20 – Thinking like an economist 3: What is your objective?

In Pannell Discussion 18, I touched on the need to select a clear objective when tackling a complex decision problem. Without a well-defined and well-considered objective, one cannot sensibly choose among the available decision options. It’s like the old saying, “If you don’t know where you are going, any road will get you there.”

For financial problems, selecting the objectives is often easy (e.g. maximum profit, or a balance between profit and risk), but for environmental problems, it can be more difficult. But that makes it particularly important to work on getting the objective right.

For example, imagine that you are asked to design a policy to protect or enhance “biodiversity”. You might start with an objective of maximising the level of “biodiversity” per dollar spent. However, definitions of biodiversity tend to be broad and non-specific. An extreme example comes from Wilson (1994, p.359) who defines biodiversity as:

“the totality of hereditary variation in life forms, across all levels of biological organization, from genes and chromosomes within individual species to the array of species themselves and finally, at the highest level, the living communities of ecosystems such as forests and lakes.”

A similarly broad definition is given in the National Strategy for the Conservation of Australia’s Biological Diversity.

“the variety of all life forms – the different plants, animals and micro-organisms, the genes they contain, and the ecosystems of which they form a part.”.

These are not helpful definitions for the purposes of decision making. The test is whether they could be used to select one environmental project ahead of another – clearly, they could not.

Practical decision making requires much more specific objectives to be specified. A key task for ecologists and environmental scientists is to provide advice to the community on specifically which environmental outcomes are more and less important, including supporting rationales for this advice.

One possible response to this challenge is to say that we should find out which environmental outcomes the community wants and values, perhaps by conducting surveys, such as non-market valuation studies. This may be part of the solution, but it misses one of the key issues. The quality of the information that surveys provide is constrained by the quality of information that respondents have about the ecological, environmental and social significance of the environmental assets in question, and often they have little idea about these things. Collecting and interpreting information of this type is a task for ecologists (among others) and it is a task that has barely commenced, at least in terms of providing information that is useful for community decision making. The significance of particular species or habitats to the community may depend on biology-related characteristics such as

  • scarcity or uniqueness,
  • the extent to which other desirable species or habitats depend on them,
  • similarity to undisturbed natural habitats (although that seems rather arbitrary to me, given the dynamic nature of natural habitats in the long term)

as well as on socially-relevant characteristics such as:

  • visual aesthetics,
  • whether the species has an appealing lifestyle (honeyeaters versus intestinal parasites),
  • proximity to human population centres,
  • visibility, and
  • provision of specific environmental services.

Biological scientists might, perhaps, feel that the former list is a more respectable target for their attentions than the latter, but the practical reality is that the items in the second list are relevant to the community. Consider, for example, whether the arguably-more-frivolous factors on the list would influence the results of community surveys, including non-market valuation studies.

This is not to say that it is ecologists’ role to find out what is important to the community in the way of biodiversity conservation. As I am conceiving it, ecologists (in concert with other specialists) would provide information that helps the community and its representatives and institutions select appropriate objectives. The objectives chosen should be specific, measurable and supported by a rationale. The objectives should not fully specify the courses of action to be taken (since that pre-empts the decision and may rule out more cost-effective options). Instead, they should specify the desirable outcomes.

Ideally, the objectives would be expressed in terms of the high-level benefits to society that biodiversity provides (e.g. specific ecosystem services, a source of genetic resources for medicine or agriculture, values related to recreation and tourism, non-use values such as existence value). In practice, planning on the basis of such broad high-level objectives is very difficult, primarily because of lack of information (e.g. about the contributions of different biodiversity outcomes to each of these objectives).

A practical fallback position is to select narrower and more specific objectives for biodiversity outcomes that are judged to provide high levels of one or more of the relevant values. A good example is provided by “Victoria’s Native Vegetation Management: A Framework for Action”, which selects an objective of overall “Net Gain” in vegetation values based on a specific vegetation quality rating system known as “habitat hectares”. Other Australian policy documents tend to express their objectives in broader, non-specific terms, such as “Protect and restore high value wetlands and natural vegetation, and maintain natural (biological and physical) diversity”, which, unfortunately, provides little real guide to decision making.

David Pannell, The University of Western Australia

Further reading

Pannell, D.J. (2003). Heathens in the chapel? Economics and the conservation of native biodiversity, Presented at a workshop of the Cooperative Research Centre for Plant-Based Management of Dryland Salinity, “Biodiversity Values in Agricultural Landscapes”, Rutherglen, Victoria, 14-15 October 2003. Forthcoming in Pacific Conservation Biology. full paper (109K)

Wilson, E.O., (1994). Naturalist. Island Press, Washington D.C.