When it comes to valuation…what is a product or service worth?…maybe the MasterCard folks say it best. Let’s paraphrase them. Cost of the Earth’s observing systems, satellite- and surface- based (ocean and land)? Some very few tens of billions of dollars per year. Cost of the engineers and scientists to handle the communication of the data, build the models, and convert the results into decision support, knowledge and a predictive understanding? No more than another ten billion dollars or so annually. Knowing what the Earth will do next – that is, adding to our knowledge base of the resources such as food and fiber, water, and energy, on which we depend; distinguishing between habitats, environments, and ecosystems that are robust and those which are threatened and need our immediate help; and foreseeing the onset of natural extremes such as flood and drought, heat and cold, and the approach of storms? Priceless.
We’re jumping into this topic today instead of taking it in more logical order for two reasons: first, some unfinished business related to last week’s AMS Summer Community Meeting, as reported in earlier posts on this blog; and second, because of the release yesterday of a summary report highlighting findings and recommendations from a very interesting Value of Information workshop held at Resources for the Future in late June.
At last week’s AMS meeting, one of the senior participants suggested that those of us in Earth-science-based services and supporting research ought to do a better job explaining the value of our work. In the context of that discussion, he was absolutely right, but his idea presupposed that we had the quantitative foundation to make our case. The fact is that what little we know about the value of Earth observations and their use is rudimentary, fragmented, anecdotal, and therefore, somewhat suspect. This is a nascent field.
Happily, the Value of Information (VOI) workshop sowed seeds for changing this picture (note: the author was on the steering committee for that effort). The summary report itself is worth reading. It contains a nice framing of some of the key questions and issues, and some well-honed conclusions. But the real reasons for optimism? First, the leadership by Molly Macauley and Ramanan Laxminarayan, who between them have enviable track record of scholarship in these subjects, and great connectivity to the larger community of science and practice. They were the right choice! Second, the backing of Lawrence Friedl and NASA’s Applied Sciences Program. This NASA support bodes well because it acknowledges from the start the need for continuing research in this area, even as estimates of the value of information are being developed. The real potential here comes not from a one-off workshop but from the sequence of work and workshops to come over a sustained period of years. And finally, the approach looks scalable/viral; able to develop into the fuller-level of work that is needed, and fairly urgently.
A few additional observations are in order, going forward.
To start, note this. It’s difficult enough to calculate the cost of Earth observations, sciences, and derived services. To do the needed inventories, across government at all levels, and the private sector in the United States, and to extend these inventories internationally, is challenging in and of itself. Nevertheless, that is far simpler than the calculation of the benefits, which is inherently more difficult. Many of the efforts captured by the inventory serve multiple communities and purposes. Moreover, only some of the benefits are readily monetizable. The VOI summary report addresses some of the methodologies used to ascribe value to information, and to be moderately quantitative. Each of these methodologies needs to be further advanced. At best, they make up an incomplete tool kit. New gear will be needed.
Far more importantly, however, the value of information is not only hard to measure; the value of information is not a fundamental physical constant, like, say, the density of water, or the acceleration of gravity, or the speed of light. The value of information depends, very sensitively, on the prevailing policy framework.
To see this, consider two contrasting examples. First, the electrical utility industry. Years ago, electricity generation was local. Each utility had to have the capacity to meet peak local demand. The problem was that the peak demand intervals were few and far between. Most of the year, that peak generating capacity would lie idle. Then technology advanced to the point where electricity could be put on large regional grids. Policy makers realized that peak demands were confined to small portions of the grid, so that the fluctuations in demand would be correspondingly reduced as a fraction of the total. They could then correspondingly decrease generating margin. A policy of deregulation accomplished that aim. There are other steps involved here, but the end result was that environmental information – say, forecasts of tomorrow’s maximum and minimum temperatures, and the resulting impact on electricity demand – became more valuable. By contrast, as Steve Rayner and others have pointed out, water resource managers, controlling multiple use dams on major U.S. watersheds, operate under such a web of regulatory restrictions that (in that context) two-to-three-week forecasts for wetter or drier conditions are of little or no value.
Information has to be available in time. For example, giving a farmer a highly-accurate two-hour hail forecast may get the family to safety but won’t protect the wheat fields. No action can be taken.
In a sense the VOI summary report covers both these points, especially the latter. They’re embodied in its statement that “information has the most value when action can be taken in response to the information. If action cannot be taken, information has less value.” But “action can be taken” is a little different from “action will be taken.” Look at climate change. Many argue that coping with climate change is difficult because it’s a slow-onset event (they invoke the frog-in-boiling-water metaphor). But in one respect, climate change is rapid-onset – developing in a time short compared with the time required for seven billion people to reach consensus on what to do. (Parenthetically, that’s one of several reasons why adaptation is an attractive complementary policy option. Smaller groups can reach consensus, and begin to act, more quickly; they’re already doing so, some for years!) The jury is still out on whether climate change information has been provided to the world’s nations in time; the answer depends upon the policy process.
Second – value indeed, but value to whom? The distributional aspects of value are as important as that absolute value. Policy also determines who benefits and who pays, and in what ways. Both domestic and international policies are important here. Going back to our electrical-grid example, for several years, Enron and other companies occupying the same financial-sector space were beneficiaries. Internationally, look at the Earth Observation Systems of Systems. Developing countries need assurances that information about their natural resources and environment will be as valuable to them as to the developed world. This is a hard sell at a time when Middle Eastern countries and China are buying large tracts of agricultural land in Africa, for example.
Finally, as these last comments suggest, the real value of Earth information lies in globally shared aspirations to live a little more safely, a little more comfortably, and a little more equitably, on a planet of finite resources, with fragile habitat and ecosystems, and doing much of its business through extreme events. Small wonder that these issues are becoming matters of geopolitical stability…in short, priceless.
 For comparison, the world’s GDP is about $60T per year, or more than one thousand times this much.
 Here’s a test for telling whether you’re in Washington, DC, or whether you find yourself in some other city in the United States. If your mother straps you in the infant seat of the car, and it has a toy steering wheel, and she says, “Now you can steer, just like Mommy,” you could be anywhere in the U.S. But if she straps you in and says “Now you’re on the car’s steering committee,” you’re in Washington, DC.
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The author will be out of the office for the next few days. Look for the next post on or about Thursday, August 26th.
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