Inderscience Publishers

The parable of the carpenter

When valuing environmental functions in a neo-classical framework, both data on opportunity costs, reflected on an elimination costs or supply curve, and data on preferences, reflected on a revealed preferences or demand curve, are indispensable. It is, in principle, always possible to estimate the opportunity costs, be it sometimes with great uncertainty margins. This is not the case with data on preferences, such as expenditure on compensation resulting from losses of function (compensation costs). Therefore, making assumptions about preferences is inevitable. Consequently, there are as many values for functions and green national incomes as (reasonable) assumptions can be made. In the latter case, a comparative static general equilibrium model has to be used, because of the major changes occurring. Preliminary results of the elaboration of the Sustainable National Income according to Hueting make it plausible that the distance to sustainability is substantial. Carpenters and economists should be judged in the same way.

Keywords: costs, environmental functions, scarcity, sustainability, valuation

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