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The Yasuní Effect

Economic, social and philosophical study about the true and absolute value of Yasuní National Park on Ecuador.

Pablo Begnini

Political Scientist © B.A. in International Relations ©

Universidad de los Hemisferios Quito-Ecuador

The following research is a philosophical interpretation of statistical and sociological theories about the value of the natural resources that can meet human needs. The opinions expressed in the work are the sole responsibility of the author and are intended to awaken a new social consciousness about the preservation of the true treasures that humankind possesses.

The Yasuní Effect

Pablo Begnini


The purpose of this study is to provide the information and necessary data to demonstrate the

logical and practical value of natural resources that are still in complete disposal of humanity. Using

as theoretical framework of the Paradox of Value or Paradox of Water and Diamonds, I intend to

confront the absurd system of valuation of goods with the human reality, which is in violent

opposition with the supposed logic that characterizes us as rational thinking beings.

I will try to finally conclude about the effect of this erroneous evaluation in the conservation of the

Yasuní National Park.

I. The Paradox

In 1776 the Scottish economist Adam Smith 1 , published his work "An Inquiry into the Nature and

Causes of the Wealth of Nations" better known as The Wealth of Nations. This book is considered

the first formal record of modern economics. In this work, Smith proposes, among other things, the

"paradox of value" which states that, although water is more useful than diamonds, they have a

higher price in the market.

With this disparity, Smith attempted to project into the economic theory the asymmetries that exist

between the concepts of the value of things and their real application. In a passage of Adam Smith's

An Inquiry into the Nature and Causes of the Wealth of Nations, he discusses the concepts of value in

use and value in exchange, and notices how they tend to differ:

What are the rules which men naturally observe in exchanging them [goods] for money or for one another, I shall now proceed to examine. These rules determine what may be called the relative or exchangeable value of goods. The word VALUE, it is to be observed, has two different meanings, and sometimes expresses the utility of some particular object, and sometimes the power of purchasing other goods which the possession of that object conveys. The one may be called "value in use;" the other, "value in exchange." The things which have the greatest value in use have frequently little or no value in exchange; on the contrary, those which have the greatest value in exchange have frequently little or no value in use. Nothing is more useful than water: but it will purchase scarce anything; scarce anything

1 (5 June 1723 17 July 1790) Was a Scottish moral philosopher and a pioneer of political economics, is the author of The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations, is considered his magnum opus and the first modern work of economics. Smith is widely cited as the father of modern economics and capitalism.

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can be had in exchange for it. A diamond, on the contrary, has scarce any use-value; but a very great quantity of other goods may frequently be had in exchange for it. 2

On this basis, we can see how Smith introduces two new concepts in economic theory: value in use

and value in exchange. Both values measure the capacity of acquisition that a product has (in the

example of the Paradox would be water and diamonds) regulating the demand for them. Assuming

that Smith himself in his work determines the balance between supply and demand, we can say that

the supply is conditioned by the type of value that is considered for the calculation.

This approach was not introduced to the economic system by Adam Smith; people like Nicolas

Copernicus and John Locke had already attempted to solve this paradigm. The German sociologist

Karl Marx offers an interesting interpretation on this issue and proposes a solution based on labor

value theory.

According to Marx, the magnitude of the value of a commodity is measured on the basis of socially

necessary labor for its production. The production value is independent of the value of use that the

product is given and also the kind of needs that it may satisfy. Therefore, the value of water is

usually less than a diamond because the socially necessary labor to get a diamond is greater than

needed to provide water and this is independent of that water is used to fulfill a vital function and

Diamond does not. From the point of view of Marx, the paradox of value is just one example of

theoretical error incurred by the classical economists like Smith and mixed to confuse value with the

value in use and an example of commodity fetishism incurred these economists to try to figure out

the value of nature.

Furthermore, the neoclassical theory offers an alternative solution to the paradox. This theory

suggests that the value of property has nothing to do with the properties of the goods, but if the

attitudes of people towards the goods. For example, although water is a necessity, people do not

want a particular supply of water when there are sufficient alternative sources. When there are few

sources, like the desert, the value of a particular amount of water increases.

If we consider the neoclassical proposal, we note that the concept of scarcity has been introduced

and the use, value and exchange value of the property is deeply influenced by the scarcity factor.

Based on neoclassical theory and analyzing all the above proposals, arises the Marginal Utility. The

marginal utility theory says that the value of a good is not determined by how much labor was

exerted in its production. Rather, its price is determined by its marginal utility.

