Environment, Growth and Value

The paper presents an impossibility theory, that micro-economics cannot consider environmental factors, and suggests that an analysis of the treatment of environment within economic theory reveals shortcomings in many areas of economics.The essential element in the consideration of environment is the economic evaluation of environmental disruption. The development of new technology or of anti-pollution measures require that resources be correctly allocated. There are several reasons why this cannot be considered. The static nature of economic theory prohibits consideration of both technological and legal change. The ceteris paribus approach is inappropriate for dynamic analysis, and both the orthodox definition of economic rationality and the positivist philosophy are inapplicable to dynamic analysis.Further problems arise due to the inability of economic theory to consider social value: in particular socially scarce ‘positional’ goods cannot be accounted for. The environment is one such good, but the concept of distribution also involves social scarcity, and is inadequately dealt with by economic theory. An environmentally sound economics must develop a theory of distribution.