Journal of Policy Research in Tourism, Leisure and Events

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The mythologies of environmental economics

Neil Ravenscroft

To cite this article: Neil Ravenscroft (2010) The mythologies of environmental

economics, Journal of Policy Research in Tourism, Leisure and Events, 2:2, 129-143, DOI:
10.1080/19407963.2010.482273

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Journal of Policy Research in Tourism, Leisure & Events
Vol. 2, No. 2, July 2010, 129–143

The mythologies of environmental economics

Neil Ravenscroft*

School of Environment and Technology, University of Brighton, Cockcroft, Lewes Road,

Brighton, BN2 4GJ, UK
(Received November 2009; final version received March 2010)
Taylor and Francis
RPRT_A_482273.sgm

Journal
10.1080/19407963.2010.482273
1940-7963
Original
Taylor
202010
N.Ravenscroft@brighton.ac.uk
NeilRavenscroft
00000July
&ofArticle
Francis
Policy
(print)/1940-7971
2010 Research in (online)
Tourism, Leisure and Events

This paper offers a polemic on the policy implications for leisure and tourism of
the shortcomings of contemporary approaches to environmental economics. The
paper argues that the market construct of neoclassical economics is flawed by its
inability to address situations in which markets do not operate and that this flaw is
exacerbated by repeated attempts to overcome the problems through inappropriate
technical fixes. To illustrate the argument, seven ‘myths’ of environmental
economics are identified, which highlight the flaws and examine some of the
implications for policy in areas such as common property. The paper suggests that
a new approach to environmental economics is required, founded on principles
that are not bounded by ideas of exchange. Informed by the advances made in
ecological economics, the paper considers the potential of associative economics,
as set out by Rudolf Steiner in his lectures of 1922, when he identified that the
assumptions of neoclassical economics would not lend themselves to a globalising
world in which the nation state has declining relevance.

Keywords: tourism development; environmental economics; neoclassical

economics; associative economics

Resumen

Este trabajo presenta una polémica sobre las implicaciones políticas para el
turismo y el ocio de las deficiencias de las actuales visiones de la economía
medioambiental. Se argumenta que el constructo de mercado de la economía
neoclásica es imperfecto por su inestabilidad al aplicarse a situaciones en las que
los mercados no operan y que esta imperfección se agrava por los repetidos
intentos de resolver los problemas a través de posiciones técnicas inapropiadas.
Para ilustrar este argumento, se identifican siete mitos de la economía
medioambiental que destacan las imperfecciones y examina algunas de las
implicaciones para la política en áreas como la propiedad común. El trabajo
sugiere que es necesaria una nueva aproximación a la economía medioambiental,
basada en principios que no estén enraizados en las ideas de intercambio.
Mediante los avances realizados en la economía ecológica, se considera el
potencial de la economía asociativa, tal y como fue presentado por Rudolf Steiner
en sus clases en 1922, cuando identificó que los supuestos de la economía
neoclásica no nos conducirían a un mundo globalizado en el que la nación estado
tiene una relevancia cada vez menor.

Palabras claves: desarrollo turístico; economía medioambiental; economía

neoclásica; economía asociativa

*Email: N.Ravenscroft@brighton.ac.uk

ISSN 1940-7963 print/ISSN 1940-7971 online

© 2010 Taylor & Francis
DOI: 10.1080/19407963.2010.482273
http://www.informaworld.com
130 N. Ravenscroft

Résumé

Cet article présente une polémique sur les implications politiques pour les loisirs
et le tourisme des points faibles des approches contemporaines sur l’économie
environnementale. Cet article soutient que le marché construit avec l’économie
néo-classique est défectueux par son incapacité à aborder des situations dans
lesquelles les marchés sont inopérants et que ce défaut est exacerbé par des
tentatives répétées de surmonter les problèmes grâce à des solutions techniques
inappropriées. Afin d’illustrer cet argument, on identifie sept “mythes” sur
l’économie environnementale, qui mettent l’accent sur les défauts et examinent
certaines des implications politiques dans des domaines comme la propriété
commune. L’article suggère qu’une nouvelle approche de l’économie
environnementale est nécessaire, fondée sur des principes qui ne sont pas limités
par des idées d’échange. Renseigné par les avancées faites en économie de
l’écologie, cet article examine le potentiel de l’économie associative, comme l’a
exposé Rudolf Steiner dans ses cours de 1922, lorsqu’il a identifié que les
suppositions de l’économie néo-classique ne se prêteraient pas à un monde
globalisé dans lequel la pertinence de l’état nation est en déclin.