2 Smith, Adam (1776). "Of the Origin and Use of Money".An Inquiry into the Nature and Causes of the Wealth of Nations.http://www.econlib.org/LIBRARY/Smith/smWN.html.

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This is the least important use of the property to the person. The reasoning is: if someone has a good, used it to satisfy a need or desire: which has higher priority. The productivity of less productive use of a good is its marginal utility. This decreases with increasing availability (and vice versa). Thus the marginal utility explains clearly why the last bottle of water in the desert is so valuable (and therefore, under such circumstances, you would gladly give a diamond for a bottle of water).

As can be seen in figure 1.1 low water consumption has a much higher marginal utility than diamonds and is consequently more valuable. People regularly consume water at much higher levels than they do of diamonds and thus the marginal utility and water prices are lower than that of diamonds.

utility and water prices are lower than that of diamonds. Figure 1.1 3 It should be

Figure 1.1 3

It should be emphasized that this is a subjective theory of value: the diamonds are valuable because the marginal utility of a diamond as an ornament is very high, but that's just because people consider important ornamentation. If we were all Amish, (they do not approve these ornaments) the marginal utility of diamonds would fall. These accounts for the aesthetic value of the diamond; however it would not explain why they are more valuable than similar stones or imitations.

3 This graph shows the marginal utility (measured in en: utils) of en: diamonds and en: water as a function of the amount consumed. As a person consumes (buys) more and more diamond) http://en.wikipedia.org/wiki/File:Diamond-Water_paradox.png#filelinks

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II. Scarcity and Value

As we saw earlier, the economic theory regards the equivalence of value based on patterns just as scarce, use value, exchange value, socially necessary work to acquire and marginal utility. All these determinants directly influence the Objectivist conclusion which argues that the concept of marginal utility ignores the fact that goods have some inherent properties that make it useful. The fact that the farmer has chosen to hold grain and not gravel, is because the grain has the ability to be edible, a property that gravel has not.

These inherent properties of goods are those that increase their value in logic function that can meet the need, but the scarcity factor is the mediator who judges how much demand for it must exist.

It is then the scarcity of diamonds which leads to cost more than water? Of course, according to economic logic, but the factor that the philosophers and economic thinkers did not consider is that the scarcity is relative to the reality in which we want to shape it.

Logically, if we consider the needs of a person who can buy a diamond, we may conclude that their primary needs have been sated, because no one would save a year to buy a diamond, if don’t have to eat, to dress or live. In contrast, a person lost in the desert would be more interested in having water to drink than a diamond to wear; in the latter case the value of water would be much higher than that of diamonds.

In summary then, the scarcity factor is in turn regulated by the technical and social reality in which we consider it, and from this point of view and considering the reality of earth, “Diamonds are very precious and hard to find stones and water is what is left on earth”. Unfortunately that statement is terribly wrong.

III. Hopeless and Real Statistics

Water covers 3/4 parts (71%) of the Earth's surface. This substance can be found almost anywhere in the biosphere and in the three states of aggregation of matter: solid, liquid and gas. 97 percent is salt water, which is found mainly in the oceans and seas; only 3 percent of its volume is freshwater. Of the latter, 1 percent is in liquid form. The remaining 2% is a solid in layers, fields and ice shelves and sea ice in the latitudes near the poles. Hydrology is the study of the movement, distribution, and quality of water throughout the Earth.

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The study of the distribution of water is hydrography. The study of the distribution and movement of groundwater is hydrogeology, of glaciers is glaciology, of inland waters is limnology and distribution of oceans is oceanography. Ecological processes with hydrology are in focus of ecohydrology. 4 Figures 3.1 and 3.2 show the distribution of water on the earths surface.

show the distribution of water on the earth ’ s surface. Figure 3.1 5 Figure 3.2

Figure 3.1 5

of water on the earth ’ s surface. Figure 3.1 5 Figure 3.2 6 4 Based

Figure 3.2 6

4 Based the main articles Hydrology and Water distribution on Earth http://en.wikipedia.org/wiki/WaterRetrieved Nov/19/10

5Graph of the locations of water on Earth, http://ga.water.usgs.gov/edu/waterdistribution.html. Traced and redrawn from File:Earth's water distribution.gif

6 The amount of water on Earth is fixed. Less than 0.01% of the planet's 1.4 billion cubic kilometers is easily accessible freshwater in lakes and rivers. About a fifth of the water used worldwide comes from the 30% of the

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The human body is composed of between 55% and 78% water, depending on their actions and

build. 7 To avoid disturbances, the body needs about seven liters of water daily, the exact amount will

vary depending on the level activity, temperature, humidity and other factors. Most of this water is

absorbed with food or beverages.

