Rolf Groeneveld (ENR): Welfare economics and wicked problems in wet environments

Marine and coastal governance has been characterised as a ‘wicked’ problem: unlike ‘engineering’ problems, wicked problems lack a clear definition, relevant variables are deeply uncertain, and stakeholders have different and conflicting beliefs and values. Welfare economics ‘tames’ wicked problems by making a variety of positive and normative assumptions that have enabled quantitative normative statements. This paper traces the boundary between the two paradigms and suggests a research agenda to strengthen the role of welfare economic analysis in marine and coastal governance.

Organised by Environmental Economics and Natural Resources

Tue 26 March 2019 12:30 to 13:30

Venue Leeuwenborch, building number 201
Room C82

Regarding the problem definition, welfare economics takes a consequentialist approach, assuming that the problem definition is settled before solutions are discussed. Examples in fisheries policy abound, however, where the distinction between problems and solutions are less clear-cut. In any case, the problem definition and delineation, which includes among other the formulation of policy alternatives, is the product of a political process. A growing body of literature looks into the political processes shaping cost-benefit analyses in transport and infrastructure policy, but so far such studies are lacking in marine and coastal governance.

Approaches to deal with risk and uncertainty abound in the economics literature, but ‘deep’ forms of uncertainty, where the set of relevant variables and/or their probability distribution is unknown, are common and still difficult to deal with. Marine ecosystems are notoriously complex, poorly understood, and unpredictable. Methods to deal with 'unknown unknowns' and to integrate these unquantifiable risks in cost-benefit analysis are so far lacking.

Welfare-economic analysis necessarily assumes consensus on facts. Facts, however, are often disputed, for example the effects of pulse trawling on the ecosystem, or the extent of overfishing. At best such variety in views and beliefs reflects uncertainty, which can usually be dealt with. At worst, however, some parties involved question the legitimacy of others' views, leaving it to the analyst to decide which views are to be taken seriously. Where such disputes come from and how the inclusion of particular views in a cost-benefit analysis affects their acceptance are largely open questions.

Lastly, although welfare-economic analysis can handle heterogeneity in preferences, it necessarily assumes that values are commensurable and substitutable. The problem here is that marine and coastal governance may also involve ‘sacred’ values such as fairness, respect for nature, and safety. When presented with such 'taboo' trade-offs between sacred values and 'secular' values such as income, respondents prefer to avoid the trade-off altogether. Open questions in this regard include the pervasiveness of sacred values and taboo trade-offs, and how they can be dealt with in non-market valuation or complementary analyses.

Overall, these observations call for better decision-making procedures under ‘deep’ uncertainty, a better understanding of such issues as belief formation and ‘taboo’ trade-offs between secular and sacred values, especially from a psychological and sociological perspective, and a better understanding of the role that welfare-economic analysis can and should play in interactive, adaptable governance procedures.