Mots-clés: développement touristique; économie environnementale; économie

néo-classique; économies associatives

Introduction
Despite efforts to develop new ways of thinking about leisure, tourism and the envi-
ronment (see, e.g., Garrod & Fyall, 1998; Holden, 2009), there is an enduring belief
among many that the environmental impacts of tourism and leisure development can
be addressed satisfactorily through modified approaches to conventional economic
analysis (León, Hernández, & González, 2007; Notarstefano, 2008). As is well under-
stood, the modifications revolve, for the most part, around developing pricing models
for impacts that are not traded and therefore do not have market prices associated with
them (Montenegro, Huaquin, & Herrero Prieto, 2009). As a result, a mythology has
developed that has obscured many of the assumptions upon which environmental
economics is based, meaning that there is an inadequate appreciation of the full envi-
ronmental impacts of recreation and tourism development (see, e.g., Jaffe, Newell, &
Stavins, 2005; Victor, 2010, for wider discussions). Following a brief review of the
neoclassical foundations of current economic thought, the paper will reveal some of
the myths upon which conventional environmental economics is based, in the process
offering new insights into assessing the costs and benefits of tourism and leisure
development.
 Journal of Policy Research in Tourism, Leisure & Events 131

The neoclassical economics of the environment

The theoretical foundation of the economics of non-priced recreation lies in the
neoclassical assumptions made about the nature, role and function of markets as sites
of exchange – conventionally through prices being established for the trade of goods
and services (Clawson, 1966; Gratton & Taylor, 2000; Hanley, Shaw, & Wright,
2003). In many competitive markets, the price of a good or service may be a reason-
able approximation of its value. Yet, a key tenet of neo-classicism is that markets
‘fail’; that is, fail to reveal the precise price–quantity relationships that they are
supposed to reveal, in the process underestimating the value of the good or service
(Jaffe et al., 2005). According to Gratton and Taylor (2000), market failure occurs
under a number of conditions associated, largely, with an inability to capture the infor-
mation required to establish robust price–quantity relationships. This is convention-
ally associated with public services (where political decisions are made about levels
of provision that may be different to those that would have been made by individuals)
and externalities, where the full impact of a good or service is not reflected by its
market price (see Jaffe et al., 2005, and Skinner, 2010, with respect to technology and
environmental policy).
Markets are sometimes deemed to fail with respect to the use of the natural
environment due to the externality argument, that since there is often no way of
excluding those who do not wish to pay for access (or for the harm that they cause),
the full impact on the natural environment is not reflected by its market price (Curry,
2001; Turner, Morse-Jones, & Fisher, 2010). In other cases – water, for example – its
(relative) abundance of supply (certainly in the developed world) means that the price
paid for domestic or tourist supplies is quite unrelated to its value (see Ogorelc, 2009,
with respect to resident perceptions of tourism impacts). Thus, demand and supply can
interact in ways that are advantageous to consumers, in supplying goods at prices that
are lower than the value to the consumer of those goods. The difference between value
and price is known as the ‘consumer surplus’. The presence of consumer surplus
encourages over-consumption – cheap air travel, for example, where the full environ-
mental impacts are not accounted for in the price of a ticket – is such an example
(Dywer & Forsyth, 1993; Latimer, 1981).
The fundamental economic problem is thus one of measurement: how do we
measure the value (as opposed to the price) of a good or service? While many
commentators (following Bentham, 1987) feel that this is not possible, neoclassical
economics contents itself with a surrogate measure, generally related to people’s will-
ingness to pay (WTP) for the good or service (see Bateman, Munro, Rhodes, Starmer,
& Sugden, 1997; Bateman, Langford, Munro, Starmer, & Sugden, 2000; Laitila &
Paulrud, 2008; Montenegro et al., 2009; Santhakumar, 2009). Consumer surplus is
thus the difference between what people would have been willing to pay and what they
actually paid. There are five established approaches to generating estimates of WTP:

