Professor David Pearce

Economist who priced the environment

The economist David Pearce cared passionately about the environment, but never let emotion override his powers of reason - a trait that could be irksome to those with less disciplined minds. His most provocative idea was that environmental harm was not caused by greed or indifference or malevolence. It was caused by the environment's being under-priced. To many people, the idea of pricing the environment seemed immoral. To Pearce, letting it be used for free was worse. When asked in a recent BBC interview how he justified putting a price on the environment, Pearce replied that he lived "in the real world of real policy. I look at the forces that destroy nature, and I try to use those same forces to conserve nature." And so he did.

It was the Cambridge economist A.C. Pigou who first thought of the idea of taxing pollution. Pearce's contribution was to operationalise and, yes, market the idea. He argued that the value of environmental services could be calculated, and he revelled in showing politicians his numbers. This could be done, he told them. This should be done.

Pearce's first chance to shape policy came in 1989, when he was appointed an adviser to the Secretary of State for the Environment, Chris Patten. How to reconcile the market principles of Thatcherism with the newly expressed concern for the environment? Pearce - though no Tory - gave an answer that appealed to Conservative ideology: use the market, he said. Even before this appointment, he took this idea directly to the public in the form of a book (co-authored with Ed Barbier and Anil Markandya). Blueprint for a Green Economy (1989), also known as "The Pearce Report", became something of a sensation. I believe it remains the biggest-selling book on environmental economics ever published.

Patten failed to implement the book's recommendations but Pearce's ideas were more important than his connections, and he had wisely put them in the public domain. Slowly but steadily, thinking about environmental policy changed. The London congestion charge, the climate change levy, the European emissions trading scheme - all of these tools being used today are realisations of Pearce's big idea.

In academia, sticking to a topic can be a wise move, or a poor one - and only hindsight can tell which. Pearce found his subject early, and never let go of it. His first paper on the subject of private and social values was published in 1966, when he was a lecturer at Lancaster University, years before Earth Day, let alone the Earth Summit. Later, at Southampton University in the late 1960s, Pearce formed an environmental economics study group, but was unable to attract more than seven participants. Undeterred, he persisted with his research agenda through a succession of appointments, at Leicester University, and then at Aberdeen, until finally joining University College London in 1983 to become Professor of Economics.

When I came to know Pearce in the mid-1980s, and he was head of the Economics Department at UCL, he reckoned there were no more than five environmental economists in the whole country. Today, there are dozens. Every one has been touched one way or another by David Pearce. He was as influential outside the UK as within. When the World Bank was criticised for neglecting the environment, Pearce was asked to recommend changes. His advice? Include values for the environment in the bank's evaluations of projects and policies. When the Organization for Economic Co-operation and Development looked for a common rule to guide environmental policy, Pearce encouraged the organisation to adopt the polluter pays principle. It did.

Pearce's economics were conventional, but his clarity of expression sometimes got him into trouble. Protesters once gathered outside his office building, howling that, as a lead author of the Intergovernmental Panel on Climate Change, he had recommended attaching a lower value to the life of a Bangladeshi living in Bangladesh than a Bangladeshi living in the UK. How could that be justified? Here is the way Pearce explained it to his sons, Corin and Daniel. If we valued the two Bangladeshi lives the same, then we should be willing to spend as much on the health, nutritional, and other needs of the Bangladeshi in Bangladesh as we do on his brother in the UK. We do not do this. To put the same value on the two lives in climate policy but not in our other policies would be inconsistent. That is all Pearce's calculations were saying. He certainly was not saying that we should value the lives of these people differently.

This story explains what may have seemed a contradiction in Pearce's life. He cared more for the environment, more for the downtrodden, than any activist I ever met, and yet he always kept his head. He understood that caring was not enough. To make a real difference it was essential to know why the current situation was bad. Only then would it be possible to propose ways that were sure to make it better.

Pearce was a prolific writer, but, unlike most academics, he did not write only for his peers. He wrote for students. He wrote for policy makers. In a sense, he compensated for the narrowness of the academy. And by doing that, he brought recognition to the entire field. It is just one of the reasons he was awarded the first Lifetime Achievement Award by the European Association of Environmental and Resource Economists last June.

Another reason: he gave others his time, his encouragement, and his inspiration, cultivating a new generation of environmental economists. He established a research capability in the London Environmental Economics Centre, run jointly by UCL and the International Institute for Environment and Development, and the Centre for Social and Economic Research on the Global Environment, based both at UCL and the University of East Anglia. He also created an MSc in Environmental Economics at UCL - a programme that spread the discipline to every part of the globe.

It is interesting to know the spark that lights a fire in a person like this. A story Pearce told may hold the clue. Soon after David and his wife Sue were married, a group of locals, hunting on their property, killed one of their cats. The hunters offered £12 to prevent a legal action, but, with the help of the League Against Cruel Sports, the Pearces sued. The judge, who made it clear that it was somewhat improper to take the renowned Hambledon Hunt to court, ordered the group to pay exactly £12 compensation. This meant that the Pearces' legal fees were not covered, but no matter: the judgment in their favour changed the law of trespass, and, to David Pearce's delight, was cited in the Reader's Digest Family Guide to the Law. The incident inspired Pearce to investigate the connections between property rights and externalities, between private and social values. It was to become his life's work.

Ten years ago, David Pearce moved with his wife and their sons to a farm in Essex. He cherished this place, and after the move the pace of his work slowed just a little, as he began making time for simpler pleasures. Sue has an enduring memory of her husband, sitting on his tractor, looking out over his fields, beaming a broad smile.

Pearce died very suddenly of leukaemia, only hours after being diagnosed.

Scott Barrett