The Political Economics of Sustainability

Abstract

Neoclassical economics is the dominant paradigm in economics. The neoclassical perspective is ideologically specific with its focus on markets and prices and in other ways. Cost-benefit analysis (CBA) is part of this neoclassical tradition and is currently the dominant approach to decision making in the public domain. This approach seeks an identification of all kinds of impacts connected with the alternative courses of action considered and a systematic comparison of these impacts, using money as the “common denominator”. The analyst aims at one value for each alternative, for instance a net present value, suggesting the relative “efficiency” of that alternative. The idea behind cost-benefit analysis is that all impacts can be traded against each other in monetary terms and also that the analyst can refer to the “correct” price of each impact for purposes of societal evaluation. When there is no actual market, reference is made to an imagined or “shadow” market. Such studies of “shadow markets” proliferated in the 1980s. The focus is on the consumer’s willingness to pay (WTP) for perceived “environmental goods” and the method used is referred to as the Contingent Valuation Method (CVM).