The world population has increased from 2,630 million in 1950 to 6,671,000 in 2008. During this

period (from 1950 to 2010) the urban population has increased from 733,000,000 to

3,505,000. 8 Given the difficulty in obtaining potable water for human consumption in many parts of

the world, has become an intermediate concept, safe water as water that contains harmful bacteria,

dissolved toxic metals or chemicals harmful to health, and therefore considered safe to drink,

therefore is used when the water supply is compromised. This water is not harmful to humans, while

not fulfilling the ideal conditions for consumption.

For various reasons, the availability of water is problematic in much of the world. Currently, an

estimated one billion 9 people have no inadequate access to drinking water. This situation is

aggravated by the consumption of unsafe water, which favors the proliferation of diseases and

outbreaks.50 countries, bringing together almost a third of the world's population lack adequate

water supply and 17 of them draw out more water from aquifers than can be renewed naturally. 10

The pollution, moreover not only pollutes water in rivers and seas, but the underground water

supply used for human consumption. But this imminent crisis is not going unnoticed by all; Michael

McCarthy member of the Common Dreams Organization describes it as:

Population growth, pollution and climate change, all accelerating, are likely to combine to produce a drastic decline in water supply in the coming decades, according to the World Water Development Report, published today. And of course that supply is already problematic for up to a third of the world's population. […] The report makes an alarming prediction. By the middle of the century, it says that, in the worst case, no fewer than seven billion people in 60 countries may

world's freshwater which is stored in groundwater. BBC News in graphics


7 Jeffrey Utz, M.D, What percentage of the body is water The MadSci Network.

8 2 nd United Nations Report on Water Resources Development in the World, p.88-90

9 UN report published in BBC.com on August 26, 2004. Retrieved: Nov/20/10

10 Ravindranath, Nijavalli H.; Jayant A. Sathaye (2002).Climate Change and Developing Countries. Springer

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be faced with water scarcity, although if the right policies are followed this may be brought down to two billion people in 48 nations. 11

For his part the BBC's environmental correspondent Alex Kirby neatly summarizes the situation saying:

The amount of water in the world is finite. The number of us is growing fast and our water use is growing even faster. A third of the world's population lives in water-stressed countries now. By 2025, this is expected to rise to two-thirds […] More than five million people die from waterborne diseases each year - 10 times the number killed in wars around the globe. 12

Figure 3.3 shows the estimated annual world water use.

1 2 Figure 3.3 shows the estimated annual world water use. Figure 3.3 1 3 All

Figure 3.3 13

All these testimonies and arguments clearly show a stark reality about one of the most important

needs of mankind. The analysis I have described above is operated as a function of the beneficiaries

of natural resources that is humanity.

But, if the initial approach of my work proposes the analysis of the relation of value between water

and diamonds we will find a violent opposition in the paradox, because in the historical moment in

which it was proposed science did not meet the development is today, and thanks to these advances

11 Michael McCarthy, Water Scarcity Could Affect Billion :Is This the Biggest Crisis of All ?Published Wednesday, March 5, 2003 by the lndependent/UK.http://www.commondreams.org/headlines03/0305-05.htm

12 Alex KirbyBBC News Online environment correspondent Water scarcity: A looming crisis? October 19


13 Facts and figures on the world's water use and


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we can now determine scientifically that the value of diamonds through the water is logically wrong because as a way of irony we have to know that water is needed to produce a diamond.

we have to know that water is needed to produce a diamond. Figure 3.4 1 4

Figure 3.4 14

Carbon is a chemical element remarkable for several reasons. Depending on the conditions of its formation can be found in nature in different allotropic forms, amorphous and crystalline carbon as graphite or diamond. It is the cornerstone of organic chemistry.

At very high pressures, the carbon turns into a diamond, in which each atom is bonded to four other carbon atoms, being the 4 sp3 electron orbitals, as in hydrocarbons. The diamond has the same cubic structure as silicon and germanium and, thanks to the strength of carbon-carbon chemical bond, is, together with boron nitride, the hardest substance known.

