The failure to combine economic and environment value in market price : a theoretical history

The thesis investigates the failure of market price to incorporate a payment to the environment for its economic contribution to the process of production. Owner-operated agricultural land is used as the 'link' between the two value systems. The Aristotelian concept of 'nature's bounty' is identified as the basis of an historical connection between environmental and economic value in land. The concept of a natural surplus is observed to play a critical role in the theory of rent. Ricardian rent theory is pivotal in effecting a separation of environmental, from economic value by attributing zero value for rent on sub-marginal land, thus making, it is argued, the environmental component on land at the margin, valueless. It is observed that the status of a surplus value has contributed to rent being seen as price determined, with a consequent 'weakening' in its role as a cost of production. The argument is made that, while supply and demand ultimately determine price, labour and capital, due to their political and theoretical status, determine price in the shorter term, with these costs paid irrespective of price. It is argued that land, due to its price determined magnitude, fails to determine price even in the short term and thus the environment suffers through land's categorization as a surplus value. This carries implications for policy making where an assumption is made that environmental costs can be retrieved by the landowner through price.