Revenue Law and
the Environmental Legal System

David William Spain, B.A., L.L.B.

[Queensland University of Technology Law School / November 1996]




(a) Neoclassical Economics
.....(i) Overview
.....(ii) Market Failure
.....(iii) State Failure
(b) The Tragedy of the Commons
.....(i) Overview
.....(ii) Decimation of Raw Resources & Biological Capital
.....(iii) Atmospheric Pollution
.....(iv) Australian Economy
(c) Incommensurate Goods
.....(i) Overview
.....(ii) Existence Values
.....(iii) Intergenerational Equity
.....(iv) Health & Sanity
.....(v) Private Ownership of Natural Resources
(d) Modern Neoclassicists
.....(i) Pigou, Coase & Boulding
.....(ii) Neoclassical Rallying
.....(iii) Cost Benefit Analyses
(e) The Sustainable Market
.....(i) The Nature of ôDevelopmentö
.....(ii) Low Impact, Low Demand Sustainable Lifestyle
(f) Triangulation


(a) Overview
(b) Command & Control Regulation
(c) Facilitation of Consensus
(d) Economic Instruments For Environmental Purposes
.....(i) Overview
.....(ii) Discharge Fees
.....(iii) Treatment Fees
.....(iv) Environment Taxes & User Fees
.....(v) Product Charges
.....(vi) Tradable Pollution Rights
.....(vii) Tradable Resource Rights
.....(viii) Deposit Refunds
.....(ix) Performance bonds
.....(x) Subsidies for Non-Pollution


(a) Introductory
(b) Assessment & Collection Mechanisms
(c) Broad Economic Effects
(d) Specific Planning Effects
(e) Site Revenue and the Environment
(f) Political Realities


(a) Overview
(b) Independent Authorities
(c) Calculation of Charges
.....(i) Introductory
.....(ii) Target of the Charge
.....(iii) Discounting
.....(iv) Purpose of Reserve Benchmarks
(d) Assessment of EIEPS for Point Pollution
.....(i) The Nature of Point Pollution
.....(ii) Difficulties in Monitoring & Assessing Point Pollution
.....(iii) Categories of Wastes
.....(iv) Neutralization of Non-Hazardous Wastes
.....(v) Neutralization of Hazardous Wastes
(e) Assessment of EIEPS for Non-Point Pollution
.....(i) The Nature of Non-Point Pollution
.....(ii) Peculiar Difficulties of Non-Point Pollution
.....(iii) Carbon Sequestration
(f) Assessment of EIEPS for Renewable Resource Extraction
.....(i) Introductory
.....(ii) Valuation of a Renewable Resource
(g) Assessment of EIEPS for Non-Renewable Resource Extraction
.....(i) Introductory
.....(ii) Auctioning Quotas for Non-Renewable Resource Extraction
.....(iii) FinderÆs Fees
(h) Earmarking of EIEP Revenue




Due to the dominance of neoclassical economics over the world's markets, the value of resources extracted from, and of pollution emitted into, the planetary environment has been largely disregarded and discounted. This has led to ruthless private exploitation of the global commons, manifesting in unrationed extraction of raw resources and damage to land, rivers, sea and air. Only by integrating economics with ecology can "sustainable development", which meets current needs without compromising the future, occur. That integration cannot be left up to profiteering industry nor indulgent indigenous governments and requires forceful intellectual demand.

To some extent, in the more developed nations, environmental externalities have been curtailed by command and control regulation, but the bulk of the externalities (especially non-point pollution) continue unabated, with severe effects upon human health and viability, other species, global climate and intergenerational equity.

It is possible to minimize central planning and state control, yet to retain the free market as the facilitator and regulator of production and exchange, provided that the environmental legal system adopts appropriate economic instruments which address and redress these externalities. In this way a true & viable economic efficiency can be eventuated. Given resource constraints, and if equity is to be achieved between the developed and developing worlds, the new stasis will inevitably involve decentralized, co-operative, self-managing, low-impact, low-demand communities, but there need be no diminution of the quality of life.

The appropriate economic instruments must be operated against, or rather as part of, a Site Revenue economy, where annual rental value of sites privately occupied is collected as public revenue (in lieu of all forms of taxation). In this regard, such instruments address not only the locational values of sites but also resources extracted out of them and wastes expended into the global commons.

The Site Revenue system must be adopted globally. All rentals within the Site Revenue system should reflect market pressures on the basis that the bequest value of existing species and habitats is inestimable, that a safe minimum must be retained of all biological stocks, and that known raw resources must be rationed, at any given time, on a 1000-year plan. Whilst general rentals from locational value of sites may be paid into general revenue, rentals in respect of environmental externalities must be earmarked for expenditure specifically related to those impacts.


(a) Neoclassical Economics

....(i) Overview

The standard neoclassical model of an economy is an abstract, blackboard theory, which bears little relationship to the real world economy. It envisages a self-perpetuating, "closed circuit" where boundless, free resources are endlessly converted by labour into goods and services and finally become resources again. Consumer prices are seen as having a natural stability reflecting resource availability & extraction costs, production costs and demand.

As a result of viewing the environment as a boundless, common-property resource with zero price, goods in neoclassical economies were produced with high pollution externalities and sold unrealistically cheaply, thereby stimulating over-demand and exacerbating degradation. Neoclassical markets fail to audit or account for a plethora of external impacts & incommensurate goods, whether public, private or non-human, thereby systematically undermining ethical responsibility. In their encouragement of material acquisition (pace the clamouring protestations of subjectivist & 'liberal' devotees), industry and the values-free "ideal" market shape & serve hedonistic and "want-regarding" motivation whereby fortuitous, shallow preferences, which indulgently disregard ideals, are easily driven by the perverted blandishments of advertising.

