by David Boyle
But whoever inspired her speech, ministers and officials who had been expecting the usual rant against hippies and layabouts had to do some quick thinking. The British government was now, at one stroke of a pen, supposed to be firmly in the forefront of the green movement. The trouble is most of them didn’t know what that meant. Their attempt to answer the question launched a new twist to the story of measurement, and made the trenchant, cat-loving environmental economist David Pearce into almost a household name – and into a controversial and embattled figure on both sides of the Atlantic.
The most immediate problem was that Mrs Thatcher had recently appointed the least green of all her ministers to run the Department of the Environment. Nicholas Ridley was a heavy smoker, and clouds of cigarette smoke enveloped his desks and meetings. His main task there had been to abolish the system of local government finance so that everybody in the country – rich and poor – would pay the same amount. This highly-controversial so-called Poll Tax was about to undermine the foundations of her government, but that was months in the future. Ridley also held environmentalists in particular contempt. Even the moderate and well-respected Association for the Conservation of Energy he dismissed as being in the pay of the insulation industry.
Yet the British government was now officially green, and they also had to draft a constructive response to the recently-published Brundtland Report, Our Common Future, the most recent United Nations attempt to come to grips with the environment and development agenda. They weren’t sure how to do it. The report had introduced the idea of ‘sustainability’ – which meant making sure development didn’t damage the earth for future generations. It also covered everything from poverty to education. Where do you start? Ridley farmed the problem out and commissioned Pearce to write it.
Pearce was then at the top of his chosen profession, one of the best-known and most experienced proponents of cost-benefit analysis in the UK. He was a professor at University College, London – site of Bentham’s glass case – and had travelled all over Africa for the World Bank and other UN bodies. If anyone could hold the line between the green agenda and a British government obsessed with markets and costs, it was Pearce.
How could you create a sustainable world in practice? That was Pearce’s issue, and his answer was to make the environment expensive. Because it was free to cut down the Amazon rainforest or pollute the atmosphere, everyone just went ahead and did it. Yet there clearly were hidden costs when people did so – damage to the air we breathe causes health problems, for example. Damaged rainforest speeds up global warming, which means freak weather conditions and rising sea levels. There are real costs attached. The idea was to measure these costs and give threatened forests, views and species a monetary value.
Pearce wrote a manifesto for cost-benefit. If the government adopted the idea, it would mean armies of economists measuring every aspect of the environment. It was also a small political breakthrough. At last, a new kind of environmental politics that Conservatives might be able to embrace – it worked not by regulation but by using the market. If there are costs, the polluter should pay. Who could object to that?
When it was ready, Pearce was ushered in to see Ridley in the hideous glass and concrete building that housed the Department of the Environment. They peered at each other though the cigarette smoke and disliked each other on sight. But that didn’t matter: Ridley had done his duty and this report was headed for the dusty shelves.
Pearce delivered twenty copies, drafted a press release and the civil servants agreed to host a small press conference. Only two journalists turned up. And that’s where it would have ended, had not one of the journalists asked about the green taxes Pearce had hinted at. He had already been careful not to spell these out in the report itself because it was beyond his remit, and not the kind of thing this secretary of state wanted to hear. But in reply to the question he suggested that maybe the government could look at taxes on fertiliser, pesticides and energy. At the back of the room, the Department of the Environment press officer made urgent ‘wind it up’ gestures with his hands.
Back at home in Bedford with his wife that evening, Pearce was watching the late night current affairs programme News-night, and was astonished to see a headline on the front of the Daily Mail for the next morning which referred to a coming ‘pollution tax shock’.
‘I can’t believe it,’ he said to his wife. ‘Somebody’s stolen our ideas.’
But it wasn’t somebody else of course. Pearce’s hint that a future government might introduce taxes of this kind swept onto the front pages. ‘I literally couldn’t believe it,’ he said later. ‘Anybody’s guess is as good as anybody else’s. Was this something they wanted or they engineered? To this day I don’t know.’
