Extending Capital to Nature, Reducing Nature to Capital— Peter Dorman

Capitalizing the commons. Peter Dorman explains why this should not be done.

Basically, actual value lies real resources ("stuff"), not in nominal terms ("money"). For example, this is suggested by the distinction between nominal (market price) and real (inflation-adjusted price). The value of stuff is based on availability and utility. The most "valuable" real resources are are vital resources. On this scale, air and water are the most valuable, although owing to their availability, they are considered free goods.

The Biden administration has announced it is inaugurating a program to incorporate the value of natural resources and ecological services into national income accounts. The New York Times article reporting this development predictably portrays the response as divided between two camps: on the one side are environmentalists, who think this will lead to more informed decision-making, and on the other Republicans and business interests who fear it is just a stalking horse for more regulation.

For the record, here is one environmentalist (me) who thinks it’s a bad idea—not completely, but mostly....

Are the quality of our environment and the availability of natural resources crucial to our well-being? Certainly. Can these effects be captured by economic measurement? Mostly no. The monetary economy is, almost by definition, the realm of the fungible. Money is what allows us to have more of one thing at the cost of less of another, and then to change our minds and switch back to what we had before. Pizzas can be bought and sold for money. School buildings can built for money. So as a society we face a choice between different consumption categories, one that is reversible if attitudes shift.

What is fundamental about most natural resources is that they are not fungible....

Econospeak
Extending Capital to Nature, Reducing Nature to Capital
Peter Dorman | Professor of Political Economy, The Evergreen State College