Ronald Bailey on the Economic Value (or Lack Thereof) of Nature

Back in March 2009, Ronald Bailey wrote a nice review of Mark Sagoff’s book Environmental Values which argues that contrary to the assertion of some ecological economists and others that nature does not have any economic value.

Similarly, Sagoff argues that while modern ecological economists would certainly not endorse the labor theory of value, they do “generally accept the idea that economic value represents or refers to an intrinsic or inherent essence to which they attach normative significance.” Such environmental economists take one of two tacks in their quest to establish objective intrinsic values. Some try to estimate the value of ecosystem services based on people’s claimed willingness to pay (WTP) for those services. Others argue that value in nature arises from certain factors thought to limit production, such as energy, net primary production, or low entropy resource flows. These positions mirror Locke’s labor theory of value, Sagoff asserts, because they encompass “a commitment to the idea that economic value is a measurable quantity—whether physiological (labor), psychological (WTP), or material (low entropy resource flows).” Sagoff agrees with Austrian economist Friedrich Hayek that tying to calculate allegedly objective values using some non-monetary measure is beyond the scope of human knowledge.

Part of the solution to assigning a real value to the parts of a nature that matter most to human beings, then, will be doing what seems antithetical to many environmentalists — bring such resources under a market system,

In the end, Sagoff does not heartlessly advocate condemning species to oblivion, cutting down all the trees, poisoning pollinators, or sullying lakes, rivers, and aquifers. His point is that ecological economics are misconceived, that ecological conservation and protection cannot be justified on strictly economic grounds. Claiming that nature provides $33 trillion in ecosystem services is unpersuasive, given that most of nature’s services greatly exceed demand and are thus provided for free. “We recognize that the preservation of the beauty, complexity, and integrity of the natural world represents an aesthetic opportunity, a spiritual duty, and a moral obligation,” asserts Sagoff. While he is surely right, making the protection of nature a moral issue will make it that much harder for people of different ethical and aesthetic views to compromise. Nevertheless, appealing to ersatz economic calculation is, as Sagoff declares, “the most self-defeating path environmentalists can take.” Instead, ecological economists should devote more time to bringing more of the natural world within the ambit of the market system. As Sagoff concludes, “The solution is to structure property rights to turn liberty into prosperity, not to put scientists in charge.”