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From ticket touts to cutting pollution, we need markets and morality

By Guy Newey Thursday 26 February 2015

This blog first appeared on Business Green.

When I was reporting on the Beijing Olympics, I wrote a story about ticket touts. One American tout* told me he had sold a ticket to the opening ceremony for $50,000; “bigger pay day than the Super Bowl,” he boasted.

A few weeks earlier, there had been chaotic scenes as Beijingers tried desperately to get hold of the last group of tickets on sale. Many of the tickets had been priced affordably for Chinese, which meant they were prime for touting to foreigners and richer Chinese. The market forces were too powerful to resist, even though such touting appeared illegal in China. Everyone in Beijing could get hold of tickets if they had enough cash. But people who were not as wealthy could not or, if they did have tickets, found it very hard to resist selling them, even if it meant missing out on the once-in-a-lifetime chance to watch the Olympics in their home city.

Did the fact that tickets were for sale degrade the Olympic ideal? Or was it just market processes efficiently allocating resources to those who wanted to catch the preliminary rounds of the fencing? Should we care and what the hell does any of this have to do with the environment?

More and more policymakers use market processes to try and address environmental problems. We have emissions trading scheme, to try and combat climate change. Biodiversity offsetting (where damage to one piece of land is compensated for by paying to restore or improve another piece of land) is being tested in the UK and is in widespread use elsewhere. Some environmentalists, suspicious of capitalism in general, baulk at their use, arguing that nature is priceless.

Should we be comfortable about using markets to solve these problems? As a society, we do not allow people to trade kidneys as we think there is something about the sale of body parts which is morally unconscionable. The ethical argument goes that our organs may belong to us, but to put a price on a body part would be an ethical affront of such a scale that society would the worse off as a whole were we allowed do it. Is giving someone a right to pollute, as trading schemes and offsetting processes do, any less ethically questionable?

In Michael Sandel’s wonderful book, What Money Can’t Buy: The Moral Limits of Markets, he discusses whether environmental protection should be left to markets. He argues against emissions trading schemes, because they make it acceptable for polluters to pollute. Moreover, rich countries can just buy their way out of environmental obligations by paying for action in poorer countries. In effect, they are touting the permission to degrade the natural environment.

Carbon offsetting was satirised on the cheatneutral website. If someone in one place feels guilty about cheating on his wife, he can offset this by paying someone to remain faithful. We would not be comfortable about that, why should we be the same with pollution?

I have spent a lot of time championing market processes as a way to address pollution, including defending the ETS and calling for biodiversity offsetting. But I am not blind to the fact that by introducing market processes, you risk changing the moral nature of the problem you are trying to solve. You give the impression it is acceptable to trash one bit of countryside, even if the overall benefit to nature is higher. The language does not help: offsets, biodiversity banking, conservation credits, pollution permits. It is the commodification of nature, and we should feel uncomfortable about it. Sandel does not argue that we should ban market processes per se, but he says we must think hard about whether the market allocation process is the appropriate one for the problem.

Moral opprobrium is a very powerful mechanism and has changed how society views many issues, including slavery. But it is not clear if it is strong enough to stop pollution on its own. Therefore we should be using both weapons – morality and market – to tackle environmental damage. Markets exist in a social context. They do not replace society.

One little way to think about this issue in the political world is when faced with someone arguing for a lower carbon price, or avoiding biodiversity offsetting, you use moral as well as economic language: ‘Do you think it is acceptable to pollute the atmosphere? How much is acceptable? What are you doing to stop it beyond your legal requirements or paying to pollute? Is it OK that your increased wealth comes at the hands of a damaged environment?

Would certainly spice up a ministerial meeting…

*The arrival of ticket touts, illegal in China, at the Olympics provided a perfect microcosm of China’s economic rise. Westerners came in with an innovation. China soon copied it and perfected it, using the advantage that they spoke Chinese and had better access to the supply of tickets. Of course, the state then came in and arrested all the touts, but I suspect the practice has not ended there…

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