Sunday, November 05, 2006

Land values: Environment and Development

Imbedded deeply with in the western European Judeo-Christian-Islamic cultural perspective is the idea of valuation of actions and things. When the linear concept of improvement over time towards an end goal of perfection is applied to the environment, the collision of ideas about valuation obscures the discussion about the environment. What exactly is the best use of the land around us?

Today’s, November 5, 2006, Washington Post back page editorial by Tiffin Shewmake sparks a fire which lights the controversy of best use. And the issue at the heart of best use is loaded with cultural minefields which include religion and economics, to major components of politics.

The questions then are: “What is the best use of a given parcel or parcels of land? What do we mean by best use? How will we frame the question; what term will be used to define best use?”

Working backwards through the list we start with definitions. We will include time, equity, aesthetics, spirituality, and human biology. What then will be the time frame used to define best use? Currently, we use anannual accounting calendar driven by quarterly and daily bottom line goals. Even though our financial objectives are rationally a continuation over time, for the most part most decisions are made within a 12 month frame of reference. So culturally our best use timeline is one year.

Within this one year timeframe, we invest either capital or equity. We seek returns within our time constraints. Because of the short horizon, these returns are measured in equity growth with minimal concern for resource depletion. Built into the equity or capital reporting statements is an assumption that basic resources are infinite; that energy ultimately from the sun is without end. Of course if one steps back from the brink of short term thinking this premise seems false. Every square meter removed from plant life is no longer involved in the photosynthesis process and accordingly is lower the amount of potential energy. There is the possibility of giant solar panels and a energy flow from space, but at some point this would simply block the ultimately finite amount of energy available from the sun.

The last sentence demonstrates the first challenge to assessing best use as the scale of time is usually not defined a priori in any given discussion. In other words, those with a long term view are guaranteed to collide with the current normal accepted decision making timeline.

Capital or equity presents its own challenges as we are compelled to use standard accepted definitions. Capital: “Cash or goods used to generate income either by investing in a business or a different income property; The net worth of a business; that is, the amount by which its assets exceed its liabilities. The money, property, and other valuables which collectively represent the wealth of an individual or business.” Equity: “In real estate, it is the difference between what a property is worth and what the owner owes against that property (i.e. the difference between the house value and the remaining mortgage or loan payments on a house). (Copyright©1997-2005 by WebFinance, Inc. All Rights Reserved. Unauthorized duplication, in whole or in part, is strictly )prohibited). Sure hope I can use this definition here.

Notice that immediate problem with the definition of equity. There is no reference to an environmental valuation. The returns on investment in a piece of real estate are measured in asset increase or decrease without reference to long term environmental contributions ort loss. Even an aesthetic valuation will be calculated in increase or decrease to capital or equity. At least here in the standard accounting model’s balance statement there is a line called good-will, which can begin a reflect a tangential relationship to the aesthetics of the property, or more directly the recreational use as an aesthetic contribution..

Theological discussions of best use begin to bridge the timeline differences. In western religious thinking we find a mandate or command to be good stewards of the land coupled with the ever popular, “Go forth and dominate….” . This cultural imperative lies at the root of societal choices when it come to current land valuations. Land is toi be used for short term gain.

So now we come to human need, or biology. At some level, humanity needs to feed itself; the act of eating being a rather destructive event for the most part. The conundrum is that to live humans must destroy. But further thought shows that there must be a balance between short term nutrient needs and long term environmental constraints. In other words, we cannot simply slash and burn and move on. We must find a way to restore to a balance which found a organizational structure larger than humanity. So our very biology demands short term aggressive results and at the same time requires to recycle the energy expended on immediate survival in to some type of long term balance. In some way just as humanity needs to eat and drink and will do whatever is necessary to survive, so the earth’s environmental systems will find a way to survive with or without us.

In summation, our society currently looks at land in a natural state as an infinite resource from which value may be taken. As the land is put into production, its value goes up. Land left in a “natural” or unused state is low value latent with an expectation that development in some fashion is a good thing. The other side of the coin starts with the assumption that the best use of the land is a thriving self sustaining ecosystem, and that any event which threatens or ends the self contained system in a decrease in value. To me this is the root fo the political discussion surrounding all aspe3ct of environmentalism and development.

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