In fact, raw resources are neither endless nor produced, but rather are in limited supply and extracted. Moreover, extraction and transformation of them (e.g., using fossil fuels to supply energy) and expulsion of their final wastes both exploits and depends upon a world outside of such closed circuit. The real economy is in fact linear (in its prior & subsequent dependency) and dissipative in the way it uses potent materials and, having converted a fraction into human capital, expels the vast bulk as useless, low-grade heat or toxins by the remorseless process of entropy.

Indeed, it has been cogently argued that incompetent or corrupted professors from the neoclassical and Keynesian school of economics deliberately and/or negligently attempted to pervert & debase their discipline and serve vested interests. The method used was to disguise the value of land (or sites generally) as a unique factor in production by subsuming same within the broad aggregate of 'capital' generally, and by this obfuscation of basic economic concepts to forge mind control over economic thinking so as to distort perspective upon, or blinker from view, the potency of locational and environmental factors. Thus did economic theorizing bifurcate from the real world and, adding to its fundamental estrangement preoccupation with the ôintellectual toyö of mathematical modelling, lead to its current confusion, inutility and intellectual dead-end. The mystery of persistent economic failure is thus explained.

This extraction and consumption of raw resources, and this expulsion of wastes, may benefit industrial shareholders & consumers, but beyond that is conducted at the expense of the global commons. The raw resources involved are (recycling aside) no longer available for use by others or by future generations. The pollutants expelled not only damage species and threaten intergenerational inheritance, but impinge in various ways upon the amenity, health and materials of others.

It has now become apparent that unrestrained "cowboy" extraction of resources and waste disposal by dilution and dumping are no longer viable due to a burgeoning planetary population, the moral imperative to maintain intergenerational equity, the impact of extraction upon the biosphere and the massive quantity and potency of wastes, which, even if diluted and dissipated, resurface in ultimate overloaded sinks. Yet the neoclassical market still basically prevails such that dominant political and industrial attitudes continue to endorse both an indefinitely growing economy and private enrichment at public & environmental expense.

"Sensible, economical conservation ... is too prosaic, and besides it violates the .... credo of preferring the most resource-using solution. Real men don't conserve resources; real men have vision and acquisitive genes, they sally forth like their warrior progenitors and grab more. Conservation is for sissies..."

Only forthright collective action can constrain these impacts, which will be ignored by individualistic free enterprise. Such collective action must, moreover, be international in scope, since merely national constraints (e.g., using resource extraction charges or pollution fees) can be subverted by relocating industry offshore to regions with "comparative advantage"-- a process much assisted, the days, by the high mobility of both capital & cosmopolitan management.

....(ii) Market Failure

Neoclassical economics praises efficiency, that is, production of the most (so as to satisfy all demands) at least cost. It is a concomitant of this attitude that efficiencies (i.e. aggregate benefits) may be improved but at the expense of equities (ie by causing a minority to lose). So far as human loss is concerned, it can be argued that (provided the costs of doing so are not too high), this sacrifice may be redressed by redistributing income (e.g. by giving the dole to farmers dispossessed by mining), and is not integrally a concern of law. An important concept in considering ôefficiencyö of this type is Pareto efficiency, which exists when a situation cannot be changed to make someone better off without at the same time making another worse off.

The neoclassical ideal, efficient market fails to exist in reality, because it discounts the inarticulate and unborn, monopolies subsume competition, transaction costs intervene and informational asymmetry prevents all parties knowing all relevant factors, thereby rendering competition imperfect. Also ôfreeloadersö benefit from 'public goods' to which they have not contributed (e.g., lighthouses, defence): an unattractive proposition to private enterprise.

More particularly, for our purposes, a vast range of unpriced adverse impacts upon third-parties and the environment are ignored. Only the efficient anthropocentric allocation of an economy's output is weighed, whilst ignoring the environmental impact which the scale of the throughput has upon the communal environment. Modern markets, virtually ubiquitously, fail to reflect (and so "externalize") environmental impacts, whether occasioned by consumption of non-renewable resources or by unconstrained pollution. Conventional economics endorses maximization of instant throughput (ie of production, sales, turnover and profit) and has little regard to increasing efficiency whilst maintaining substance in the long-term.

This failure to integrate economy and ecology renders impossible the Pareto-efficient allocation of resources: it makes some people (eg shareholders and consumers) better off but only by making others (e.g. natives, downstream communities, future generations -- not to mention species) worse off. In considering any calculation of market efficiency it is essential that account be taken of the true value of raw resources extracted, natural capital harvested and pollution externalized. Any such adjustment is complicated: neat dollar values cannot be defined.

Measuring and constraining impacts is crippled by the lack of common units and methods for assessing or pricing environmental degradation, or any accepted resource accounting system. This lack leads to an underpricing of resources and of impacts with consequent burgeoning consumption and pollution. Depletion of human capital (e.g., by living off savings or by running down machinery with no sinking fund for its replacement) is not treated as income, but consumption of natural capital is. Rather than treating resources exported and pollution engendered as being costless givens having no downside on GNP, National Resource Accounting should be adopted to analyze and trace physical resources and so identify impacts & demands, thereby facilitating planning and reflection of externalities in national accounts.

This failure to value the environmental commons as a public good is, in reality, not so much an inherent or necessary free market failure as the construction and imposition, by treacherous academics and financiers, of a deceptive and fraudulent market.

....(iii) State Failure

State failure generally (including the failure to master environmental externalities) is occasioned by inherent corruptions in democracy, pathologies in bureaucracy and perversions in the market-state interface, and by the confusions, self-interests and buck-passing which bedevil this complex politico-bureaucratic organization.