But whoever was pulling the strings, it certainly wasn’t Ridley. His main political battle over the Poll Tax was going badly and three weeks later Mrs Thatcher held one of her frequent reshuffles and Ridley was gone. His replacement was the young high-flyer Chris Patten, the future last governor of Hong Kong. At 10.30 am on Patten’s second day in office, the phone at Pearce’s home in Bedford rang. A civil servant asked him if he could be at the Department of the Environment within an hour. He made it by the skin of his teeth, was ushered in to see the new Secretary of State – whom he had worked with before when Patten had been in charge of overseas aid. ‘Patten was an entirely different character,’ said Pearce later. ‘He had an intellectual and very inquiring mind and a slightly disarming style. He was quite down to earth.’
‘Ah, David!’ said Patten as he walked in. ‘What do you know about the Poll Tax?’
Pearce confessed he knew absolutely nothing about it and couldn’t help him on the knottiest political problem of the day. But within an hour or so, he had been appointed to advise him for two days a week on environmental economics. The government would embrace the idea of measuring the price of the environment after all.
It was August 1989, the Thatcher boom was at its height – the day he was appointed, the newspapers were reporting that champagne might have to be rationed because of the enormous demand from British yuppies in their pin-striped suits. Patten’s political gamble to embrace the environment was a risk, but it was the silly season and the media were delighted. They described Pearce’s trenchant style, his balding appearance, and his strange taste in stripy shirts. They applauded his green credentials, commuting to work every day by train from Bedford. They described him wandering through the forests of Botswana and across Sudan armed with a calculator. They quoted unnamed friends describing him as ‘no Maynard Keynes, but very good-humoured for an economist’.
‘The tide against the environment has turned,’ Pearce told the press. ‘But there will be a lot of continuing disasters on a lot of fronts before things get any better.’
It was a hopeful moment. Eastern Europe was on the verge of revolution, the Berlin Wall still stood but only just. And it looked as though ten years of Conservative government had, after all, resulted in senior ministers interested in safeguarding the world for the future. For Pearce, it was also the biggest chance that cost-benefit analysis had been given for decades. If it could be measured – the value of elephants, the cash cost of aircraft noise, the value of the Grand Canyon – Pearce would measure it. And by measuring it, you could set a price to it, and find a way of protecting it.
It was pragmatic in the extreme, but it was also hopeful. Yet within six years Pearce was being condemned by the environmentalists of the world as a pedlar of ‘racist economics’. He would have unleashed a torrent of international abuse on his head, and he would face a vitriolic campaign against him – including a public letter signed by leading members of the chattering classes all over the world – culminating in the humiliating rejection of his framework for tackling global warming by the United Nations.
II
David Pearce was born in Harrow on 11 October 1941, in the lull between the Blitz and Hitler’s doodlebugs and just as Keynes was turning his mind to
rebuilding the world financial system. His father was a glassblower and his mother was a school cleaner at Harrow, the exclusive private school and alma mater to the Prime Minister Winston Churchill.
His life was changed by having a future home secretary as his teacher. Merlyn Rees was then a struggling Labour candidate for the constituency of Harrow East, and it was Rees who persuaded his parents to let him stay on at school into the sixth form. From there it was Lincoln College, Oxford and a Ph.D. at the London School of Economics on the bread crisis of 1795–6. Then via three British economics departments in new universities to be professor of economics in Aberdeen, the centre of the British oil industry.
But Pearce was no dry-as-dust economist. He had enthusiasms. He collected English porcelain. He loved bird-watching in Africa. He loved animals – posters of them are emblazoned around his office at University College, and he has dedicated all his books to his cats. He now owns seven of them, plus two large dogs. At an early stage in his academic career he got interested in making economics kinder to wildlife by adjusting GNP so that the damage to nature and wildlife was accurately reflected in the national accounts. It was the start of his lifelong interest in making the economy take the environment into account.
