What is the economic value of a tree?
Since economics was founded as a discipline, there has been a single answer to this question: the value of a tree is equivalent to its market price. Through this lens, the economic value of the tree is simply its ‘exchange value’ in the market.
The founding father of political economy, Adam Smith, also identified two other bases of economic value: ‘use value’ and ‘labour value’. Applied to our example, the use value of the tree is the timber it provides a local community, say for shelter and firewood; and its labour value derives from the human labour that is required to transform it into beneficial products.
Smith, however, along with the rest of political economy community, overlooked a fourth base of economic value that builds on the writings of Henry David Thoreau, John Muir, Gifford Pinchot and Aldo Leopold, as well as environmental scientists like Rachel Carson, Barry Commoner, David Bengston and Michael Lockwood. The name we can give to this fourth base of economic value is ‘function value’.
Applied to our example, the tree’s function value is its contribution to the maintenance of the forest ecosystem of which it is a part. As a ‘mother tree’, the tree’s function value will be significant as it contributes to the maintenance of an old-growth ecosystem. Conversely, the tree’s function value would be relatively insignificant if it is one of several thousand trees in an exotic tree plantation.
Sustainability value
What is the economic value of the tree from a sustainability perspective? In my new book The Political Economy of Sustainability I derive a new, pluralistic, molecular conception of economic value termed ‘sustainability value’ by applying insights from value theory to the literature on sustainable development. I then explore its implications for states, markets and civil society actors.
In the book I argue that the sustainability value of a thing is the output of duly constituted, collaborative, cross-value deliberative processes that reconcile its four competing values — exchange value, use value, labour value and function value.
Thus instead of calculating the value of the tree based on only its exchange value (or use value, labour value or function value), a political economy of sustainability perspective treats economic value as an output of collaborative governance processes that reflect the tree’s holistic value.
To realise sustainability value, the four competing value potentials of a tree must be (a) recognised and (b) legitimately mediated — a process I term ‘tetravaluation’.
Tetravaluation is defined as a process that engages actors in transparent, representative, accountable and knowledge-rich deliberation to reconcile a thing’s competing usefulnesses in specific territorial, temporal and institutional contexts.
Getting to sustainability value
Tetravaluation is partially occurring all around the world, in various forms from real Corporate Social Responsibility (CSR) to the emergence of Green bonds, ESG (environmental, social, governance) investment, triple-bottom line accounting, social enterprise, beneficial corporations (B Corps), community and cooperative provisioning, sustainability certification schemes and a host of other efforts.
In global supply chains, for example, forest companies are employing the Forest Stewardship Council (FSC) certification and labelling scheme to ensure that timber sold in big retail outlets comes from forests that are responsibly managed. To develop its standards, FSC ‘tetravaluates’ across three economic, social and environmental chambers, each of which is further subdivided to ensure equal participation by actors in the Global North and Global South.
The emergence of B Corps also signals a shift towards tetravaluation, as this new corporate form challenges American economist and free-market advocate Milton Friedman’s notion that ‘the business of business is business’. Whereas Friedman claims that business should focus laser-like on maximising exchange value, B Corps seek to balance ‘doing well’ with ‘doing good’, the latter focusing on the firm’s wider effects on communities, workers and nature.
Forms of tetravaluation can also be identified at the community level, especially in food and agriculture initiatives such as farmers’ markets and community-supported agriculture. Local farmers including those engaged in low-input and organic farming sell nutritious, seasonal vegetables, milk, cheese, jams, meat and other produce to their local communities reducing food miles and contaminated run-off and improving soil health while simultaneously creating spaces for increased social interaction to foster greater social cohesion.
In highlighting the underlying commonalities among otherwise diverse and dispersed individual, community, state and corporate initiatives, I hope to deepen understanding of what is required to make these initiatives fully compliant with the requirements of sustainability value and to stimulate new actions based on lessons learned. The overall objective is to foster greater cooperation and tolerance across the myriad, diverse initiatives at different units and levels of analyses to collectively grow the prefigurative sustainable political economy the world so desperately needs.
The Political Economy of Sustainability by Fred P. Gale is available from Edward Elgar online at https://www.elgaronline.com/view/9781785368004/9781785368004.xml. Enter the code VIP35 to obtain a 35% discount off the listed price.