It is commonly known that the diamonds were produced naturally but only less than a year ago a group of Mexican scientists could make diamonds from a compound containing acetone with water, ethanol and water, and methanol and acetone with water. The manufacturing process of diamonds, roughly tequila involves heating to 280 Celsius degrees in a special device to transform it into gas. Then, in a reaction chamber, the gas is heated to 800 degrees to break their molecular structure. At this stage is where you create solid diamond crystals with a size of between one hundred and 400 nanometers.

As we can see on the placed statistical data, the water is a basic need for subsistence living. In contrast to the treatment we could give to the common goods (or ornamental ones) water is a

14“Tequila Diamonds”. Mexican scientists have managed to extract from the traditional drink of the country, microscopic and purest diamonds”.Fernando Ramírez Ruiz and Alfredo San Juan, Diamantes de Tequila Milenio on line 2009-01-18 http://impreso.milenio.com/node/8521177

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partially renewable resource and adjusted to the actual reality of our planet, we can only consume a tiny amount of it. Considering all the technical description we can conclude that even water is required for the formation of diamonds.

So the question remains, if we have shown that water resources are clearly limited and that it is an asset of vital importance, why do diamonds cost more? Possibly the answer to this old question is just as old as its formulation and to determine it we must analyze the historical baggage that the question implies.

IV. Philosophical and Historical Context

Mid-third century BC the Macedonian philosopher Aristotle wrote two of the greatest works in social science called Nicomachean Ethics and Metaphysics. In these books the prominent philosopher provides the rationale fundaments of what today we call "common sense" and proposes a number of theories about the rules of social relations. But despite the antiquity of these writings we should not ignore the profound influence of classical philosophical thought in the most important concepts of order and the current systematically social structure.

So, according to the Aristotelian Metaphysics the substance is mainly the form, that is immaterial, and the only one true substance is the pure substance. The pure forms of matter are independent of God, the intelligences of the spheres and the active intellect in man. The pure form is the intelligible element while the matter is impenetrable by thought. There is a substrate underlying change without defined characteristics is in potency, all that is changed by the action of an efficient cause. Matter always exists in conjunction with the shape that characterizes it, cannot exist by itself, and is an element of all bodies.

Simply, all existing objects are composed of matter and form, Matter is the set of characteristics that influence the way the form is, but Matter is in constant potency (so that may change beyond our control by action of an efficient cause).The Form is the abstract element that is contained in the object that is the generic concept of the thing (we all know what a car is, although we have not seen all the cars of the world we can identify one if we seen). By the way people are identical in form or in terms of human nature, but different because the matter is different.

But natural objects are in potency with respect to the completion of its form, the act is first than the potency, the act is the end that for which there is or is acquire the potency.

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In simple terms natural objects will stay in potency (in constant evolution) until its complete form be

suited to the material understanding for which they were moved 15 (the act is the end, regardless of

the application that we could give to natural objects, the adequacy of its reality its end, its

purpose of existence). Figure 4.1describes the formulation process of the appropriateness of the

water and diamonds values in relation with the Aristotelian reasoning.

diamonds values in relation with the Aristotelian reasoning. Figure 4.1 1 6 On the other side

Figure 4.1 16

On the other side in his Ethics, he made a description of the value of the objects and the tool

developed by the society of the time to make it just the exchange of goods and services: money.

Any object can be used in two ways: giving the object the use of its own (use value), or giving another (exchange value). 17

Almost two thousand years before Adam Smith, Aristotle argued about the concepts of value, but

more interesting is that the variants of the paradox of value (water and diamonds) are closely

related to a social reality a little more developed than the primitive community. If we eliminate the

15 According to Aristotle what is eternal is first and is currently in the broadest sense. God is present as an eternal source of movement, the passing of power to act, God must be topical, the First Unmoved Mover

16 Pablo Begnini, Aristotelian logic about the Theory of Value. Nov/2010

17 Aristotle, Nicomachean Ethics. Theory of value p.119

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money factor, we consider that primitive society based its economy on the free exchange of products and in this context (characteristic of the first settlers of the planet) the ecological awareness of natural resources did not even exist. Human thinking has evolved alongside the man and even we are aware of it or not, the worst mistake that a social analyst might make is to base our conclusions focused on a contemporary vision of reality that is Timecentrism 18 .

In fact the arguments of Adam Smith or Karl Marx about the disparity in the price of water and diamonds fit perfectly into the vision of the world of 18th and 19th century.

