Garden eels, freshly baked bread and the value of water

The short homemade video below shows a couple of spotted garden eels in action. You can go visit them yourselves, like I did, at the Aquaria Water Museum in Stockholm (which unfortunately closes down for good during 2018, so hurry!). Garden eels live in colonies of up to thousands of individuals on sandy bottoms in tropical and subtropical waters. They dig a burrow, hide about two thirds of their body (the fish is up to 40 cm long and 14 mm in average diameter) and peek up to catch foods that pass with the current. They apparently stay in the same burrow their whole life (except when mating when they move their burrow closer to a partner’s burrow).

Video: Lina Isacs

The garden eel above is in this text for two reasons: 1) I had no other water-related picture at hand when I sat down to write, 2) the mere thought of it makes me happy. Having thought a while about whether these were good enough reasons, I realized they both might fit for illustrating the topic I’d planned to write about. We’ll see if you think the same.

The bread. Since many years back, I use to start a five-week course that I teach with the following experiment. It aims to make students get some of the main points of the whole course in about 45 minutes:

From a paper bag I pick up a freshly baked bread. I tell the students I’ve bought it the same morning from a local bakery with local ingredients from organic farming, and I pose this question: “What’s the value of this bread?”. The students are not silent for long but start asking immediately what I mean. “Value? What do you mean by value?”, and I use to answer as sweeping as I can and then, instead, I divide the students into three big groups, about 20 in each, and say, “You, over there, are to discuss what you think the bread is worth and decide collectively about its value, and then write the value down on this piece of paper”, which I hand them while continuing. “And you, here in the middle, you too will discuss the value together in your group, but then, without telling anyone else, write down the value yourselves, individually, on this piece of paper, along with your name. And lastly, you, over here, without talking to anybody about it, write down what you think the bread is worth, followed by your name.” To make it more fun I use to say they don’t have to use their true names if they don’t want to, just as long as they remember what name they used, which always seems to appeal to some of the most creative (I’ve had Sten Sture d.ä., Stevie Wonder and a few other celebrities in the classroom).

Then, before handing in the pieces of paper, I tell everyone to return to their seats, and say “Now, this time it’s an auction, where the one with the highest bid has to buy the bread from me, I mean – really”, and ever since the second time I did this experiment I always add that I mean it, for real, “Because, the first time I did this the students thought it was a joke, which it isn’t – you really have to pay the amount you state, if your bid is the highest.” They are then told to write down a value on the same pieces of paper, next to the figure they already have, without talking to each other, and that when they’re done, they are free to leave the room for the upcoming break, while leaving their paper piece to me on their way out. “The winner will be announced after the break.”

A moment of bewilderment (or excitement) then always follows, when the students look around at each other, laugh and fidget for a bit, before taking action, pressed by the 15 min pause looming.

During the pause, I prepare some statistics. In an excel sheet, I write down the bid of those who made a collective choice, make columns with each individual’s bid from the two exercises, and calculate the average from the three types of individual values I now have – the ones from those who made an individual choice after having talked to their group, the ones of those who didn’t talk to anyone before writing down a bid, and the bids from the auction, which includes everyone in the class.

After the break – when it’s unusually easy to get them back in the classroom – I show them the results, focusing on the differences between the four values, before revealing the winner.

Each year, the tendency is the same: the auction’s mean is always the lowest, between 1,5 and 2,5 times as low as the highest, and though not every time, the highest mean is often the bid made collectively.

So what do I want to say with this? I let them buzz in pairs a couple of minutes. Then they easily spot the traditional methodological problems of what environmental economists call “non-market valuation”:

  • The hypothetical setting makes people overstate the value.
  • For the collective value case, peer pressure makes people want to seem better than they are, especially if those with the loudest voice are strongly engaged in environmental issues (which most of these students are).
  • For the individual value cases, norms about that one should act environmentally friendly make you state a higher value than what you’re actually prepared to pay.
  • There’s a difference between “value”, “worth” and “what you want to or can pay in money”.
  • Some can’t afford to pay the amount they think the bread is actually worth.

At this point, I use to ask them what type of value the auction value is supposed to imitate, and when I say “the market value”, the discussion takes a bit of a turn, and to be honest I might use to talk a bit too much myself from then on. “The difference between the market price and the higher values you stated, what does it represent? What did you consider then that you didn’t consider during the auction?” If someone mentions “positive externalities” I use to think I’m superfluous, but things like “biodiversity”, “animal welfare”, “emission costs” impress. Some insights, however, needs a bit more time than what we have left of the lecture, and although I don’t think I ever manage not to at least try to, I use to spare the more philosophical reflections to later in the course.

The value of water. So what does this have to do with water? The thing is that I’ve done kind of the same thing in my research, but with “real people” and a real environmental problem. In my PhD project, we met stakeholders from the area called “8 fjords” at the Swedish west coast, where marine water quality has deteriorated severely during the last decades, which is closely linked to the local cod being nearly extinct. The project treats the question of how to describe the value of that which we value in nature, but which is hard to measure in classical value terms (money).

In this project, our case-study participants were first asked to state how much they would like to pay in tax per month to make a water quality improvement come true. They were then given the task to collectively decide about the relative importance of different values, such as future generations’ needs, preservation of species, private property rights, to take a few examples.

To make the story short, we really made an effort to counteract methodological problems like those listed above. Even so, the difference between what people perceive to be “the value” of something and what they include in an amount they are willing to pay was significant. Most importantly, not even their stated willingness to pay fully captured what they perceived as “the value” of the water quality improvement.

As obvious as this may seem to most, existing methods within “conventional” environmental economics nevertheless have problems taking this into account. And to me that is not so strange. How would you describe the value of the priceless, making it visible to decision-makers – consumers included – when evaluating or forecasting the environmental and social impacts of a project, or of a private enterprise?

That’s what I and many other environmental economists currently struggle with. Especially if you tend to be intrigued by the two sides of human nature – the one being lazy to the point of not even daring to search for a relevant photo to include in an article you’re happy to have been asked to write, and the one which is recurrently moved to tears by the mere knowledge that species like the garden eel exist and thrive; even species that you never even get to see.

Lina Isacs

Doctoral Candidate at Water and Environmental Engineering

https://www.kth.se/profile/lisacs