It wasn’t a new idea, as we have seen – but it was a technique that had not been developed for some generations. When he moved to Southampton University in 1967, Pearce and his colleagues formed a small group of environmental economists. It had only six members. One of them was E. J. Mishan, whose revolutionary book The Costs of Economic Growth was just then hitting the bookshelves.
By then, cost-benefit analysis was back in fashion. The government was desperately trying to work out where to build the third London airport. They had rejected the preferred site at Stansted in Essex, and for the next two and a half years the commission chaired by the senior judge, Mr Justice Roskill, combed the evidence. To make sure there was a choice of sites, the Town and Country Planning Association think-tank put in their own planning application to build an airport at Foulness, on marshland off the Essex coast much frequented by Brent Geese.
Cost-benefit analysis had been used successfully a few years before to defend the idea of extending the Victoria Line to London’s poverty-stricken suburb of Brixton. But this wasn’t so much a calculation as a way of giving transport minister Barbara Castle an excuse to say yes, which she duly did. The Roskill Commission, on the other hand, were determined to work out the answer mathematically. They would do a cost-benefit analysis on all the possible sites – the biggest analysis of its kind ever carried out. They would put a value on the noise of aircraft, the disruption of building work, the delay of flights, the extra traffic and they would calculate the answer. For the Roskill Commission, there was going to be no value judgement at all. The figures would speak for themselves.
To avoid any chance of judgement and to keep the process completely ‘scientific’, the measurements were put together in 25 separate calculations. They were only added up right at the end of the process. And to the horror of some of the members of the commission, when the final addition was made, the answer was wrong. The site they felt was best – Foulness – was going to be £100 million more expensive in cost-benefit terms than the small village of Cublington. After 246 witnesses, 3,850 documents, seven technical annexes and 10 million spoken words, some of the planners on the commission felt cheated. In public, they stayed loyal to Roskill. The commission was excellent, said Britain’s most famous planner Colin Buchanan – a member of it – ‘it just got the small matter of the site wrong’.
The team had managed to measure the exact cost of having too much aircraft noise by looking at the effect noise tended to have on house prices. Doing the same calculation two decades later, Pearce came up with a figure of £250 lopped off the value of each house per extra decibel. But when it came to measuring the value of a Norman church at Stewkley, which would have to be demolished to make way for the runway, things got more confused. How could you possibly put a money price on that? One team member suggested they find out its fire insurance value. The story got out and reached the press. Doing it like that would measure the value of the church at just £51,000.
A fierce political debate erupted. Commission members were accused of being ‘philistines’. Pearce’s old adversary John Adams, from the University College geography department, drew up an alternative plan. Using similar cost-benefit methods, he showed that the cheapest option would be to build the airport in Hyde Park – but that Westminster Abbey would have to be demolished. The satire didn’t work: the Sunday Times published a letter from a retired air vice marshal congratulating him for recommending Hyde Park for an airport, and pointing out that he had proposed exactly the same thing in 1946.
Nearly three years after the project had started, the new Conservative government announced in April 1971 that they did not accept the calculation either. The third London airport would not be built at Cublington, as the commission had suggested. It would be built at Foulness, then re-named Maplin Sands, after all. The Maplin plan was scrapped during the energy crisis three years later in 1974 and the airport was built at Stansted anyway, but that is another story.
The residents of Cublington celebrated noisily. Their local MP Timothy Raison wrote to The Times, assuring Roskill that people burning his effigy hadn’t meant it personally. But the number-crunchers were furious. The first absolutely rational, fair and open system for making a decision had just been dumped by ministers, said the Commission’s deputy director of research A. D. J. Flowerdew in a letter next day. But he rather gave himself away when he described the decision as ‘a triumph for the ex-urbanites and subsidized farmers of North Buckinghamshire, and engineers who hope to be awarded the licence to print money afforded by the reclamation contract.’ The technocrat wasn’t quite so coolly rational after all.
