The Intersection of Economics & the Natural World with Marc Conte, Associate Professor of Economics at Fordham University
Aligning actions with the true cost to society is crucial.
Marc Conte is an Associate Professor in the Economics Department at Fordham University, a faculty research fellow at New York University, and a recent Visiting Associate Professor at the Yale School of the Environment.
As an environmental economist, his research pursuits often explore how market prices fail to accurately reflect the impacts of market actions on the environment (and the resultant implications for society) and how market interventions can be used to achieve more desirable environmental and social outcomes. Prior to his arrival at Fordham, he was a post-doctoral research fellow at Stanford University, where he was a key contributor to the Natural Capital Project. Marc earned his Ph.D. at the Bren School at UCSB, as a trainee in the NSF-funded IGERT Economics and Environmental Sciences program.
Marc developed an interest in the environment at a young age, thanks to time spent outdoors with his family, notably exploring the ponds and beaches of Cape Cod. He developed an academic interest in economics and ecology while an undergraduate at Dartmouth College. He continues to be an active hiker and is an enthusiastic amateur birder, whose 2020 highlights include a Lapland Longspur, Snow Buntings, and a Snowy Owl (the first in Central Park since 1890!).
Marc gave host Raj Daniels a lesson in environmental economics on episode 142 of the Bigger Than Us podcast. He also reflects on the early days of his interest in the natural world, how it intersected with his foray into economics, and his observations and objectives as an economics professor.
The Intersection of Economics and the Natural World
Excerpts from a conversation with Marc Conte on the Bigger Than Us podcast. These quotes have been edited for brevity and readability.
When many people hear the term economics, they are drawn to the idea of business and the economy, and maybe even finance. But economics is a social science that attempts to understand people’s behavior. And the lens that is used there is thinking about how people make decisions when they face trade-offs.
The idea of markets or the kind of tantalizing potential of markets is that sometimes under very strict conditions if we allow people to engage in trade in a market, they will make society as a whole as well off as it can possibly be. This is a pretty astonishing result that suggests that setting up markets is all you need to do.
Then, regulators and governments can stand back. They don’t need to intervene in our daily lives.
This is, of course, something that’s very appealing — the laissez-faire attitude and the idea of libertarianism and freedom to make our decisions.
But that result only holds under specific conditions. And one of those conditions is the idea that the price of an individual for engaging in some behavior is equal to the cost to society. So this private cost is equal to the social cost.
Economics is a social science that attempts to understand people’s behavior.
We know with environmental issues, this is not the case. Because the thing about the cost of manufacturing, any good you consume really — sneakers or your iPhone or something like that — that comes with the emission of some type of pollution. That pollution imposes a cost on society through health effects directly to people, and also the impacts on the ecosystems where the pollution is absorbed.
What Would More Government Involvement Look Like?
I think the government can play a role in society and in the economy by providing some assurance about people taking risky behavior.
What I mean by that, and why that’s important for the environment, is we have developed a society that is very dependent on energy from fossil fuels. A lot of our infrastructure is built around this, especially in the United States with our dependence on private vehicles for transportation.
You can look at the success of a company like Tesla that received several million dollars in loans from the government to get started, and I think it should be credited with motivating these major car makers — we heard the recent announcements from GM and Volkswagen is committed to electric vehicles — to adopting these new technologies.
I think that happened because the government provided funds that made the development of these new products less risky for these companies.
Now that we know the challenge posed by climate change and the damages caused by the emission of greenhouse gases, we need to introduce new technology into these markets. We need firms who are willing to take the risk of developing new products so that consumers can maintain their lifestyles while having less of an impact on the environment.
Some policies that seem well-intentioned can actually lead to undesirable outcomes.
We have centuries of experience with hurricanes in the US, and we know where they tend to happen. We know what portions of the continent are at risk from these damages.
You might think you could make an argument that the property values should capitalize on that risk. So places that are at risk should have a slightly lower value.
But maybe the infrequency of these events prevents that risk from being at the fore of people’s mind, or from being as salient as it could be. We might think of insurance—these monthly payments, or these biennial payments, every six months—they might serve as more of a reminder about these risks.
The area around Miami has some of the highest coastal property values in the world. There’s a huge incentive for policymakers there to keep property values high because that’s the tax base for property taxes. But there’s also the challenge of having to deal with all of the implications of damages from these tremendous storms.
So there is a desire probably from policymakers in the short run to look out for their constituents. “Let’s keep housing affordable, let’s provide insurance at rates that are reasonable.”
But that’s a little bit in conflict with the welfare of the constituents in the long run.
There are examples of that from around the country. There’s a National Flood Insurance Program that the government runs. People live in homes that keep getting flooded and they get money to repair it but they can’t sell the home because they can’t afford to move, or because people don’t want to buy the house because of that risk.
I believe in the potential of well-designed policy. The challenge is, of course, that people are very good at responding to changes in the way the game is played. Some policies that seem well-intentioned can actually lead to undesirable outcomes.
Policy for Environmental Stewardship
I think that the one essential policy that we may be coming to is a price on the cost of carbon — to have some dollar amount that corresponds to the damages to society, whether through health effects, natural disaster damages, impacts on the environment that have welfare effects for people, because of our interaction with nature and the happiness we get from it.
That’s a critical step to help us work through this transition, where we are really having a huge shift in the technologies that drive our society and moving away from our dependence on fossil fuels, and thinking about being great managers and stewards of the remaining ecosystems.
There’s a lot of misunderstanding. We need to come up with a way to bridge that gap so that we can communicate these ideas and emphasize that there will be winners and losers from changes in life and moving away from fossil fuels toward renewable sources, but that those winners and losers can come together in a way to make everybody better off eventually.
Evidence-Driven Decisions for the People
[We must] really be mindful about the value of different perspectives.
I think the balance that we have to strike when trying to address these problems is our willingness to be careful. And, to really think deeply about issues and think deeply about other people’s experiences, because some advice you give to someone whether it’s in our research context or in any other context may come from a good place but may not really resonate with them.
As we’re trying to come up with solutions to make life on this planet as pleasant for all organisms living on it as possible, [we must] really be mindful about the value of different perspectives.
I think we want to be evidence-driven in our decisions. That relates to data and policy, but it also relates to interactions, and it requires people to relax some assumptions that they have about other types of people.
The Full Transcript
Read the full transcript of Bigger Than Us episode 142 with Marc Conte.
Before we go, I’m excited to share that we’ve launched the Bigger Than Us comic strip, The Adventures of Mira and Nexi.
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