Cost-benefit analysis is widely acknowledged to be an appropriate tool for providing advice to policy makers on the optimal use and management of natural resources. However, a great deal of research has indicated that the assumptions made in cost-benefit analysis concerning the natural environment diverge from real world observations. In this paper I discuss these observed divergences. To do so, I introduce the concept of Natura economica. Natura economica is the environment as it is understood in economic analysis in general, (...) and cost-benefit analysis in particular, namely as a bundle of commodities with potential market value. I argue that if this understanding of nature and its value is very different from what is generally observed, it reduces the value of the resulting policy recommendations. I then suggest four questions that policy makers should ask when they evaluate their choice of appraisal methods. If the answer is 'yes' to all of them, then cost-benefit analysis can provide valid information. However, if the answer to any of these questions is 'no', other methods, such as multicriteria analysis and participatory processes, should be considered in order to arrive at better-founded policy recommendations. (shrink)

Although the ecological tradition tends to favour a substantive role for non-market institutions in securing objectives such as environmental sustainability, Green theorists have paid relatively little attention to the important challenge posed to such proposals by the pro-market arguments of Austrian economics. The methods of ecological economics, such as multiple criteria evaluation, offer important potential for responding to the Austrian thesis that democratic, non-market institutions face a coordination problem in the face of complexity. However, the development of an adequate ecological (...) response to the Austrians requires clarification of the conceptual underpinnings and potential scope of such methods. (shrink)

This thesis is about whether it is a good idea to place monetary value on nature, to remedy the fact that we treat it as having no particular value to us humans, although it clearly has. The thesis is based on five research papers that can be said to position themselves on opposite sides in the debate on monetisation of nature. The first two papers consider the basis of neoclassical environmental economics and apply the value theory and valuation methods from (...) normative neoclassical welfare theory, on which monetisation of nature is based. The other three papers examine, with increasing degrees of criticism, this theory of value and especially its central assumption that value can be derived from people’s choices, or “revealed preferences”. The thesis itself is a “reflective story” about the journey I made as I learned to think about and understand neoclassical environmental economics in new ways. I reflect upon my work from a philosophy of science perspective, consider how for-granted-taken ideas from neoclassical economics affect environmental economic analysis and its conclusions, and examine the subject of value and valuation from what has become my new theoretical standpoint, ecological economics. It concerns meta-theoretical questions about ontology, that is, ideas in a research discipline about how things really are (what is), and epistemology, ideas about how researchers can provide relevant knowledge about reality. Such ideas are often taken for granted in neoclassical economic analysis and how they affect the analysis and its conclusions is not seldom unreflective. In the thesis, I move from explaining why neoclassical environmental economists advocate monetisation and pricing of nature as important solutions to environmental problems, to exemplifying how this turned out in research projects intended to serve as decision support in practice, and then to exploring and clarifying an alternative theory of value and valuation from ecological economics based on value pluralism and so-called deliberative valuation. In a concluding discussion, I point out that there are reasons to be sceptical about whether monetisation of nature is the right path to follow if we want to change our unsustainable relationship with nature and tackle the serious ecological crises we currently face. I show that monetisation of nature in practice requires a considerable amount of pragmatism, since the applied version of the theory deviates far from its idealised claims about the possibility to capture actual, total values. I also show that the descriptive (so-called positive) part of neoclassical theory and its normative part overlap in a way that makes it very difficult to speak of “objective” science in environmental economics. Instead, and despite strong recognition in the discipline that environmental problems are “market failures”, neoclassical theory has an ethical and ideological bias that favours individuals’ freedom of choice and market solutions, at the expense of collective decision-making and discussions about values that cannot be quantified. The important contribution of the thesis is that it clarifies the consequences of a central idea in the theory behind environmental economic analysis, namely the idea of values as commensurable, that is, measurable in one single unit. This idea links to the misleading conception of choices as “trade-offs”, where all choices are essentially viewed as the result of people’s constant exchange of costs and benefits within themselves in every choice they make, with the result that everything gets better (or at least not worse). Based on my research, I suggest that, in reality, people do not generally “make” trade-offs. If anything, people try to avoid them, especially when it comes to difficult choices, such as those concerning the true value of nature, because such choices involve moral conflicts between values that are incommensurable. As a basis for valuing transformational change, monetisation is therefore unsuitable, as it conceals rather than reveals the ethical dilemmas that are the very definition of sustainability problems and causes us to search for the efficient or so-called “optimal” solutions claimed possible in neoclassical theory and rhetoric, although such solutions do not exist. What we need instead is to represent public opinion in environmental decision-making in ways that do not conceal people’s actual moral considerations. Environmental valuation is political. It must be done together with others through reason-sensitive means, where people’s actual experiences of value conflicts – within us and between us – can be deliberated before making decisions. This makes decision-making more complex, but as an alternative to monetisation, this realism is not necessarily unrealistic. The fact that incommensurability is grounded in human experience means that the complexity of social and environmental decision-making has a real counterpart in conflicts within ourselves. One could see this as a potentiality, because we may have more confidence in people’s ability to recognise the relevance and necessity of less simplification and more complexity in decision-making. People need to “deliberate values” rather than “consuming” them and being expected to express all sorts of values through money. (shrink)