14 Conclusion
Concluding Remarks
The conclusion of the book has been reached. Upon commencing the investigation with my students, I lacked precise knowledge regarding the appropriate methodology to evaluate the lakes within this beautiful, unceded Secwépemc territory. Initially, a cautious methodology was employed to evaluate the annual value of ecosystem services rendered by lakes to the community and beyond. This technique involved utilizing the benefit transfer method, which relies on values derived from previous research that may not be directly applicable to the present analysis. Hence, this enabled us to establish a baseline (minimum) assessment of the ecosystem services rendered by these significant biomes within the Earth’s inhabited environment.
Furthermore, the students actively integrated and engaged in the exploration of Indigenous values within their own chapters. One of the most challenging aspects of this study involved determining the intrinsic value of lakes as a prominent component of our natural resources. The annual flow of ecosystem services provided by lakes undergoes a process in which economists apply the social discount rate to ascertain the present value of the natural asset. Determining a suitable discount rate is a matter of subjectivity and has been a topic of contention within academic discourse.
An inverse relationship exists between the discount rate and the perceived value that the present generation assigns to the provision of environmental services for future generations. The concept of discounting the future at significantly high rates is a challenge when considering Indigenous values, as it contradicts their perspectives. I have spent considerable time contemplating how to include a social discount rate that aligns with Indigenous principles regarding the well-being of future generations and the preservation of natural assets. I have debated with my students about this issue, and we have arrived at a potential solution to use the lowest possible discount rate.
From an economic standpoint, there are two prevalent factors that contribute to the act of discounting: the social rate of time preference, also known as social impatience, and economic growth that presumes an increase in the standard of living for us humans. Nonetheless, as elucidated in the aforementioned chapter on the evaluation of lakes’ global significance, it is imperative that we refrain from regarding the element of impatience when addressing matters that have repercussions for forthcoming generations.
Famous Economists on Social Discounting — Accounting for social impatience when addressing social discounting is view negatively by famous economists, who stated the following:
- Ramsey (1928) stated that the act of discounting for social impatience can be deemed ethically unjustifiable and attributed solely to a lack of imaginative capacity.
- Pigou (1932) described this phenomenon as suggesting a deficiency in our ability to perceive distant events accurately.
- Harrod (1948) stated that the phenomenon in question might be characterized as a “human infirmity” and a “polite expression for rapacity and the conquest of reason by passion.”
- Solow (1974) advised to behave in a manner that assumes a social rate of time preference of zero, while concurrently discounting future spending if there is an expectation that the future will be more prosperous than the present.
However, it is important to consider why an economist may disregard discounting. If one holds the belief that future generations will experience greater wealth than the present generation, then, in accordance with the principle of intergenerational equity, the value of a dollar today surpasses the value of a dollar in the future. This perspective allows for the application of a discount to the benefits enjoyed by future generations. In his work on the economics of climate change, Stern (2007) employed a discount rate of 1.4%, mainly to incorporate per capita economic growth. In his integrated assessment model for climate change policy, Nordhaus (2008) employed a social discount rate of 6%. The observed rate bears resemblance to the actual historical rate of return of the Dow Jones Industrial Index or the Standard & Poor 500 Index. Nordhaus (2008) recommended adopting a gradual approach towards addressing climate change due to the significant discount rate, while Stern (2007) argued for immediate and strong action to contain climate change.
The utilization of a falling social discount rate has been advocated by Weitzman (1994, 1998) and Arrow et al. (2013) due to the uncertainties present pertaining to future interest rates and economic growth. According to Fleurbaey and Zuber (2012), there is contention around whether the application of a negative social discount rate could be warranted when evaluating the enduring consequences of climate policy. The presence of uncertainty around future growth necessitates the consideration of climate policies, as they tend to yield greater benefits in scenarios characterized by adverse climatic consequences.
It is reasonable to argue that individuals experiencing the highest levels of vulnerability to climate change are often those belonging to the most economically disadvantaged segments of society. The authors contend that policy priority should be directed towards enhancing the wellbeing of individuals who will experience the most adverse impacts of climate change rather than being determined only by traditional utilitarian social welfare principles. There is evidence to suggest that the overall quality of life has not experienced significant improvement, and may have even deteriorated, over the past four decades when evaluating it through the lens of the genuine progress index rather than relying solely on GDP per capita (Kudishzewski et al., 2013).
Therefore, within the context of this literary work, we employed two distinct rates in order to evaluate the significance of lakes. Firstly, it is proposed that a high rate of 1.5%, akin to the perspective put forth by Stern (2007), be considered. Secondly, it is suggested that a social discount rate of 0.1% be adopted, based on the premise that significant damage has been inflicted upon the natural environment. Utilizing a very minimal discount rate also aligns with Indigenous perspectives on the intrinsic value of nature.
Oren Lyons’ comment regarding the teachings of the Peacemaker emphasizes the significance of the concept of the Seven Generations (Public Broadcasting Service, n.d.). According to his statement, it is imperative to refrain from prioritizing personal interests, familial considerations, or even the concerns of one’s own generation when participating in a council dedicated to the wellbeing of the community. He advocated for making decisions considering the wellbeing of future generations, spanning seven generations, in order to ensure their ability to appreciate the benefits and resources available in the present. Oren Lyons, a prominent figure within the Onondaga Nation, holds the esteemed position of Faithkeeper.
