the socialist tree calculation

(cross-posted to the Mises blog)

While the headline of a recent New York Times article employs a subjectivist notion of value, "Maybe Only God Can Make a Tree, but Only People Can Put a Price on It", the article makes it clear that the concept of price formation is something less well understood in the so-called paper of record.

Witness how the tree prices were derived:

"Step 1 was a tree census, a two-year process that sent more than 1,000 volunteers to count every tree on every street in the city. The census results were then fed into a computer program that spit out a dollar value for each of the 592,130 trees counted, a figure that does not include the roughly 4.5 million trees in parks and on private land...

It takes into account several factors, including a tree’s impact on local property values, its contribution to cleaning the air by absorbing carbon dioxide, and how much its shade helps reduce energy consumption.

Factoring in the costs associated with planting and upkeep, New York City’s street trees provide an annual benefit of about $122 million, according to the Parks Department. The study concludes that New York receives $5.60 in benefits for every dollar spent on trees."

But wait just a second-- how does a computer program determine the price for the trees? I'm reminded of Gary Galles's article "And Then a Miracle Occurs." Much like the cartoon professor who uses that phrase as a stage in a mathematical proof, the "price-calculating" black-box could only invoke some arbitrary determination based on of what the historical market demand has been for street-side trees.

Now although the city government presumingly pays market prices to private contractors for the planting and maintenance of these trees, the notion of these trees now having a determinable market value or price is quite meaningless without a market to set them. To further ascribe the role these trees play in property valuations is an empty consideration without the knowledge of what opportunities were forgone with their planting. Thus is the nature of the socialist beast.

The root of this problem :) was brought up by Mises over 80 years ago in a series of articles beginning in 1920, shortly thereafter culminated into his Socialism: An Economic and Sociological Analysis in 1922, and later in his treatise Human Action.

Lacking both omniscience and a market to determine the value individuals place on trees, planners cannot determine the opportunity cost that the trees represent, making any monetary calculation of the benefits provided a worthless spectacle of ignorance on stilts.