State failure is exacerbated in democracies due to its inherent structure. Politicians are elected by popular vote and tend to function from base motives, in their own short-term interest (of remaining in office, getting rich etc.), without regard to the global commons or to future generations. Politicians rarely have technological expertise and are exposed to capture by bureaucrats & industrial lobbies. Industry possesses detailed information but has a strong interest in constraining remedial action and in influencing or ameliorating the design of anything which must be done. Indeed, the power of such lobbies is insidious and can render conflict stillborn, thwarting its very entry into the political agenda (as remains the case with the Site Revenue debate).

Politicians are thus prone, in their decision-making, to many improper (selfish or short-sighted) influences and lobbies. Such sectional pressure cripples altruistic and informed political motivation, especially where desirable reform would impact upon welfare dependents. This is especially so as regards housing, food and fuel prices, which are invariably substantially distorted since markets in such products are shaped by decades of public intervention reflecting significant political resistance against green revenues which reflect 'true' environmental costs. The market-state interface has become very blurred, given state participation in the market and widespread use of private contractors (who often gain powerful leverage to define strategies).

State failure is evidenced by inappropriate laws, easy permits, lax regulation, failure to curb externalities or prosecute, secret profiteering and even active bribery and corruption: a multiplicity of costly regulations ineffectively combating symptoms rather than causes. The most viable policies are not so much regulatory/removal as either structural (reducing demand, eg the need for private transportation and fuel) or preventive (e.g., by "clean technology" reducing raw material input and waste), but there is little will for their adoption and implementation.

Whilst vulnerability exists at State & Federal levels, the greatest dangers occur where extensive environmental responsibilities are delegated to politically-sensitive local authorities which strive for a consensus with industry. Where industry and development forces are able to (in effect) bribe politicians or councillors by "campaign donations" etc., the unfavourable interaction between the market and the state is at its most incestuous and the rout of public decency is complete.

The bureaucrats comprising government instrumentalities, like free-enterprise individuals and their political masters, also rationally pursue their own self-interest at the expense of ideals . Thus, a hydro-electric or a municipal waste authority will tend to inflate its empire by building dams or sewerage works as if these were ends in themselves, rather than mere means. Failure to impose effective, integrated pollution control at the source (opting instead for lax licensing, dilution and end-of-pipe solutions) spawns a burgeoning and wasteful bureaucracy and extensive but largely idle treatment empires which can ultimately encourage rather than constrain production of polluting material lest costly works lie idle and appear superfluous and officials become unemployed.

This leads to distortion, bias and ineffectiveness in regulations since the authorities create the necessary empire (of employees, power & budget) merely on paper potentials (not in actual or effective investigations and prosecutions). Bureaucrats prefer central control and routine solutions, neither of which are sufficiently flexible to deal with the complexity of environmental externalities. Case-specific solutions (which might entail bothersome thought and initiative) are ignored and expensive solutions (which build well-paid but vapid regulatory empires) displace prevention.

Both regulatory bureaucrats and regulated industries exist symbiotically in a sphere of specialist technicality (for which wealthy industry, ever effective in lobbying, holds the relevant data) which politicians and laymen cannot enter. They talk the same jargon and each hopes to be head-hunted for plum jobs with the other: this leads to "regulatory-capture" (which is usually tacit, informal and subliminal) of bureaucrats by eco-industrial complexes. Once they are in cahoots (usually endorsing central control and routine mass solutions) specific abuses are impersonalized into anonymous, general categories. Responsibility is distanced into remote and sluggish bureaucracies and the wool is quickly pulled over public eyes.

In this way, the bureaucrat-industry cartel milks taxpayers' funds and perpetuates its own indulgences. The more industry is allowed to impact the environment unhampered, the more revenue can be squeezed -- for a few decades -- out of the artificially expanding economy, the more empires there are for bureaucrats with pretend clean-up campaigns, and the more profits for the few. The devil laughs all the way to the bank. Only disasters (such as cholera outbreaks or the hole in the ozone layer) tend to break this cartel's grip nexus (which is more the incremental result of the bureaucratic and regulatory process than a deliberate conspiracy) and refashion meaningful policies.

As a result of this state failure, for two decades industry has been allowed to mass-produce in usual or enhanced volumes, subject perhaps to dilution and end-of-pipe regulations and subsidies which have been a boon to bureaucratic empires, done nothing to constrain the mounting quantum of externalities, and (by displacement) has created new problems. These problems are essentially iatrogenic (doctor-induced) and multiply the problem, not least because repairing activity is more expensive (for the state) than prevention and increases dependence on taxation of growth industry.

2(b) The Tragedy of the Commons

....(i) Overview

Imagine yourself as a herdsman in the Sahel at a time when the total population of herd animals has just reached the carrying capacity of the land. Suppose you have a chance to acquire ten more animals. Suppose also that you are in complete possession of the facts -- that you understand carrying capacity and the dangers of transgressing it. Should you, or should you not, add ten more animals to your herd?

Since the additional animals are... ten more than the carrying capacity, all your animals will have a little less food per capita next year than this. So will everyone else's animals. So will every other country. Even so, you expect a net gain from the acquisition, for this reason: the gain is all yours, but the loss (from transgressing the carrying capacity) is shared among all the herdsmen. Your share of the loss is only a small fraction of the total. Balancing your gain against your loss you decide to take on ten more animals. In economics this is called a rational decision. To behave otherwise would be to behave irrationally--in the short run.

Every other herdsman in a commons must, if rational, reach the same decision -- not only this year but in every succeeding year. In the long run this kind of behavior produces disaster for all, as overgrazing turns semidesert into desert. Even if you understand completely the disastrous consequences of living by the rules of the commons, you are unable to behave otherwise. The rules pay you to do the wrong thing.

As a good citizen you might refuse to add to your herd, but what makes you think every other herdsman would also be a good citizen? If even one participant in the commons should act in a "selfish" (read, "rational") way, your restraint would go for nought. As selfish and rational exploiters appear at the expense of the public-spirited, envy will cause some of the latter to join the "rational" decision makers in their ruinous behavior.

