Pigouvian Rabbits in Tropical Forests

Jan 9 '13

The following guest post is by Prakash Kashwan, an assistant professor of political science at the University of Connecticut.


Might the enthusiastic support for forest conservation in the tropics produce negative social and political consequences, and contribute to environmental degradation?  The answer is yes, and Henry Pigou (of the Pigou tax fame) may have foreseen the potential for such counterintuitive outcomes. In a New York Times blog post entitled “The Real Pigou”, Nobel laureate economist Paul Krugman points to a puzzle of great significance to the scholars of political economy. Discussing the concept of negative externalities, Krugman quotes from Henry Pigou’s classic work “The Economics of Welfare (1932),”

“…incidental uncharged disservices are rendered to third parties when the game-preserving activities of one occupier involve the overrunning of a neighbouring occupier’s land by rabbits”

Thinking aloud about Pigou’s choice of the rabbit metaphor, Krugman remarks,

“The principle is there, all right. But, I mean, rabbits? And no, this wasn’t written in an era when England was still a green and pleasant land; this was written in 1920, when much of the population lived in sooty, smog-ridden industrial conurbations…..Not what I expected”

Krugman’s reflections point to the classical problem of the environment – development tradeoffs. However, Pigou’s use of the rabbit metaphor to explain negative externalities is a useful reminder that even the apparently innocent and normatively desirable outcomes (such as forest conservation) may potentially produce some serious negative consequences. Moreover, because such actions or outcomes are considered to be normatively desirable, we are more likely to ignore their negative consequences. A case in point is the ongoing debates about climate change and what to do about it.

The recent spike in the frequency of catastrophic climate events such as hurricanes and floods has lent urgency to calls for action. In addition to the ongoing debates regarding domestic policies of cap and trade (California’s greenhouse gas cap and trade program is up and running), calls for global action on climate change have also intensified in recent times. One of the key proposals on the table at the U.N. conventions on climate change relates to forest conservation and forest protection in developing countries in the tropics. Because forests capture atmospheric carbon, maintaining natural forests and supporting new forest plantations anywhere in the world will reduce greenhouse gas concentration. This sounds like a great plan – developed countries can contribute meaningfully to global efforts at climate change mitigation, at costs much lower than what similar reductions at home would cost. These arguments are often used to make a case for institutionalizing international carbon offset programs (see, McDermott et al. 2011).

However, these intuitively appealing plans run into steep barriers on the ground, and the full appreciation of these challenges may be difficult precisely for the reasons that may have made Krugman wonder about the Pigouvian rabbits. One possible reason Pigou may have chosen to use rabbits in a discussion of negative externality may have had to do with the normative confusion potentially involved in a discussion of externalities. In other words, no action, however benign, should be deemed to be good (or bad) in an absolute sense. It is the consequences on Pigou’s disinterested actors, which matter more than the nature of the actions in question.  Let us now turn back to the developed country support for forest and biodiversity conservation in the tropics. Are there reasons for environmentalists to be cautious in their support of tropical forest conservation financing?

To begin, unlike in the developed West, property rights are not clearly defined in developing countries. The indigenous and other forest peoples the world over are up in arms against their governments’ claim of forest ownership (also consider the Canadian First Nations’ ongoing Idle No More movement). Given the prevalence of these conflicts, it is rather easy to see that there is high risk in proposals that promise an exchange of funds (from developed states) for forest and biodiversity conservation (in developing states).  A recent GreenPeace report articulates similar concerns against the firms in California buying carbon offsets from the State of Chiapas in Mexico) Even so, the gravity of these problems does not become apparent until one digs a little deeper into the history of political economy of forest exploitation.

The roots of forest property rights conflicts go back to the days when colonial governments, interested mainly in exploiting the rich timber resources in the tropics, nationalized vast territories previously occupied and used by indigenous peoples. Because many post-colonial governments also relied on the exploitation of timber and other natural resources to keep themselves solvent, the colonial era institutions – the combination of property rights and other punitive laws meant to protect those property rights – have lived way beyond their colonial shelf lives. It is these political economic interests of national governments that motivate government-appointed delegates to ask for finances in return for ensuring forest protection at home (Kashwan 2013). The sudden influx of carbon forestry funds creates perverse incentives for national governments and powerful market actors, leading to the phenomenon of green-grab. By this token the well-meaning advocacy of forest conservation in the tropics may have very serious social, political, and environmental consequences. In particular, the rent-seeking activities of the governments and government officials may turn the forest people against the projects aimed at promoting forest conservation, thereby reinforcing old conflicts or creating new conflicts. Such conflicts are in turn likely to lead to increased deforestation and ecological destruction.

Having said this, one would perhaps agree with Krugman about Pigou’s poor choice of rabbits as an exemplar of negative environmental externalities. Nevertheless,  Pigou may then have made a profound statement about the political economy of struggles over environmental resources. Indeed, he may have been thinking well ahead of his time.