re:p+ase ~:apie&sm wiCh a beC
not about the existence of environmental calastsw5 07 atic 6~ causes d h chat do occur or about the cause-and-effect relationships involved in such matters as trace exposures to industrial chemicals or the extent. if There is conflict any. of global warming. between those who expect loss of jobs or income and environmentahsts. But those who would have had jobs had the economy been

cu pr,ruuir(e appm-prriare furms c# accenting. whereas the light green varieties propose accounting changes that are incompatible with the logic of the capitalist system. Hence their internal quarrels involve rival accusations of selling out (environmentalist on the outside and capitalist on the inside) and unpracticality (radical on the outside, impotent on the inside).

ACCOLfNTlNC

Of

the

two,

the

meliorists

dangerous to capitalism.

are

the

FOR THE EMIRONMENT

more

For if their changes to

national accounts are accepted, capitalism will corrode from the inside while the system wig be held responsible

for its growing

confusion

Connectedness

-I’9

(the healthful and harmhti con-

sequences of any given thing are intertwined

in

the same objects)s it foilows that water drowns. natural food contains carcinogens, a cup of coffee contains the same amount of poisonous

(is its purpose equality or efficiency? is there a

substances as an entire year’s pesticide residues

hierarchy

from the agricuiturai and food-processing industry (Feinstein. 1988). it also follows that harms to

of good

and bad capital?)

and its

declining rate of growth. The demands of the dark green environmentaiists. by contrast, are better seen for what they- are - demands for radical

system change -

claims

for taking

considerations

while

their specific

this or that out of market

may be bought off piecemeal.

As this paragraph was written on 2 April 1993. I heard an interview with an environmentalist on public radio about President Clinton’s etforts to mediate between

loss of jobs for loggers and

preservation of old-growth forests. This con&t, she told the interviewer, had gone way beyond

environmentai \&es. to the extent they exist, are no different than other harms. Singling them out for attention

is a sign of special privilege.

ail the harms done in the world,

lf

either agreed

or claimed, had to be subtracted from national product accounts, there would Literally be no end to them. Environmental accounting is like bringing a class action suit without having to provide evidence. Just as injury

is claimed

without

a jury, so

saving the habitat of the spotted owl as a declared endangered species. Now whole eco-

costs are assessed outside of markets. A leading virtue of markets is that people have to pay for what they want, demonstrating that they are

systems are sick and it is our task to make them weli. Will critical accountants become doctors for sick ecosystems? Or will they heai themselves

putting their resources where their preferences are. No such demonstration is necessary for inserting highly subjective ideas of environ-

first?

mental

costs into

The critical accounting movement. whatever its shade of green, is an effort to compel

Critical

accountants

national

income

accounts.

seek to impose their will

capitaiism to account for the harms it does. More

through accounting bodies. And I thought they were opposed to rule by experts!

precisely. those who profit most t+om modern technology, according to the “polluter pays”

From a broader cultural perspective. accounting is (and could be even more so) a funda-

principle, are to be required to pay for its harms through the price system by making their estimated costs part of obligatory accounts. At first blush. this attribution of cost may appear reasonable. Alter ali. costs of doing business are regular parts of company accounts. And if these costs depreciate environmental assets, ought they not be expensed just like other assets? Right? No. wrong.

capital

The most important thing to be said is that (virtualiy ) everything that does good also does harm. lf harms were reasons for stopping things. for instance, no hospital in the world could stay open due to the prevalence of iatrogenic (hospital-caused)

disease. From the Axiom

’ Man) examples are cited in \K’ddavsk) ( 1988).

of

mental

discipline.

What

could

be

a more

hmdamentai ground for the construction and testing of meaning than the efforts of human beings to hold each other accountable’ Grounding accounting in ways of life, including of course. their power relationships. requires a general theory containing a typoiogy of viable cultures, and an explanation of how people who prefer each culture seek to hold both their comrades and their opponents in dtierent cultures accountable. Each way of life has forms of accounting fit for its purposes. Thus we might expect fatalists to seek to escape Tom audit. individualists to focus on post-audit (the (in )famous ‘bottom line”). hierarchists to prefer

both pre-and-post

audit to determine

who has

the right to do what. and egalitarians audits into measures not of economic but of equality now extended

the contributions

to the world’s knowledge

and

health from the poor countries? Where are their

to alter growth

contributions

into the environ-

to feeding, clothing.

and housing

the world’s peoples? Or is critical accounting to be critical of everything except its own egalitarian presuppositions? The accounting

ment (Douglas. 19’8: Thompson el al.. 1990; .Schwarz & Thompson. 1990). so as to hold the established cultures (the individualists and

profession

hierarchists ensconced as corporate capitalists) responsible for the inequalities they create and

will

be better

served

by rooting

its subject matter in a pluralist conception of political cultures than uncritically adopting

maintain.

the

Taking a walk before going to work this morning. I ran across a bumper sticker saying

another. Should accountants

“Live simply that others may simply live.” That

say of life. along with their accounting principles,

says it all. Or does it? A strong case could be made that people in rich countries who con-

if they discover that the globe is not warming? \Xhat is the value of a normative stance so easil)

sume more also produce world

more, giving to the

more than they take from it. Where

stance

of

undermined

are

one

way

of

life

change

to

their

attack

preferred

literally by changes in the prevailing

winds?

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