What might begin as the selfish rationalism of a few, ends in the corruption of the many.

The land, rivers, oceans, atmosphere, climate, and all natural species inhabiting them were not made by humanity yet are, basically, a common good freely available to all and hence a commons. However, freedom rationally to pursue self-interest by exploiting a commons brings ruin to all, and this remains true whether that commons be local grassland or the ecosphere.

For millennia all work was performed by people and animals eating food energized by the sun, but for the last century over 90% of work has been performed by energy derived from limited stockpiles of fossil fuels containing millions of years of accumulated photosynthesis. For a time, say as late as 1950 (aside from localized tragedies), there may have been some justification for a general sense that basic resources were endless and that natural systems would cleanse wastes. Against this background, the ôcowboyö ethos of allowing finders to keep resources (subject to a few extraction costs and royalties) and encouraging the mere dilution and dissipation of pollutants (eg via ocean outfall, high smoke-stack or toxic dump) seemed a fair enough way to go. [Incidentally, it should be noted that the resultant pattern has set up an expectation of rights to extract or pollute which have no acceptable basis].

Exploitation of renewable biological resources (such as forests and fish) exceeds natural replacement of the stock and is eroding basic capital. The result has been mounting loss of vegetation, erosion of topsoil, species extinction etc. This loss diminishes not only the beauty and complexity of the planet but even the food supply and social harmony of humanity. Environmental goods (such as clean air and water) are scarce commodities which are widely valued but which have for centuries been used and abused by individuals and industry generally for private gain, often to the disadvantage of those at remote locations. The social costs of such use must be covered by the social benefits.

Technological improvement and potency, together with swelling population, are spawning far-reaching global environmental impacts from pollution, resulting in rapid degradation of the ecosphere. Specific areas of impact include greenhouse gas emission, stratospheric ozone depletion, toxicity build-up in dumps, pollution of coastal waters, etc. Apparent advances in agricultural productivity (based on broadscale mechanized farming, fertilizers and agriculture) in fact is accompanied by excessive clearing of vegetation, the acidification erosion and salination of soil (leading to deforestation and desertification), loss of biodiversity and eutrophication of surface water. Natural ecosystems are amazingly varied and resilient but biospherical impacts and stresses may be complicated and diverse. Often a combination of factors (e.g., acid rain, discharge toxicity, soil compaction, salination etc.), create a chronic predisposition which an inciting factor (eg drought, frost or mechanical injury) may tip over the edge. Whilst local environmental decline has occurred over the millennia, only now is pollution of air, water and land becoming so universal as to affect the vast bulk of people and diminish profitability of major industries (e.g., tourism and fishery).

Without constraints, an individual's cost of purifying waste will always exceed that of dumping it in the commons. Realizing this, many environmentalists placed general faith in government intervention and indeed perceived communistic planned economies as having a systemic advantage over free economies as regards collection of information and application of constraints. The crumbling of communism has disclosed massive environmental abuse (e.g., in the ocean-dumping of nuclear wastes and the diversion of waters feeding the Aral sea) and revealed how misplaced was this latter belief. Indeed, that general faith too is now withering as failure persists to tackle pollution at source. Certainly there has been increased governmental intervention, but it has been limited to mere dilution, which does not constrain production of pollutants per se.

Whilst most people in industrialized countries (comprising 20% of earth's population but consuming 80% of its wealth) tend to dismiss these impacts as remote and concern with them as alarmism, and whilst politicians and economists in advanced countries have as yet done little to come to grips with the issues, the fact is that severe indicators exist and it is foolish to ignore their warning.

(ii) Decimation of Raw Resources and Biological Capital

It takes about 1 hectare of agricultural land to feed one person in a rich country, but such land (which is diminishing through erosion) comprises only about 1.5 billion hectares of the 13 billion hectares on Earth, placing an absolute cap on the population sustainable. The average per capita annual consumption of biological resources in the rich world is 15-20 times that on the poorest half of the world's people. Approximately 40% of all non-oceanic plant and animal life is harvested by humans, yet catch rates are diminishing (there is evidence core biological stocks are being consumed), the bulk of the industrializing world is at present only partially impacting and our population may well double. This bodes ill for global peace.

Extensive academic studies over the past decade, whilst largely ignored in government policy, solidly establish that at present 20% of the earth's population (at present 8 billion, projected by 2065 at 11 billion), being able to bid in hard cash (and by their continued consumption to continue doing so), consume 80% of its natural capital. The production thereby engendered is usually unsuitable for the needs and budgets of the world's poorest half.

As regards exploitable reserves of mineralized ore (both known and likely), if 11 billion people were to consume them at current rates they would be totally exhausted within 30-40 years. Technical advance cannot solve these problems, and seabed deposits might in general double quantities as regards only a few items (e.g., copper and manganese). The cost of extracting minerals (presently 560 litres of oil p.a. per American) is also rising.

Yet estimates of world oil supply indicate a serious situation where production may peak about 2000 and dwindle to 1/3 by 2025: gas reserves are roughly equivalent. Broadscale nuclear energy appears unlikely due to massive construction costs and accident and waste problems, whilst nuclear fusion is far from perfected and may be quite limited due to shortage of lithium. Natural energy sources (wind, solar, tidal, hot rock) have decent potential, especially if constructed whilst existing metals and fossil fuels are available, but encounter expensive and wasteful storage problems and cannot sustain anything like current regular consumption of energy from fossil fuel. To obtain energy from coal, especially the sulfurous brown coal of China, would exacerbate the Greenhouse effect. To prevent the carbon content of the atmosphere increasing any further fossil fuel use must be reduced by 60-80%: if this were done immediately, each person in a rich country would receive only 1/18 of present consumption.