If the economic thought of the time did not facilitate the development of a theory based on reason and the real understanding of the crisis were facing or we will face in the future, the system of social and political reaction will never reach a sustainable balance. So, as I mentioned earlier, the paradox of value (which in simple terms I have tried to solve) amounts to an old question which theoretically continues until today, but possibly its theoretical framework can be analyzed better if we renewed its variants with two elements of contemporary treatment, one symbol of money and material value and the other a malversation symbol of a dying resource: gold and forests

V. Gold vs. Forests

Considering all the previous analysis, I decided to replace the variants of the paradox with two terms of new relevance. Gold has historically been the symbol of wealth and power and is now used "theoretically" as support of the physically richness and value of the currency of nations. Moreover Forests are the icon of the preservation of life and the new ecological consciousness of the world, a new vulnerable factor of the human future which is in grave danger.

But the most important thing of these two factors is the evolution of them as a monetary value. Figure 5.1 shows the development of the gold price in the last 10 years.

18 Theoretical research framework in which the develop of the research is oriented on a vision of one particular historical period, basing the findings on the same social, economic and political context.

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The Yasuní Effect Pablo Begnini Figure 5.1 1 9 As we can observe the market price

Figure 5.1 19

As we can observe the market price of gold has increased dramatically as evidenced by its scarcity or due to the strong demand that exists. But paradoxically not only forests have depreciated but their scarcity is alarming. Figure 5.2 shows the forestry situation in the United States.

5.2 shows the forestry situation in the United States. Figure 5.2 2 0 1 9 Gold

Figure 5.2 20

19 Gold Value based on the New York Close. http://www.preciooro.com/valor-oro.html

20 Loss of old growth forest in the United States; 1620, 1850, and 1920 maps:

From William B. Greeley's, The Relation of Geography to Timber Supply, Economic Geography, 1925, vol. 1, p.

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In fact the Dominican Government valued at $ 3.5 million loss over 28 million square meters of

forests, which have disappeared with 163 forest fires occurred in 2009. 21 If we consider this value

we would be talking about a near-zero value of the forest reserves. Using this relation I have

attempted to assess the Yasuní National Park.

I have attempted to assess the Yasuní National Park. As we can see and in relation

As we can see and in relation to the valuation that the Dominican Government has given to its

forests we can conclude in that the Yasuní National Park would be worth on 1227’500.000 dollars,

which is very considerable. But here's where it gets interesting because if we divide this value for the

number of hectares of the reserve and we transform these acres in square meters:

the reserve and we transform these acres in square meters: In fact, with this relation one

In fact, with this relation one hectare of the Yasuní National Park would cost $ 1250 dollars and a

square meter of the most biodiverse watershed on the planet would cost 12 cents.

But many people could still argue that the value of the Yasuní is not on the surface but in the oil

reservoir containing underground. Well, that oil is nothing more than a potential fossil fuel in a

historical period where alternative energy sources cannot be fully implemented by the enormous

interests of the Corporations which do not think to get out of the market.

Ecuadorian economist Pablo Lucio Paredes defined as follows:

[…]Esa es la gran debilidad de la propuesta Yasuní. ¿Por qué valorar en 7.000 millones? ¿Por qué no más? ¿Quién dice que la descontaminación del mundo y la biodiversidad valen exactamente la ganancia que generaría el petróleo? […] ¿Quién dice que el “valor” del Yasuní es de aproximadamente 7.000 dólares por hectárea?

21 http://economiapais.wordpress.com/2010/04/22/el-poco-valor-de-los-bosques-en-rd/

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That's the great weakness of the Yasuni initiative. Why estimate of 7,000 million? Why

not more? Who says that decontamination of the world and biodiversity are worth exactly

the gains to oil? [ hectare? 22

] [


says that the "value" of the Yasuni is approximately $ 7,000 per

Indeed as I have tried to demonstrate the value of a natural resource is simply incalculable, as well as incalculable would be to determine the enormous damage that we could make to the planet destroying what little he has left.

VI. Priceless

Theres not on Earth an economic value the can buy the miracle of life. Nor is there a material good

with which we can compensate for all the damage that the earth has endured since the mankind is

walking on it. With this simple investigation I do not intend to increase the price of natural resources

like water, but we understand that priceand valueare two different things, as the price shall

remain in force as long as stupidity in the system. But the concept of value will be developed when

the new awareness of worldwide evolution simply understands that: “When the last tree is cut,

when the last river has been poisoned, when the last fish has been caught, then we will find out that

we can’t eat money.”

22 Pablo Lucio Pardes, La economía del Yasuní, El Universo.