The Tilted Incentive System


New roads inexorably appear in our scarce—and getting scarcer—unbuilt spaces. This happens because roads, in our present economic system, have value while space does not. How does this work?

Our world grows more crowded. Population grows and standards of living rise. More resources are needed to maintain these trends. More people drive to more places; there are more oilfields, mines, and logging operations; there is more traffic moving raw materials to factories and finished products to consumers.1 There is a financial payoff for building roads that link these human activities.

Money and roads

An enormous amount of money goes into roads, both old and new. Public roads are an essential service, and there are well established funding systems at federal, state, and local levels to maintain, improve, and—most importantly—extend the public road network. In addition to the extensive public road network, there are private roads that connect homes, resource extraction sites, and businesses to the public roads. Developers—of homes, mines, oil fields, shopping malls, whatever—make money, often great sums of money, through their building efforts—and roads are the backbone of their developments.

The non-monetary value of open space

Uninterrupted open space, on the other hand, is the backbone of our ecological support system. These spaces provide clean water, pollinators for crops, wildlife habitat, aesthetically pleasing views, and native vegetation. Ecological economists estimate the global value of natural ecological services as 125 trillion dollars per year [7], services for which no money is paid—so there is no direct financial incentive to maintain the health of these services. What incentives there are for natural service maintenance, are indirect and arise from the potential of loss of the free services. When someone has enjoyed a free service, its value often goes unnoticed until the service goes missing.

When a road penetrates into an open space, it inevitably diminishes the ecological value of the open space,2 and the road builder pays nothing for this loss. The builder might argue that s/he paid for ecological value when buying the parcel, and that is partly true. What is false is the assumption that the ecological value ends at the parcel boundaries. Ecological losses caused by a road are distributed across more land and more people than the parcel where the road is placed and its owner.Ecological science points consistently to lateral ecological connections, and these connections do not stop at land ownership lines. The ecological costs incurred by a road, therefore, are absorbed by more land than the parcel where the road is placed and more people than the owner of the parcel(s). There is no reimbursement to the owners or users of these external lands, or to those who utilize or depend on the ecological services and assets that they provide. The road builder gets a partly free ride.

Value that is “off the books”

The tilted playing field is the direct result of a serious problem with the economic accounting system that is used nationally and internationally. Natural resources, including ecological resources, are generally “off the books.” When coal is mined and sold, the accounting system shows the sale price (less mining and delivery costs) as a profit, but it does not account for either the loss of the resource—which might be used by someone else in the future—or for the environmental damage that occurs with the use of the resource. Economists say that resource reductions and environmental costs are externalized, i.e. outside the accounting system.

The value of open space and the cost of the loss of open space are externalized, and externalization is what tilts the incentive system. The way to solve this problem over the long term is to monetize space, which means to give it an explicit financial value.

Next: An Open-Space Future is Possible

Read more…

What is Space?
Space requires both area and distance.
Space is a Nonrenewable Resource
Space loss is essentially irrevers­ible, so space inexorably shrinks.
Roads Versus Space
New roads, and other things built near roads, always reduce space. Who wins and who loses?
The Value of Roads
Roads perform valuable services, so people will pay for them.
Protection from Roads = Protection of Space
…because roads are the first step in space reduction.
Back to: Open Space—Our Vanishing Resource
Overview of the forces behind space loss.
 Ecological economics
Additional information about dishonest bookkeeping that ignores losses of “free” ecological services, and how uninterrupted space makes sense as a natural commodity to bring into the explicit economy.
Footnotes:
1 For more about the basic motivations for road building, see The Value of Roads.
2 Numerous ecological and hydrologic effects of roads extend significant distances from the roads themselves. For an extensive review, see reference [8].