It is quite impossible that all the world's population could attain the material wealth currently enjoyed by advanced nations. Sustained economic growth is not possible because human activity already fills the available ecological space. Dominant ôadvancedö patterns of lifestyle and consumption are unsustainable: fundamental changes and major reductions in resource use must be confronted. There need be no, or little, reduction in quality of life is that transition is planned wisely and done in good time. Yet, far from reining in growth, world economies are pursuing it: at 4% pa growth sixteen times as much will be produced in 70 years. Such multiples are manifestly absurd, and cannot be achieved by promoting the service sector (much of which is dependent upon electricity, tourism and travel). In any event, economic growth increases inequality and polarization: the economy is driven by greed for profit and market share, not by need, and it is a delusion that growth actually improves experienced quality of life.

There are strong grounds for concluding that present levels of resource use and environmental impact are totally unsustainable, yet we are committed to an economic system which will seek to multiply them many times in coming decades, without limit. It is difficult to understand the mental functioning which enables almost all economists and politicians to proceed as if there is no need whatsoever even to consider possible limits to growth.

Our economic theory takes into account only monetary values. It is therefore incapable of dealing with the most important values and costs the real economy involves, such as the value of species, ecosystems, communities, peace of mind, security etc., or the cost of the anxiety, stress and depression inflicted on workers, unemployed and poor people, or the cost of the noise an airport or highway imposes. Whilst conventional economics praises maximum consumption and sufficiency is irrelevant, perhaps we should be more concerned with optimum patterns. "To define sufficiency one must ask æsufficient for what? The answer is sufficient for the good life. "

....(iii) Atmospheric Pollution

The massive, rapid and unprecedented emission of ôgreenhouseö gasses blanketing the Earth's atmosphere since the Industrial Revolution has raised average planetary temperature by some 0.5oC in the past century and is likely, upon current best estimates, to raise planetary temperature by 0.5oC per decade, effecting unknown climatic, rainfall and disease changes. Greenhouse gasses include CO2 from the burning of fossil fuels for energy and transportation, methane (CH4), CFCs from refrigerants and NO2 from fertilizers and nylon manufacture. By swelling the upper layers of the ocean and melting ice the Greenhouse effect is likely to raise sea-level some 20 ( 10 cm by 2030 and some 65 ( 35 cm by 2010. Changes in sea temperature can destroy fish-stocks (eg collapse of the herring stock in the English Channel when sea temperature dropped by 0.5oC during the 1930s).

Ozone in the stratosphere is formed by the impact of light upon oxygen molecules and protects the Earth from ultraviolet radiation. Man-made "inert" chlorofluorocarbon [ôCFCö] gasses (much used as refrigerants until recently) in the stratosphere are ionized by solar ultraviolet radiation to free chlorine ions, which scavenge free ozone by catalytic reaction, allowing ultraviolet rays through to the planetary surface where is can cause cancers and inhibit photosynthesis, especially in phytoplankton which is so vital as the base of the oceanic food chain. Other pollutants (e.g., sulphur) have short atmospheric residence and fall out as a deposit or acid rain within the immediate locality or directly down-wind.

....(iv) Australian Economy

At present the mining and agricultural industries in Australia are exporting some $40 bn and $20 bn worth of Australian natural wealth per annum. In many ways the agricultural industry is also a miner -- of topsoil (which is lost via erosion from hard-hoofed animals or as minerals in grains and meat) and of vegetation. Adding to this $60 bn income some $22 bn from manufactures, $14 bn from inbound tourism and some $4 bn from investments gives Australia its total foreign income of $100 bn per annum, which total is $20 bn short of our foreign expenditure at $120 bn per annum (being $85 bn on goods, $20 bn interest repayment on $250 bn debt, and $15 bn external tourism).

Clearly modern Australia is selling off the farm, plundering the trust fund which belongs to future generations, in order to pay for its consumption of consumer goods. This plundering involves not only loss of natural capital but also extensive environmental and expense. The massive wealth being generated by this exploitation of natural capital, is being squandered upon imported consumer goods, with little being invested into our own manufacturing infrastructure. Indeed, to have a booming manufacturing sector would strengthen the Australian dollar, making our exported minerals less competitive.

This is the motivation underlying political and bureaucratic kowtowing to vested interests as reflected in reluctance to capture the locational value of sites (thereby fostering speculation in them and diversion of investment from productive enterprise) and the delay in enabling establishment of an Over-The-Counter sharemarket (which would enable funding of small-to-medium enterprises). It also explains the excessive destruction of protective tariff barriers: whilst exposure of native industry to competition is healthy in principle (so as to avoid protecting mollycoddled industries with flabby managers and greedy unions), the exposure of competent home industries to foreign competitors enjoying unequal advantage (eg in exploitative labour laws or in liberties to degrade environment), whilst keeping our currency weak and serving mining interests in the short term, destroys vital home industries and skills and is counter to long term national interest. Of course, any local tariffs collected to balance unfair conditions in exporting countries should be applied -- regardless of national boundaries and jurisdictions -- only to remediate such unfair conditions.

2(c) Incommensurate Goods

....(i) Overview

Incommensurate goods are attributes of reality which cannot be valued by the market. They include existence values, bequest values and such valuable Aristotelian intangibles as friendship, health and sanity. Incommensurate goods tend to be ignored in the neoclassical marketplace, and to the extent that it ascribes value to them, it does so arbitrarily and invalidly.

....(ii) Existence Values

Existence value is the value attributable to the existence of a species quite apart from humanity. Metaphysically, it is arguable that flora, fauna, biosystems and even geographical features and places [all hereinafter severally and jointly termed "natural entities"] have objective intrinsic values, which exist apart from human ends and evaluation. The anthropocentrist (with ontological extravagance) argues in reply that humanity is the ultimate measure of all value and source of evaluation, so value cannot exist without humanity. Both positions are unsubstantiated emotional assertions: whether values can or cannot exist without the "perceptions" of human evaluators, they may nevertheless ultimately have (or not have) humanity as their sole object. The real debate about values is essentially biological, ethical and even economic (in a long-term, practical sense), not metaphysical.

