I appreciate you taking the time to write.
Jonathan Foley

Not too far from my house is the Rose Bowl. Because of the Rose Bowl… Southern California’s only species of freshwater shrimp… Syncaris pasadenae… is now extinct. The Rose Bowl destroyed the shrimp’s habitat. I’m guessing that the Rose Bowl isn’t entirely responsible for the shrimp’s extinction… but for all we know the shrimp would still be extant if it weren’t for the Rose Bowl.

The Rose Bowl wasn’t randomly built. There was certainly some decision making process. Did the shrimp participate in this process? Of course not. Shrimps can’t speak or vote or protest. So who did participate in the decision making process? I sure didn’t. I wasn’t even born yet. Did you? I’m guessing that you didn’t either.

Even though I don’t know exactly how many people were involved in the process… or who they are… I know that the economics of the process were bad. The economics were bad for two reasons…

  1. participation wasn’t inclusive
  2. the decision wasn’t determined by the participants’ willingness to pay

I doubt that everyone was allowed to participate in the decision making process. When is everyone ever allowed to participate in a decision making process?

I’m sure that your organization probably has some board that makes some important decisions. If I randomly showed up at your organization and asked if I could participate in a board meeting and vote on an important decision… would I be allowed to? Of course not. But does your board ever make any decisions that affect me? I don’t know… probably a few.

With the Rose Bowl… participation should have been entirely inclusive. Any person for any reason should have been able to participate in the decision making process.

But even if participation had been inclusive… the economics would still have been bad if people had simply voted for their preferred option…

  1. Development (build the Rose Bowl)
  2. Conservation (save the habitat and the shrimp)

Voting is a quick and easy way for people to reveal their preferences. In technical terms… it’s a contingent valuation technique (stated preference). The problem with voting is that it doesn’t reveal the intensity of people’s preferences. This is why voting is bad economics.

In order for the economics to have been good…. voting would have to have been replaced with spending. Participants would have had the opportunity to spend as much of their own money as they wanted on their preferred option. If development received the most money…. then the Rose Bowl would have been built. If conservation received the most money…. then the shrimp’s habitat would have been conserved.

The side that lost would have got their money back. There are a few issues with this system… but this is the basic concept.

With all of this in mind… let’s take another look at your conclusion…

Economics is mainly helpful after ethics and physics have set the terms of what should and can be done. Not before.

Well we certainly know that the shrimp’s habitat could have been conserved. And clearly we know that the Rose Bowl could have been built. Obviously it was built. The issue really isn’t what was possible… the issue is what should have been done.

What about the physics? Clearly they would have been pretty useless in this situation. And the ethics? Traditional ethics would also have been useless. Each side of the debate could easily accuse the other side of being unethical. It’s unethical to destroy nature… or it’s unethical to impede development. Neither side is really going to win an ethics debate.

However, in any type of decision making process regarding the Rose Bowl… economics would not have come into play only after the terms had been set. If few people had been allowed to participate in the process… then it would have been bad economics during the process. If everybody had been allowed to participate in the process… but they revealed their preferences by voting… then it still would have been bad economics during the process. If everybody had been allowed to participate in the process…. and they spent their money to reveal their preferences… then it would have been good economics during the process.

So in no case can economics be removed from the process. The only issue is whether the economics are good or bad.