● Adjusted market prices: This is very much part of the ‘green’ accounting
approach (Cairns, 2002; Davis Langdon Management Consultants, 2007;
Scanlon, 2006), in which known market prices are adjusted to take account of
distortions between market prices and values. Where possible, the adjustments
are based on observed changes to related prices (the increasing value of fisheries
as a result of improvements in water quality, for example; see Laitila & Paulrud,
2008).
132 N. Ravenscroft

● Productivity methods: Ecosystem services often provide the raw materials

required to produce marketed goods. It is possible to derive production func-
tions that relate inputs to the outputs of marketed goods, thus allowing estimates
to be made of the contribution of individual goods or services (Turner et al.,
2010). An example of this is the declining cost of water treatment as a result of
improvements in water quality. See Barbier and Sathirathai (2001) for an exam-
ple from Thailand.
● Revealed preference methods: These methods of non-market valuation require
the non-market good that is the subject of the valuation to be related somehow
to a market good (tourists paying substantial travel costs to visit areas of great
landscape beauty, for example). Observations on spending behaviour for the
market good indirectly reveal the value of the non-market good (see Champ,
Boyle, & Brown, 2003). One approach suitable for the valuation of recreational
sites is the Travel Cost Method (TCM), of which there are several versions (see
Fleming & Cook, 2008; Gurluk & Rehber, 2008; Prayaga, Rolfe, & Sinden, 2006;
Wang, Little, & Yang, 2009). The TCM is based on the observation that indi-
viduals’ spending on travel (the market good) to reach a recreational site (the non-
market good) provides an indication of the value that they place on using that site.
● Stated preference methods: These methods involve a direct technique that asks
individuals how much they would be willing to pay for a single environmental
improvement. This depends very much on the ability of the researcher to
describe adequately the environmental improvements to be undertaken, and to
select a payment vehicle with which people can identify (see Hanley, Bell, &
Alvarez-Farizo, 2004; Jorgensen, Wilson, & Heberlein, 2001). A less direct
approach is to use Choice Experiments. Here, respondents are asked to choose
between a series of hypothetical options that describe different levels (amount
or quality) of an environmental good (water quality, for example) as well as
some level of monetary outlay (the cost of a day fishing ticket, for example).
The levels of the environmental good and the monetary outlay are varied across
different options. By observing respondents’ choices between different options,
the trade-off between money and the environmental good is determined. This
estimated trade-off is the person’s WTP for the water quality improvement (see
Alpizar, Carlsson, & Martinsson, 2001; Bateman et al., 2002; Turner, Giudda,
& Noddin, 2005).
● Benefits transfer methods: Rather than generate original data from which to
make value estimates, benefit transfer takes value estimates from an original
study and applies them in a new context. While being prone to errors associated
with comparative analysis (see Goldthorpe, 1997), this is a cost-effective way of
arriving at an estimate of value in cases where the cost of generating original
data is high compared to the requirements of the study (see Egan, Herriges,
Kling, & Downing, 2009; GHK Consulting, 2005; Loomis & Rosenberger,
2006). Turner et al. (2010) observe that it is the most common way in which
valuation studies are used in the policy process.

While being useful ways of arriving at an estimate of the value of environmental

goods and services, these approaches expose a number of myths that have built up
around the ability of environmental economics (and accounting) to provide reasoned
measures of value that can be applied to natural resources. While being useful as
ciphers of the prices that might be achieved if a market did operate, Bowers (1997)
 Journal of Policy Research in Tourism, Leisure & Events 133

makes the point that all the approaches must be understood in context: the estimated
price–quantity relationships are not those reflecting people’s valuation of a resource,
but their response to a model of their actual or intended use of that resource:

There is no important knowledge of valuation that consumers possess and which can be
tapped. … a true value would exist if there was a correct or true description of the
problem. There is no true description and hence there is no unique value. (Bowers, 1997,
pp. 154–156)