Biologically, natural entities can flourish or decline quite irrespective of humanity. Sometimes a halt to the flourishing of a species (e.g., decimation of an ant colony) is essential to its survival, or the death of an individual creature (eg an earthworm) is essential to the flourishing of another (e.g., a kookaburra). Clearly, at a biological level, independent of humanity, individual natural entities have their own goods, as do collectives of them; so do ecosystems, independently of their constituent parts. Moral imperatives do not necessarily follow for humanity from recognizing natural entities as biological goods: we may remain indifferent or antagonistic to the good of cockroaches or the HIV virus.

Under broad anthropocentric valuation, the flourishing of specific natural entities may range from "good" for instrumental (i.e., exploitation) reasons (e.g., oceanic fish stocks), through "good" despite their non-exploitation (e.g., black cockatoos) -- or indeed because of same (e.g., unspoilt wilderness) -- to "bad" (e.g., funnel web spiders). How far can we legitimately take this? We cannot adopt a simple utilitarian approach and endorse extensive or blanket destruction of some things (e.g., bushland or even rainforests), so that our suburbs can profitably sprawl and our Parliament House be nicely lined, on the basis that this serves "the greatest good of the greatest number". To do so involves an impossible cross-species ascription and calculus of values, and is akin to endorsing the hedonist utilitarian who legitimizes the pleasures of the sadist and child molester.

Objective environmental goods (e.g., clean air and water, natural vistas, silence free of raucous engines, biodiversity, resource availability, healthy pollution sinks) are essential to Aristotelian well-being. It is possible to accommodate such "existence" values into human calculations, but the difficulty is quantifying them independently of subjective human evaluation. No doubt some reflection of value for incommensurate goods appears in the price of commodities or sites, but the precise quantum of that reflection is difficult to comb out, and is perforce merely partial: such goods have inherent worth and this is not to be equated with the price of icecream. What is the dollar value of a viable fragment of remnant bushland in a sea of suburbs, of a sustainable koala population, of retaining the species humpback whale, of the last stands of wispy vulnerable casuarina scrub upon which depends the black cockatoo?

Ultimately, the best case for an environmental ethic must proceed on Aristotelian lines: valuing natural entities for their own sake is good because doing so deepens and defines our humanity and is constitutive for our own flourishing. Aristotelian well-being shuns mere "want-regarding" preference satisfaction as shallow "supermarket" motivation, an ignorant and indulgent pandering to uninformed desire. It is "perfectionist", aiming at informed definition of the "good life" by requiring recognition and satisfaction of "intrinsic" ideal principles and values, transformed by education and experience beyond the narrowly utilitarian and commercial, having inherent worth and transcending monetary price. Such principles are truth, virtue, health, sanity and friendship, because these "answer to good and competent evidence" and striving for them cultivates that detached perspective which is the essence of being human.

It is quite irrational to crave a debauched world or a ôsaucer of mudö. The conclusion is inescapable that economics cannot properly constrict its discipline and the intrinsically-valuable non-human world to market satisfaction of ecologically-malignant anthropocentric demands or financial profit now, at the expense of long-term public health, future generations and other species. Natural entities and resources are not extrinsic instruments created for human indulgence.

....(iii) Bequest Values: Intergenerational Equity

Intergenerational equity is concerned with the moral imperatives of what sort of world we hand on to our children and grandchildren. We are indebted to our forebears for the physical infrastructure they constructed, the knowledge they developed and channeled and the institutions they forged, and we depend upon future generations to develop our initiatives and to appreciate our achievements. Our identity spreads over time: despite ongoing arguments about weighting of values, we have an obligation to ensure intergenerational coherence in a joint community.

In modern times, fragmentation of decentralized community life (identified with place, kin and occupation) due to specialization and high mobility (in land-ownership, labour and residence), together with intense economic pressures, the impersonality of corporatization and hedonism, have bred uncertainty and sacrificed that natural intergenerational concern which characterized traditional families. The modern individual or family is far more likely to focus on a temporally local horizon, constrict obligation to instant kin and community (who can benefit or harm us) and myopically exploit the global commons for personal gain.

The perception that "we can freely harm future generations since they cannot harm us" diminishes the pertinence of a proud and worthy reputation (which cannot exist in subjective delusion and can only be objectively formed by subsequent peer group judgment) and involves a debilitating loss of historical perspective on the evolution of humanity. It also entails the dangerous assumption that death terminates consciousness, rather than liberates it from the body, and that Creation (despite having manifested freewill entities in order to forge an infinite comprehension of itself) will involve no objective judgment upon individual acts and attitudes, however damaging.

At present, in our market-dominated economy, the worth of goods and activities is measured by an unethical and irrational "cost-benefit analysis" which discounts future impacts and those upon the global commons, and attributes dominant value to satisfying "actual" (i.e., temporal and often shallowly materialist, rather than informed) human desires. Such cost-benefit analysis is anthropocentric and short-sighted, failing to address intergenerational equity and the unarticulated, intrinsic, non-instrumental "existence" needs of non-human entities.

To some extent, the interests of future generations may be vicariously reflected in the concerns of those now alive (e.g. of parents for their grandchildren), however such reflection is precarious and (due to prevalence of egoistic preferences) inadequate. Humanity has a general moral obligation to conserve viable tracts and colonies of all kinds of existing habitats and species, together with assured availability of known exploitable resources: these have an inestimable (not just a minimum) bequest value.