In his work on the Economics of Climate Change, Stern (2007) employed a social rate of time preference of 0.1% to account for the potential occurrence of a catastrophic event during the next millennium, leading to the extinction of humanity. The integration of Indigenous values into conventional economic assessment was a prospect I had not previously considered, and I remain uncertain as to whether we have successfully achieved this integration. Nevertheless, when employing a relatively high discount rate of 1.5%, it is evident that all lakes across the globe possess an asset worth comparable to the whole value of global real estate, exceeding US$300 trillion and ecosystem services in the range of at least US$5 trillion annually (Li and Tsigaris, 2024). When equally distributed among all individuals, the total valuation comes to more than $37,500 per person.
However, it should be noted that the distribution of real estate values among humans is skewed and unequal. The collective possession of abundant natural resources is a shared attribute among individuals, although frequently, there exists a lack of knowledge or recognition regarding the significance of this valuable endowment. When using a discount rate of 0.1%, the worth of all lakes increases significantly to USD 5,500 trillion, equivalent to USD 687,500 per capita (Li and Tsigaris, 2024). This valuation is almost 3.57 times greater than the combined value of all real and financial assets created globally by humans, which is estimated at $1,540 trillion and primarily attributed to personal wealth creation. We should not forget that the valuation of ecosystem services provided here is a conservative value since many ecosystem services, such as regulating (e.g., water purification, decomposition, cycling of nutrients) and habitat (e.g., maintenance of genetic diversity), were not assessed.
When assessing all lakes in British Columbia, similar results were obtained in that the asset value of the lakes was higher than the value of all real estate in British Columbia. If we use the relatively high discount rate of 1.5%, the value of BC lakes is estimated at the minimum at $3.5 trillion; this figure exceeds the value of real estate properties valued at $2.72 trillion in 2022 by the BC Assessment. When examining the 11 lakes in the Secwépemc territory, from the smallest Inks Lake to the largest Shuswap Lake, the conservative valuation of annual flows of ecosystem services is estimated at approximately US$900 million, with a valuation of USD 60 billion at the 1.5% discount rate and $890 billion at the 0.1% discount rate. Taking even the lower valuation of $60 billion exceeds the value of all Kamloops properties, valued at $24 billion, by a factor of 2.5 times. Kamloops Lake alone is conservatively estimated to yield $122.4 million annually, with an estimated value of $8 billion at the 1.5% discount rate and $122.4 billion at the 0.5% discount rate, representing an asset worth $80,000 ($122,000) to each person living in Kamloops.
Finally, I want to thank all my graduate students for their dedication, work ethic, and engagement in this project. It would not be possible without their participation. Thank you! They used the most convenient and easiest method, the benefit transfer, but made a very conservative baseline assessment. It would be impossible to study each lake by each student using other methods, such as travel cost, contingency valuation, hedonic pricing, as that would be eleven theses and would require a longer period of time to conduct relative to the period they took the course.
“Scientists say that the human body consists of approximately 90% water. Perhaps this explains why so many of us humans go to the water when we seek solace, strength, balance and emotional, psychological, or spiritual cleansing.”
— Rod McCormick, Kanienkehaka, Professor and BCIC Research Chair in Indigenous Health, Faculty of Education and Social Work Thompson Rivers University
References
Arrow, K., Cropper, M., Gollier, C., Groom, B., Heal, G., Newell, R., Nordhaus, W., Pindyck, R., Pizer, W., Portney, P., Sterner, T., Tol, R. S. J., & Weitzman, M. (2013). Determining benefits and costs for future generations. Science, 341(6144), 349–350. https://doi.org/10.1126/science.1235665
Fleurbaey, M., & Zuber, S. (2013). Climate policies deserve a negative discount rate. Chicago Journal of International Law, 13(2). 565–595. https://chicagounbound.uchicago.edu/cjil/vol13/iss2/14
Harrod, R. F. (1948). Towards a dynamic economics. Macmillan & Co.
Kubiszewski, I., Costanza, R., Franco, C., Lawn, P., Talberth, J., Jackson, T., Aylmer, C. (2013). Beyond GDP: Measuring and achieving global genuine progress. Ecological Economics, 93. 57–68. https://doi.org/10.1016/j.ecolecon.2013.04.019
Li, X., & Tsigaris, P. (2024). The global value of freshwater lakes. Ecology letters, 27 2, e14388.
Nordhaus, W. (2008). A question of balance: Weighing the options of global warming policies. Yale University Press.
Pigou, A. C. (1932). The economics of welfare (4th ed.). Macmillan & Co.
Public Broadcasting Service. (n.d.). Seven generations – the role of chief. https://www.pbs.org/warrior/content/timeline/opendoor/roleOfChief.html
Ramsey, F. P. (1928). A mathematical theory of saving. The Economic Journal, 38(152), 543–559. http://www.jstor.org/stable/2224098?origin=JSTOR-pdf
Solow, R. M. (1974). The economics of resources or the resources of economics. The American Economic Review, 64(2), 1–14.
Stern, N. H. (2007). The economics of climate change: The Stern review. Cambridge University Press.
Weitzamn, M. L. (1994). On the “environmental” discount rate. Journal of Environmental Economics and Management, 26(7). 200–209. https://doi.org/10.1006/jeem.1994.1012
Weitzman, M. L. (1998). Why the far-distant future should be discounted at its lowest possible rate. Journal of Environmental Economics and Management, 36(3). 201–208. https://doi.org/10.1006/jeem.1998.1052