Central to Bowers’ argument is that there is empirical evidence – from many fields –
that consumers are poor at using unfamiliar and emerging markets (see also Skinner,
2010, with respect to the emerging market for renewable energy). For example, one
of the first substantive studies to use stated preference methodology, which investi-
gated the non-market value of canals (Adamowicz, Garrod, & Willis, 1995), found
that people were willing – depending upon the methodology used – to pay between
£7.42 and £45 per household per year to secure certain benefits, thus demonstrating
how critical the methodology is to the outcome of the investigation. A similar
disparity was found by Bateman, Cole, Georgiou, and Hadley (2006), in their work on
the value of the River Tame in Birmingham, and by Herath and Kennedy (2004), with
respect to the economic value of Mount Buffalo National Park in Australia.
As Bowers argues, following Plott (1996), people do not intuitively know how to
use unfamiliar markets; they need to develop suitable heuristic devices, through guid-
ance and experience, which allow them to act rationally (Bateman et al., 2002, 2004,
2006; Georgiou, Bateman, Langford, & Day, 2000). In their work, Alvarez-Farizo and
Hanley (2006) found that people do not intuitively understand either the quantities
being used (what is the appropriate unit for describing a site, for example, particularly
if that site has multiple access points?), nor the prices that they are being asked to
assign to them (given that most of their experience is probably associated with sport
and leisure activities that are free at the point of consumption). In the absence of
guidance and experience, these studies found that respondents make sweeping
assumptions about the definitions of the units of measurement, allied to looking for
clues about the answers that they can give (such as: Is the problem serious or trivial?
What clues are the researchers giving?).
This was confirmed in a study of the benefits of bathing water quality improve-
ments in South West Scotland, by Hanley et al. (2003), which questioned whether
actual or perceived increases in water quality were the appropriate unit of assessment,
given that few people understood the science behind the improvements. Thus, despite
some of the beaches in the study already having met the EU bathing quality standard,
most people were prepared to pay additional sums to reduce pollution levels. The
study concluded that discussions about people’s reactions to perceptions of improved
water quality might be too hypothetical for reliable benefits estimates to be made. This
was confirmed by Söderqvist, Eggert, Olsson, and Soutukorva (2005), whose research
on perceptions of the quality of bathing waters in Stockholm used measures of water
transparency, with no reference to pollution levels.
From this it is apparent that a mythology has built up around environmental
economics, such that the ‘shadow’ values derived from the various benefits estimates
have taken on a level of significance far in excess of their validity. At one level, this
invites us to suspend any notion that the environment has values beyond those relating
to human interactions (this has been a central concern for the United Nations’
Millennium Ecosystem Assessment – see Millennium Ecosystem Assessment, 2005);
134 N. Ravenscroft

at another level, it invites us to believe that the rationality of the market is as relevant
to the environment as it is to consumer durables or any other aspect of our lives. Out
of this, the following seven mythologies have arisen.

Myth 1: that market failure is a technical problem in need of a technical solution

This is clearly not the case. The term ‘failure’ is well used in neoclassical economics
(see Gratton & Taylor, 2000; Jaffe et al., 2005) as a cipher for ‘problems’ that cannot
directly be addressed by the price–quantity relationship reflected in the market model.
It is certainly a technical shortcoming of neoclassical economics that it is founded on
a model that only works under certain (competitive) conditions. However, the ‘failure’
is a philosophical one – a failure to understand that rationality cannot always be reduced
to the profit-maximising private individual – not a technical one that requires a ‘fix’
in the ways commonly used by accountants and economists (see León et al., 2007).
This is crucial: markets do not fail; they may be inefficient, due to a lack of product,
buyers or sellers; they may not exist, because there is nothing to trade; or they may
not provoke trade, because buyers and sellers cannot agree on an appropriate price–
quantity relationship. But a market is no more – and no less – than a place (real or virtual)
where trade may take place (Skinner, 2010). In cases where there is no established trade
– many aspects of the environment – markets are clearly an inappropriate mechanism
for determining value. This is not failure; the failure lies in assuming that value is always
a function of trade (see Hein, van Koppen, de Groot, & van Ierland, 2006).