....(iv) Health and Sanity

The health, sanity and balance of individuals is incommensurable in value. Whilst the course of an illness may be valued, in some sense, by aggregating the cost of medical care, prescriptions, loss of earnings, pain and suffering etc., ultimately what has been lost is beyond pricing. To the extent that a polluted, toxic or even just ugly and blighted environment causes or conduces to that anomie and spiritual ennui common in industrialized societies, depression, ill-health or even death, the costs -- whilst largely ignored by neoclassical economists -- rapidly become simply incalculable

....(v) Private Ownership of Natural Resources

Traditionally the common law attitude has been that, as regards the commons (as distinct from private land) each person has an unlimited personal right to extract, mine, hunt, catch or pollute as much as that person pleases. This attitude ignores both external costs (i.e., on others "downstream") and existence rights of species per se, and leads both to over-exploitation of resources and the over-development of environmentally-valuable land held in private ownership. Monopolistic rights may foster a false restraint in exploitation so as to preserve longevity of the resource and maximize scarcity value.

Raw resources, both non-renewable (e.g., ores) and renewable (eg timber and wild fish, were bestowed by Creation, not made by humanity, and must be treated as common goods (at most). There is no moral basis (especially given intergenerational perspective) for one person claiming ownership of them, even is s/he did "get there first" or pay a "vendor" money for the "rights", and this remains so whatever may be the assertions of a domestic law

Traditionally, at most, royalties have been charged by states for regular commercial logging or extraction, since supply of these resources is seen as a public good (generating employment and profits). Such royalties have tended to be relatively nominal (just to assist with management costs), and are not rationally priced on a market basis. In no instance (except perhaps at that of the single, manually-labouring man at the margin), given the potency of human co-operation and mechanized equipment, can the unregulated private extraction of resources be permitted to continue.

2(d) Modern Neoclassicists

....(i) Pigou, Coase and Boulding

During the 1920s, the English economist Pigou (oppressed by the mounting urban smog of central London) originated the simple but visionary concept of externality taxation as being essential for market equilibrium. His intent was to enable an equivalence between private profit and the net social product. Pigou was also concerned with the waste (for trivial purposes) of natural product currently but not permanently abundant. Although he neither specified methods for calculating the tax nor earmarking its expenditure, it seems to be implied that the tax would equal the damage and be applied to remedy it: in theory, this would lead to an optimal stasis. However, he saw externality taxes as being not so much reparations for "damage" as a pragmatic fund to be earmarked for constraining, abating and repairing abuses of the externalities involved, e.g. by maintenance of public cleansing facilities (such as tertiary sewage works or forests) and by public research into and development of cheap and unpatented solutions. His ideas gathered little headway during the comparative resource abundance and limited pollution at that time, swiftly followed by Depression and World War, and did not begin to enjoy policy implementation until the 1970s.

During the 1960s Ronald Coase criticized the failure, post-Pigou, of theoretical environmental economics to weigh the real-market transaction costs inevitably arising from environmental pollution, and the extensive costly frictions inherent in the (hugely complex and fragmented) political and institutional constraints and tensions bedevilling this problem. These monstrous constraints, and all the variables concatenating them, are traditionally ignored by simplistic, neoclassical "blackboard" economists.

Coase assumed that externality taxation or state regulation would be so costly as to be unjustifiable and endorsed a laissez-faire approach. He asserted that if private property rights were better defined (in effect, by privatizing the environment, giving each citizen a right to clean air, no industrial fallout etc.), then externalizers would compensate those affected (under threat of civil liability), or those affected would buy off the externalizers. Coase thus envisaged granting or auctioning tradable permits to established industries, by way of "offset rights" to compensate for new restrictions. Incidentally, a side-effect of this was to thereby enable:

"ancient and honorable polluters à to grow rich by establishing their respective histories of pollution which they can now sell to others who wish to continue this wholesome tradition. Those needing air to breathe? Well, according to the modern philosophers they can enter the market, buy up offset rights and retire them".

Upon this basis -- assuming zero transaction costs -- an identically efficient outcome would eventuate in either instance, regardless of whether industry has a right to pollute or citizens have a right to a clean environment. If insertion of a stack scrubber is the most efficient way to curtail loss then it will be inserted, in the first instance by affected citizens and in the second by the factory. Of course, the party who bears the expenditure (irrelevant from the point of view of aggregate efficiency) is a matter for the law. However, zero transaction costs are impossible, since it is bothersome and time-consuming for affected citizens to identify each other and decide what to do, then and execute that decision. Coase recognized this, and concluded that the preferred legal rule is the one which minimizes transaction costs.

Coase's attempt to buttress neoclassical economics by painting environmental externalities as essentially private property concerns, is bound to failure. Whilst his emphasis on recognizing transaction costs is valuable, Coase is basically fallacious and flawed since he errs in seeing externality taxation as a method of compensating those affected rather than constraining the externalizers -- or better still, neutralizing their externalities. Ironically, he fails to perceive that complicated transaction costs will be minimized or avoided if there is no right to pollute, for then the onus of finding a solution falls upon a few polluters rather than a multitude of citizens. Moreover, payment of compensation to affected parties would involve further inefficiencies, such as complex and dubious methods of assessment and attraction of "gold-digging" plaintiffs. It is simply impossible to assess the dollar-value of impacts or even (in the case of diffused pollution) to locate, weigh and attribute externalities. Nor are environmental goods "open access" property so much as common (or state) property. Going even further, to ascribe "private rights" in it -- a concept very alien to existing laws -- creates terrible distributional and intergenerational conflicts (whereby the present private "proprietors" of (say) a river's purity may "sell it down the drain" and relocate themselves. Coase ignores intergenerational and existence rights.

