Environmental value | perception is everything

Not a HyundaiSuppose for a moment you are in the market for a new car, a nice sporty hatchback to help you ease into mid-life.

And what if, due to some bizarre rift in the fabric of reality, I told you that for one week only a Mercedes and a Hyundai were the same bargain price. You could snap up either a zippy, sexy and undoubtedly metallic new Mercedes or equally zippy and metallic Hyundai for $20 grand.

What make would you choose?

It would be the Mercedes of course — and why not? The Merc has prestige written all over the badge on the bonnet.

As it happens and despite similar specs on performance, size and reliability, there is roughly $15k difference in the retail price in Australia between a standard Hyundai and the bottom of range Mercedes hatch.

In the real world without rifts where most folk are budget conscious it is no surprise that more Hyundai units are sold. And yet there are still enough people who value the Mercedes enough to fork out the extra cash — almost twice the amount to do essentially the same job.

Perception of value is obviously a powerful force.

The extreme of this for me is the handbag. Its functionality is always that same. Sure its looks vary from brand to brand but enough for the name on the clip to mean a handbag could retail for $50 or $5,000? Bizarre.

Here is another example.

Suppose you are accused of a crime that you did not commit. It’s a complex fraud charge and the police arrest you. Right away you call the best lawyer you can afford for even though you are innocent you know it will need the $500 per hour worth of expertise to prove it. Naturally as you are innocent and the judge agrees, the court awards you damages and you recoup all your expenses.

My point though is that at the time you gladly pay what it takes. In that circumstance of false accusation there is plenty of value in that $500 an hour.

Perception of value is also a highly contextual and personal thing. This is just as well. Individual preference for value helps create much of the complexity and variety in our society and we are the better for it. If you have the means and derive sufficient pleasure from a $5,000 handbag, go for your life [although part of me can’t get past the reality that $5,000 is roughly what it costs to keep 7 Ugandan children in school for a year].

So we come to environmental value and the same rule applies: perception is everything.

In western economies the majority of people who live on and off the land value it because it provides their livelihood. A paddock is a sheep factory and a field a grain production unit where primary production is harnessed to deliver goods for sale.

Of course there is some heritage, love of the great outdoors, feelings of wellbeing and social good that comes from growing food but ultimately it is about the production and sale of a commodity. And this production value is reflected in the price of goods and the production potential that is reflected in land value of rural properties.

Except that the end buyer of the goods, the consumer, never sees the paddock. She only sees the produce and the price sticker in the supermarket. The value to her is in what she can get to feed her family for her weekly budget, or in this metrosexual age, his weekly shopping budget.

The retailer does not see the paddock either. He [or she] just negotiates a wholesale farm gate price or better still enlists a supplier to do all that dealing. These business people see value in cost reduction and the ability to bargain down. And they use the powerful levers of volume and distribution to achieve the best price.

Their perception of environmental value is profit and we are grateful that they focus on it. Without this system of wholesale production and efficient retail we would have far less money to spend at the movies.

We could say that in this scheme of producing, buying and selling produce environmental value does not exist. The value is in the goods that we manipulate the environment to produce.

‘Ah but…’ I hear you shout. We do value the environment for itself. Why else would we have national parks, laws to prevent clearing and pollution and whole bureaucracies assembled to manage all our development activities?

Well yes, there are some picturesque, relaxing or wild patches of the environment that we ‘value’ and sometimes pay good money to visit. There are also places of cultural significance that mean a great deal to us. And yes, we have planning in place to allocate and sometimes restrict activities to preserve and maintain areas that we hold dear.

But, and it’s a Kardashian sized butt, these are not direct, back pocket values.

We ‘value’ conservation, wilderness, cultural heritage and are prepared to forego some development to retain it — an opportunity cost that we collectively wear — and yet we rarely ever feel that we have actually paid money for this. Nor I would suggest would we pay directly if pushed.

Back in the day in a lecture I gave to my biodiversity class, I asked the students what they would be prepared to pay to know that elephants still existed in the wild in Africa [the technical term is ‘existence value’]. What from their wallets or purses would they prepared to give, right there and then? $5, maybe $10 they said, with concern on their faces.  That was until I actually went round with a hat as though moving through the church pews and tested their commitment. None were actually able to part with their cash.

 

Radical suggestion

So here is a radical suggestion.

In our modern, city orientated system for living, there is no environmental value beyond a small suite of goods and services what we are prepared to pay for. No fiscal value to what the environment gives beyond what we can buy and sell because we have no system beyond cash to detect value and without cash our valuation senses have become numb.

If true I would say that this is not a failure of economics or even an unhealthy preoccupation with profit. It is actually a failure of perception. We simply do not know that we have a debt to the environment. We are not aware that we have been and continue to mine its resources without accounting the full cost.

No one has put in the marketing dollars to create the brand ‘environment’ equivalent to the Mercedes logo stamped onto the bonnet. Not surprisingly most people do not see the environmental value and happily continue to purchase the goods at bargain prices.

Even though we know that we are degrading soils, wasting almost half the food we produce and sending valuable resources to landfill, none of these things matter at the checkout. There will be few folk willing enough to buy the $4 net of sustainably produced onions when there is a net of equally good looking onions in the same isle at $1 because our perception of value is right there in the store. It happens as we compare the price per kilo to what is in our back pockets. We find it hard to make purchasing decisions on values that are distant and intractable.

 

A challenge

Here is a challenge for you.

Every time you make a purchase of anything from a tomato to a television, force yourself to consider the environmental value in the goods that you are about to buy.

Do not use these thoughts to make yourself feel guilty, go ahead and buy anyway, but do have a thought for what happened in or to the environment to make your purchase possible.

 

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