Myth 2: that unpriced recreational benefits can be valued through their association
with priced goods and services
Since the ‘failure’ of the market is philosophical rather than technical, the idea that it
can be corrected to take account of unpriced goods is an oxymoron (see Turner et al.,
2010, with respect to the valuation of ecosystem services). Conventional methods of
correcting for market failure do not seek to establish value, certainly in an absolute
sense. Rather, they offer a means of selecting a numerical component that can be
related to prices that have been established in a market (Clarke & Ng, 1993). Even if
it is accepted that relational pricing can be achieved through such processes, it is clear
that price and value (benefit) are not necessarily synonymous. To establish value –
according to neoclassical reasoning – there needs to be an understanding of what
someone would have been prepared (willing) to pay for a good, less what they actually
had to pay (Santhakumar, 2009). Thus, to put a value on unpriced recreational benefits
involves a set of related assumptions about prices that are derived through
mechanisms that are demonstrably not fit for purpose. Despite this situation, major
investment and development decisions are made on the basis of such information,
with governments and developers routinely quoting benefit figures that must be
suspect in both technical and philosophical terms. This has led Stock (2010) to call for
a reframing of conventional economics to take better account of the complexity
surrounding investment and consumption decisions.

Myth 3: that consumers react rationally to questions about their willingness to pay
The convenience that consumers are rational profit-maximisers lies at the core of
neoclassical mythology. This is despite a lack of supporting evidence. Rather, there is
 Journal of Policy Research in Tourism, Leisure & Events 135

plenty of evidence that rationality in one economic sphere – food shopping, for
example – does not necessarily mean that there is equivalent rationality in all spheres,
especially in the case of large, complex and emerging agendas, such as climate change
(see Kennet, Baster, Gale, & Tickell, 2010). In part, this is related to individual pref-
erences about the allocation of disposable income (see Fleischer & Rivlin Byk, 2009).
However, it is also driven by questionable assumptions about how individuals process
information: neoclassical economics assumes that consumers have, or can obtain,
information to inform their purchasing decisions. In the absence of this information
(where the market does not operate), or in unfamiliar circumstances where they do not
know what information is required (where the market operates poorly), consumers
generally perform poorly and irrationally (Bowers, 1997; Skinner, 2010). Thus, to
expect people to react consistently – and rationally – to questions about willingness to
pay is unreasonable. It is equally unreasonable to expect that people can necessarily
cope with market simulations of areas in which they do not have knowledge and
experience.

Myth 4: that economic development necessarily involves costs and benefits that can
be compared
This follows from Myth 1 – the market postulate at the core of neoclassical economics
necessarily assumes that costs and benefits can be compared – this is, after all, the
basis of exchange. It further assumes that buyers and sellers voluntarily come to the
market (the principle of the ‘willing’ buyer and seller). Yet, where use of the natural
environment is involved, this is not axiomatically the case, particularly with respect to
the timing of costs and benefits (see Blake, 2009). As Tribe (2005) illustrates in a
series of case studies, the costs and benefits of tourism (and all major) developments
do not necessarily fall on the same people or resources. At one level this is an exter-
nality issue about degradation of the environment and diminution of the quality of
indigenous lives (Dwyer & Forsyth, 1993; Ogorelc, 2009); at another level it is about
the unintended (and unaccounted-for) impacts of development (Clarke & Ng, 1993;
Notarstefano, 2008). At the root of both these is a simple truism: the benefits of devel-
opment tend to accrue to those who originated and regulated it, while the costs tend to
fall on those who were unable to avoid it. The idea that these benefits and costs can
be captured in a single market, over a single time period – even allowing for all sorts
of technical adjustments – is to misunderstand the function of the market (Blake,
2009). Rather than the idea of ‘willing buyers’ and ‘willing sellers’ coming together
to trade, most developers (the buyers) make their decisions at a distance from those
who will bear much of the cost (who are not even the sellers), instead relying on
intermediaries, such as local government, whose interests may not be wholly congru-
ent with those whom they are supposed to represent (Ogorelc, 2009).