During the 1970s Kenneth Boulding questioned whether human welfare (which economics ostensibly serves) was a state or a process, a stock or flow. His thrust was that human welfare is a stock and that therefore consumption of non-renewable raw resources and irreversible pollution of environment, whilst they might temporarily add a few goods to the marketplace and enrich a few producers, overall and permanently diminished that stock. Given the increasing magnitude of the impacts upon a fragile, limited spaceship Earth, a cowboy mentality of grabbing what you could for yourself whilst you could (regardless of nett welfare) was inappropriate. Only by adoption of National Resource Accounting, reflecting resource extraction and externality impacts, could anything approaching an accurate GNP be defined.

....(ii) Cost Benefit Analyses

Rearguard neoclassical economists persist in granting blank cheques for over-exploitation, and argue that opposition to "want-regarding" indulgence is somehow illiberal or totalitarian, lacking neutrality amongst plural conceptions of "good", or that the moral duty of this generation is only to hand the next a certain standard of living and not to necessarily preserve biological stocks, or that technology and human inventiveness will overcome all shortfalls.

In fact, only environmental capital is autonomous in its extended existence, and all human and man-made capital depends upon it.

Modern neoclassical economics regards proposals for taxes on environmental externalities as a price which reflects the "damage" caused and, as such, will constrain excessive production and consumption until an optimum balance is struck. They also purport to be able to compute the macro-economic effects of policy changes (e.g. implementation of pollution and resource rentals) by modelling, thereby foretelling what cessation of demand, unemployment etc. to expect. If this rearguard is correct, then a scientific, mathematical method is at hand whereby appropriate fees, charges, taxes etc. can be assessed so as to redress the Pareto inefficiencies foisted upon others by the environmental externalities of the traditional neoclassical market. They propound extraordinarily varied and complicated formulae purportedly enabling the valuation of environmental assets (vistas, ore deposits etc.) and externalities (from pollution etc).

There has never been a problem is assessing the dollar value of direct costs of environmental degradation. Thus a relatively clear dollar value can be determined for rebuilding a marble wall eroded by acidic exhausts; paying for medical fees, pharmaceuticals and loss of earnings occasioned by ill-health; the reduced value of a blighted site; relocation expenses etc. Unfortunately, however, things are not that simple: these outlays are only one sliver or reflection of the impacts, and other fractions (such as the aesthetic or antiquity value of the ancient wall, or the true human cost of the ill-health and loss of home) are incommensurable.

Calculating a value for the myriad ramifications of environmental externalities, so as to quantify and provide a balancing control mechanism, can rapidly become a hugely complex exercise. The cost benefits to be analyzed are both macro-economic (e.g., fossil fuel pollution may have costs, but it brings wide benefits e.g., in transport systems) and social-disequilibrium (e.g. in the personal ramifications of poor health and oppressive aesthetics, such as manifest in depression, anomie, vandalism or criminality). Even then, were an economist, with tremendous diligence and transaction costs, to somehow explore and weigh all of this intricate, endless maze, Aristotelian, existence and bequest values (which are impossible to assess empirically), would remain ignored. Disregarding the benefits of earmarking, and envisaging payment of proceeds into general revenue, exacerbates the deficiencies.

Economics has not developed a method of ascertaining the worth of environmental assets taking into account their actual or potential use value, aversion to losing same [option value], and ascription of bequest value: even then, the impossible moral problem of anthropocentrically asserting (or denying) some existence value remains. Some neoclassical rearguard even deem it feasible to value intergenerational resources, as if some lump-sum could be calculated (by aggregating some individuals' monetary assertions) and paid now for the right to decimate or destroy, say, whales or stocks of North Atlantic cod. In any economic cost-benefit analysis, it is essential to factor in the clear needs of the inarticulate, whether non-human species or unborn generations of humanity.

Whilst it is inevitable that pollution and resource charges will raise prices, alter demand and change patterns of employment, the ways and extents it will do so and the alternatives engendered in a free economy are far too complicated for any computer to analyze in advance. Only say half the relevant data can be collected and factored in, and by the time that is done same is out of date anyway. Macro-economic modelling, dealing with hugely complex and volatile scenarios and necessarily limited by inaccurate data (especially at inter-sectoral levels) and value-judgments (e.g., as to the worth of increased public health), are bound to be of limited utility. Indeed, to the extent that such modelling has any utility, it indicates that the nett effects of environmental policies are relatively small, since they encourage use of new and efficient machinery, incite improved efficiency of process and raw-material input and stimulate employment on new fronts.

Notwithstanding this, rearguard classical economists (virtuously endorsing "consumer sovereignty" as regards their "exogenous preferences") assert that indirect impacts can be "contingently valued" by aggregating how much those affected by environmental impacts (eg by bad air, dust, noise or ugly aesthetics) would be willing to pay to end the impacts (or to accept -- e.g., via higher wages -- for surrendering any legal rights regarding them). In this way, they say, an appropriate determination redistributing income can be made unaffected by public policy or legal rights.

However, contingent valuation is a dubious methodology, impossibly complicated and distorted by inherent biasses. It is only marginally better than complete ignorance. They are flawed due to the difficulty of surveying comprehensively, the incompleteness of the information presented, the situation being hypothetical, the tendency of those polled to assert irrational random or vague figures (knowing they need not pay, or will wish to avoid doing so), confusion of different values pertaining to use of the resource (e.g., for recreation or personal exploitation as with fishing) and to non-use of it (e.g., its option, existence and bequest value), and in any event downstream distortions arising from problem-displacement. In any event, such determinations are inherently suspect as being bluntly anthropocentric (ignoring other species' preferences) and intra-temporal in the sense of ignoring intergenerational equities. All cost-benefit analysis should be regarded as an impossibly arbitrary and unethical assertion.

The conclusion has to be that all exercises of mathematical modelling which attempt to ascribe dollar values to environmental impacts, and hence to enable scientific weighing of their cost benefit, are void and vain. The only firm basis upon which to proceed is that environmental impacts should be nil, or if temporarily inflicted, completely remediated (via revenue instruments) as much as possible.

Part 2