But the effigy-burners were nothing to the assault from planning professor Peter Self, who wrote a book about it as a kind of revenge for the mauling he received at the hands of the Commission’s planning barristers. ‘It struck me at the time as strange,’ he wrote, ‘that so many intelligent people should apparently accept trial by quantification as the only sensible or possible way of reaching such a decision.’
It infuriated him that the new ‘econocracy’ – as he called it – were so pompous about numbers that meant so little. Anyone like Buchanan who looked at the competing sites could see that building the airport off the coast was the best plan, he said. You couldn’t calculate intuition and experience like that. Yet all the lawyers at the commission did was pick over the measurements: ‘The weight placed on cost-benefit analysis was then confirmed by the spectacle of the flower of the English planning bar gargling gingerly and reverently with the cost-benefit figures.’
The whole thing was a ‘psychological absurdity and ethical monstrosity’, he said. He advised economists to take Dr Johnson’s advice and kick a wall hard to convince themselves that the external world exists. His attack destroyed cost-benefit analysis for nearly two decades.
Pearce had been there, of course, retained by Buckinghamshire County Council. Now thirty years on, he emphasizes that the idea of valuing Stewkley church was just a joke. They never did measure what it was worth. In fact the assessors failed to measure a whole range of things. ‘They were measuring things that made environmental impacts irrelevant,’ he says now. ‘They measured the value of even one minute saving time for aircraft, but not the pollution from the road traffic or from the aircraft. There is nothing wrong with cost-benefit analysis, as long as you remember what a benefit and a cost means. If you do it badly, even bad brain surgery might lead you to think that brain surgery is a bad idea.’
III
As a practising Roman Catholic, there were clear moral reasons why Chris Patten wanted to find a new way of rescuing the environment. But there were good self-interested reasons too. Margaret Thatcher had recently embraced the idea, a recent poll had showed that 77 per cent of Conservative voters w
anted to protect the environment better, and there was an even more exciting prospect too.
Of all UK government departments, the Treasury is the most senior. It is the Treasury that traditionally scrutinizes all spending plans, and rules Whitehall through the effortless power of tradition and economics. But if spending plans then had to be submitted to the Department of the Environment to cost their environmental impact, things might be different. Patten had dimly perceived a reversal of roles in government with his own department on top.
Even so, it was a brave decision, also calculated to take attention away from the increasingly disastrous Poll Tax. Patten’s influence meant that there was soon a stream of green thinkers through the front door of 10 Downing Street. Mrs Thatcher met the high-profile Friends of the Earth director Jonathon Porritt for forty minutes. The American environmentalist Amory Lovins came away complaining about the waste of heat and light there – especially in the No 10 men’s lavatory.
And at the Conservative party conference that year, Patten sketched out a new way ahead, urging that the ‘government should regulate on the part of the consumer’. We can make a difference, he said from the platform. Pessimism threatened to ‘bring down on the heads of our children the darkness that many fear’. Next to him on the platform, Mrs Thatcher, the great deregulator, was seen to applaud.
By 1989, Pearce was one of the Global 500, the United Nations roll of honour for services to environmental protection, and in some demand – he had just completed Botswana’s national conservation strategy. But he was still one of only a handful of environmental economists in the country. He reckoned there were only ten at the time, and five of them were working for him.
The first thing to do was to prepare his report for Ridley for a wider audience. It was published swiftly and called after his cat Blueprint. Blueprint for a Green Planet, co-authored with his colleagues Anil Markandya and Edward Barbier, quickly achieved bestseller status. It was bought by environmentalists in their tens of thousands thrilled that this kind of thinking could come out of a government. They took it home expecting the usual fuzzy green rhetoric, and were taken aback by the complicated equations and implacable economic theory. But for the time being they were prepared to give him the benefit of the doubt. Hadn’t Pearce successfully stormed the Whitehall barricades?