Myth 5: that common pool resources are necessarily subject to degradation

through over-use
Most agrarian societies are based, at some level, on the co-use of land held in common
(common pool resources). While suiting certain forms of agriculture, it has long been
held that such regimes are inefficient, because of the lack of market-based allocation
decisions. The chief proponent of this position has been Garrett Hardin (1968) who,
in his essay on ‘the tragedy of the commons’, argued that a lack of exclusivity leads
136 N. Ravenscroft

to the exploitation and degradation of common property. This justification has been
developed subsequently, with Sweeney, Tollison, and Willet (1974) proposing a
neoclassical argument about market failure as the underpinning reason for denying
common rights over property. Yet, as Ostrom (2003) and Ostrom and Hess (2007)
argue, there is no evidence that any given institution – private or commons – generates
better outcomes for either the resource or the users under all conditions.
Krier (2008), in concurring with the view that private property rights are not
axiomatically more efficient than common property regimes, has observed that the
‘privatisation’ of the commons has been predominantly a political, rather than an
economic or environmental, act. This assertion is based on the realisation (by those
doing the enclosing of land or agglomerating of rights) that claims to private property
are likely to be substantiated by others who, likewise, want to claim individually what
has previously been held in common. The root of this paradox lies in a mis-construc-
tion of the nature and operation of common property regimes, in which the notion of
‘market failure’ – the unbridled exploitation of common property – is a falsehood
visited on the (relatively) powerless commoners by wealthy outside interests (Thomp-
son, 1991). However, the connection of private property rights with economic or
social efficiency is equally a falsehood. In their work, Ostrom and Hess (2007) argue
that property rights are just that – authority to undertake certain actions, with no a
priori assumption that this authority necessarily bestows any efficiency gain on any
other form of authority (see also Hodge, 2001). Indeed, Krier (2008) argues that the
opposite is likely to be the case, because the purpose of the rights is not so much to
promote social or economic efficiency, but a rather narrower version of private finan-
cial efficiency based on the ability to exclude others.
Thus, it is not that certain property or social regimes necessarily lead to certain
outcomes but, rather, that the exercise of rights has consequences. Common pool
resources may need different institutional management arrangements to private
property. This does not necessarily make them less efficient than private property, nor
does it mean that acquiring rights at less than their value automatically leads to over-
exploitation.

Myth 6: that consumer spending patterns can be regulated through the market
It is interesting that a simple place of exchange – a market – should be invested with
the power to manage complex consumption decisions, particularly when it is under-
stood that the market is prone to failure, especially when addressing complex or unusual
circumstances (Limnios, Ghadouani, Schilizzi, & Mazzarol, 2009; Stock, 2010). Yet
this is precisely what is routinely expected of markets: that raising prices will reduce
consumption and reducing prices will stimulate consumption (Santhakumar, 2009).
While it may be the case that consumers will switch between brands of good depending
upon their relative price, it is often the case that consumption decisions are made on a
range of factors, of which price may or may not be significant. The classic example of
this is the holiday home bought in a destination served by a budget airline. While the
original consumption decision may have been influenced by the availability of cheap
flights, the decision to continue to visit the holiday home, even as the cost of flights
rises, will be based more on the overall investment in the property than on the cost of
travel. This is also why the consumption of investment-heavy sports and leisure (golf,
power boating, motorsport, etc.) is not unduly affected, in the short term at least, by
increases in incidental costs such as travel or access to facilities.
 Journal of Policy Research in Tourism, Leisure & Events 137

In economic theory, this aspect of the price–quantity relationship is addressed by

reference to the price elasticity of demand: the degree to which consumption changes
in response to a change in price. Conventionally, the theory is that the more significant
the good is to everyday life (food, for example), the more inelastic will be the demand
(we cannot simply stop buying food if the price rises), and vice versa. This means, in
the theory of the market at least, that the consumption of luxury goods can be controlled
by price (raising taxes, for example). Santhakumar (2009) provides an example of this,
with respect to wildlife tourism in Kerala, India. Yet, in the West, we are increasingly
seeing the opposite: consumption decisions that imply growing inelasticity for luxury
goods, including the environment. Raising taxes – on carbon, for example – no longer
have the impact on consumption that they once did (Dunlop, 2009).

