At the time Europeans began to colonize the New World, John Locke compared land values in Great Britain to land values in America.
An acre of land that bears here twenty bushels of wheat, and another in America, which, with the same husbandry, would do the like, are, without doubt, of the same natural, intrinsic value. But yet the benefit mankind receives from one in a year is worth five pounds, and the other possibly not worth a penny.14
Ecologically minded economists today describe as "ecosystem services" or as "natural capital" what Locke called the "natural, intrinsic value" of land. In 1997, a group of ecological economists estimated the economic value of ecosystem services and related natural capital at between $16 and $54 trillion per year.15 Locke reasoned on the contrary that the labor accounts for nearly all the benefit land yields. "Labour makes the far greatest part of the value of things we enjoy in this world: And the ground which produces the materials is scarce to be reckoned in, as any, as any, or at most, but a very small part of it."16 Locke suggested that labor accounts for the economic value of agriculture, while what we call ecosystem services are "possibly not worth a penny."
Locke supported his conclusion in part by defending a labor theory of economic value. For Locke, labor functioned as an essential ingredient that turned otherwise useless materials into useful goods. He wrote, "Land which is wholly left to Nature, that hath no improvement of Pasturage, Tillage, or Planting, is called, as indeed it is, waste; and we shall find the benefit of it amount to little more than nothing."17 Economists following Locke, including Ricardo and Marx, endorsed the idea that the amount of labor inherent in an object determines its economic value. Because Karl Marx saw economic value as an inherent or intrinsic quantity and located it in the contribution of labor, he like Locke concluded that natural materials obtain value only when mixed with labor. "The purely natural material in which human labor is objectified ... has no value."18
It would be hard to find an economist today - especially an environmental economist - who endorses a labor theory of economic value. Environmental and ecological economists, however, generally accept the idea that economic value represents or refers to an intrinsic or inherent essence. They may adopt one of two different conceptions of the normative factor that makes one good more valuable economically than another. The welfare economists I criticize in this book hold that the satisfaction of preference ranked by willingness to pay (WTP) is inherently or intrinsically valuable, that is, "preferences do contain their own normative content."19 Ecological economists, in contrast, locate the source or nexus of value in the natural world, for example, in free energy, net primary productivity, emergy, exergy, or some other factor thought to be essential to production.
Ecological economists might follow Nicholas Georgescu-Roegen in arguing that the essential value-giving limit on production has to do with the fund-flow of low-entropy resources;20 they might agree with Paul Ehrlich and others that net primary productivity (the product of photosynthesis) constrains economic growth;21 or they may refer to various forms of "natural capital."22 It makes no difference, however, whether you agree with Locke or Marx that labor is the normative element, with welfare economists who equate "benefit" with preference or WTP, or with ecological economists who develop concepts such as emergy to define what is intrinsically economically valuable. What is important is not how these positions differ but what they have in common, that is, a commitment to the idea that economic value is a measurable quantity - whether physiological (labor), psychological (WTP), or material (low entropy resource flows).
In this book, I have argued that nature has no economic value. The reason is not that nature does not benefit us in every way - of course it does -but that nothing has economic value. I have argued that the phrase "economic value" has no reference. Economists from Locke to Marx thought the term referred to the input of labor, but it is hard to find anyone who propounds this view seriously today. Ecological economists use the term to refer to a construct, such as "emergy," "low entropy resource flows," or something of that sort I do not presume to understand. (It probably took a lot of emergy to write this book, for example, but this is unlikely to affect its sales.) Welfare economists equate "economic value" with WTP - but as I have argued, WTP is not normative and refers to nothing of value. The term "economic value" has no tenable, defensible, normative definition.23
Nothing (including ecosystem services) has any economic value because the term "economic value" cannot be made meaningful - defined in terms of an essence, ether, or entity that has normative content. As an intrinsic value WTP has no standing. References to proxy terms such as "benefit," "well-offness," or "welfare" make definitional circles back to WTP itself. Invocations of WTP do not connect the concept "economic value" with any goal or objective society as a whole has a reason to pursue. The concept of WTP connects with nothing but itself or to ostensibly normative concepts, such as "well-being," arbitrarily defined in terms of it. The economist, therefore, has no role to play in "valuing" goods, whether in terms of surplus labor, consumer surplus, exergy surplus, or what-have-you surplus. The concept of "economic value" or "valuation" is empty, arbitrary, or oxymoronic and refers to nothing that has value in itself or from a social point of view.
I agree, then, with the Austrian school of thought that believes economists should focus on two concerns. The first is to explain the nuances of Smith's Invisible Hand, in other words, "how within a specific set of institutional arrangements the power of self-interest can spontaneously generate patterns of social order that simultaneously achieve individual autonomy, generalized prosperity, and social peace."24 To understand the Invisible Hand is to recognize that goods do not exist in fixed or static amounts to be allocated to and consumed by those who "value" them most. Instead, in the appropriate competitive conditions - conditions in which price signals convey information about such things as scarcity - economic activity is creative and dynamic. The second task is to throw cold water on utopian schemes by reminding their partisans of how feckless, horrid, recalcitrant, truculent, exasperating, and depressing human nature truly is.
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