The value of environmental credentials

However, worthy as those thoughts are, I am perplexed as to why many see such an image as an asset only of relevance to the tourism industry.

What of other New Zealand industries?

The image of New Zealand should help in the selling of New Zealand products in overseas markets.

Surely, ‘Brand New Zealand’ has some value to other New Zealand exporters?

This reminds me of comments denigrating those who know the price of everything but the value of nothing.

Indeed, such comments are often directed at economists.

But I would argue that you can only value something if, when push comes to shove, you are prepared to give something else up for it.

And that is the true economic definition of price.

That is, what you have to, or are prepared to, give up.

And, no, price is not just defined in terms of dollars or cents, or yens, euros, yuan or rupees: although, admittedly, that is how price is measured.

In essence, economists [should] measure price in terms of what is lost, or given up.

In economists’ jargon this is a concept called ‘opportunity cost’.

Sometimes, it is more informative to view the value as an asset.

Like all assets, their true value lies in their ability to contribute to the improvement of goods, services and other items required for the overall well-being of an individual, family, community, society or country.

And then we can equivalently ask, what would be the cost, in terms of lower overall well-being, if such an asset were not possessed?

Conversely, we could establish the opportunities that may be lost, or put in jeopardy, if an asset’s value was to be diminished.

Opportunity cost

So, back to our image, and its value to other New Zealand exporters.

How much are we prepared to devote to protect such value?

But remember, it’s not dollars I’m talking about. It is about opportunity cost.

We may have to set aside some opportunities to maintain this asset.

Or in economic terms, some of our collective resources (call them dollars if you must) will need to be devoted to protecting this asset.

Alternatively, putting it negatively, how much would we lose if we neglected this asset?

Put this way, it reminds us that there are opportunities we may miss if we allow the asset to degrade.

As noted above, for the tourism industry it is probably clear-cut.

But other industries should also consider this possibility, because the world is changing.

In particular, consumer behaviour in many parts of the world is now, rightly or wrongly, including factors other than price when making decisions.

Perhaps brought to light most by climate change issues, New Zealand managed to withstand the ‘food miles’ debate with sound and sensible evidence.