Myth 7: that national measures of wealth, such as GDP, can be modified to reflect
the environmental and social impacts of economic development
The idea of a modified approach to the calculation of GDP has been mooted for some
time, in an attempt to reflect a broader picture of the social and environmental, as well
as the economic, health of the nation (Commission on the Measurement of Economic
Performance and Social Progress, 2009). However, as Tribe (2005) argues, even if
issues with the relationship between prices and values are suspended, the idea is
fraught with difficulties. These difficulties are related to Myth 4, that the costs and
benefits of economic development can be compared via market analyses – which they
cannot. But this mythology takes the argument further, by arguing that all the costs
and benefits associated with a particular development should be included in the GDP
calculation, even if some of the expenditure generated by the development was to
ameliorate its negative impacts (what Tribe, 2005, calls defensive expenditure). This,
clearly, has the potential to over-inflate the positive impacts of the development
(expenditure), while under-estimating the negatives, such as a loss of amenity or local
biodiversity (see Birkin, 2000; León et al., 2007; Victor, 2010). Any attempt to
account for the negatives, by reference to market substitutes, runs the risk of further
distorting the equation. This is addressed by the Commission on the Measurement of
Economic Performance and Social Progress (2009), which recognises the complexi-
ties involved in accounting for sustainability, and suggests that a series of physical
indicators are required, in part to act as a warning of when environmental boundaries
– such as the critical depletion of fish stocks – are being reached. This tacit acceptance
of the failure of environmental economics is made explicit in Para 39 of the executive
summary, which states that: ‘… placing a monetary value on the natural environment
is often difficult …’ (Commission on the Measurement of Economic Performance and
Social Progress, 2009, p. 18; see also Turner et al., 2010, with respect to valuing
ecosystem services).

Addressing the myths

While there could be discussion about the extent to which the technical fixes devel-
oped to address the shortcomings of neoclassical economics actually work (and the
Commission on the Measurement of Economic Performance and Social Progress,
2009, clearly believe that, within limits, they do), there can be no doubt that many
aspects of property development are not subject to the rigours of the market, nor to the
core relationship between price and quantity. Indeed, it is apparent that the market is
138 N. Ravenscroft

a wholly inappropriate means of allocating goods and services in cases where a direct
price–quantity relationship does not exist. This is the case for many aspects of leisure
and tourism development.
Rather than leave a vacuum, however, alternative approaches have been developed
that address issues of allocation in a more direct manner than has previously been the
case. Many of these have been developed from an ecological, systems, approach to
economics (see Stock, 2010), in which the frame of reference is shifted from the indi-
vidual to the recognition of a complex network of actors and potential outcomes.
Central to this has been the work and significance of a number of pressure groups,
NGOs and government agencies in reducing the negative impacts of tourism and
leisure development, through a mix of regulation, good practice, green taxation and
publicity (see Notarstefano, 2008; Scanlon, 2006). At the core of these approaches,
suggests Tribe (2005), is a commitment to take ‘action for sustainability’, driven by
the creation of the United Nations Environmental Programme (UNEP), the Brundt-
land Report (World Commission on Environment and Development, 1987), the Earth
Summit, Agenda 21 for the travel and tourism industry (World Tourism Organisation,
1997) and the World Summit on Sustainable Development in 2002. In these terms,
sustainability is about developing a global economy that does not use resources
beyond their regenerative capacity. This, by its very nature, must mean moving away
from any idea of the market as the primary vehicle for resource allocation – although
this is not to say that the market may not have a role in determining prices when trade
does take place (see Kennet et al., 2010).
Essentially, argues Tribe (2005), action for sustainability focuses on three areas:
regulation of land use and environmental planning; modification of the market; and
‘soft tools’ such as guidance and certification. The first two areas of action are very
much part of governmental responsibility – determining what can happen where, and
under what circumstances or constraints. Environmental designations are an important
part of this, as is the requirement for Strategic Environmental Assessment on all major
infrastructure projects (European Parliament and Council of the European Union,
2001). There are also many ways in which market mechanisms can be modified to
take greater account of the environment (see Commission on the Measurement of
Economic Performance and Social Progress, 2009). Chief among these are bringing
vulnerable resources under state ownership and applying taxes, grants and subsidies
in ways that encourage certain actions and discourage others (León et al., 2007). There
has also been a concerted attempt to introduce tradable rights and permits, which are
essentially quotas that limit the overall impacts of a particular activity (carbon emis-
sions, for example) while not being prescriptive over who can cause the impacts
(Dunlop, 2009).
While these approaches do offer new ways of considering the economics of the
environment, they continue to suffer from association with the market, and its ines-
capable logic that trade takes place when advantageous for the buyers and sellers,
regardless of the impact on the environment of that trade (see, e.g., Limnios et al., 2009).
This leads, ultimately, to a question of values, not in the sense of the market, but in
the sense of what is ‘right’, equitable (see Carruthers, 2009) or ethical (Holden, 2009).
Tribe (2005) and Limnios et al. (2009) argue that there are practical steps that can be
taken to limit environmental impacts through modifying the context within which the
market operates. This is mainly by modifying market prices, highlighting inequalities,
suggesting limits to growth and exploitation, and advocating affirmative action to
achieve certain goals. This is consistent with the proposal for environmental indicators
 Journal of Policy Research in Tourism, Leisure & Events 139

put forward by the Commission on the Measurement of Economic Performance and

Social Progress (2009). It is also consistent with the work of pressure groups and NGOs
such as Greenpeace, Oxfam, the New Economics Foundation and Tourism Concern,
which all highlight the social and environmental impacts of unregulated human actions
and suggest limits that need to be imposed to safeguard both people and the environ-
ments in which they live. These actions have led to recognition that it is not the type
of business that determines the socio-environmental impacts of leisure development,
but the way in which the net benefits of the development are distributed. Tribe (2005)
highlights the concept of pro-poor tourism as ‘an approach to developing and managing
tourism … [that] enhance[s] the linkages between tourism businesses and poor people’
(Tribe, 2005, p. 424). The concept of pro-poor tourism can certainly be expanded to
cover all aspects of leisure development.
Pro-poor tourism is an example of a new, associative, approach to economics.
Following Rudolf Steiner’s economics lectures of 1922, the associative approach to
economics is based on the idea that economic life is the responsibility of every
human being in collaboration (association) with humanity as a whole (see Steiner,
1972). Rather than the abstraction of the market, associative economics is essentially
practical – about putting values on goods and services that are not constrained by the
narrow ideas of trade and profit maximisation. For Steiner, this was about address-
ing the emergent globalisation with an appropriate form of economics that was not
based on competing national economies. The foundation of this new approach would
be to undertake economic life on a consciously co-ordinated associative basis,
person to person. Rather than the singular profit maximisation of neoclassical
economics, where the central economic question is about the profit of one person (or
company, or nation state) at the expense of another, the central question for associa-
tive economics is how to divide the available resources in a manner that allows
everyone to prosper (a form of profit minimisation). Adopting an associative
approach to environmental economics – as is the case with ‘green’ and ecological
economics (see Kennet et al., 2010; Stock, 2010; Victor, 2010) – would involve a
much broader and deeper assessment of socio-environmental needs, with an attempt
made to satisfy all needs, not merely those who have the power to exclude others
from the debate.

Conclusions
This has been a wide-ranging paper that has sought to make visible some of the
fundamental problems associated with a market approach to the allocation of scarce
environmental resources. While there is recognition that neoclassical economics is
not suited to such allocation decisions, the paper argues that a mythology has grown
up around the market mechanism that has decentred the debate away from the
philosophical poverty of the approach to a range of technical fixes that render it fit for
purpose. As the paper shows, neoclassical economics is not fit for the purpose of
making allocation decisions about the environment, and no amount of technical
fixing can alter this. Rather, there is a need to seek an alternative way of managing
economic relations. It is suggested that alternatives such as ‘green’, ecological and
associative economics may have much to offer, certainly in helping decision-makers
become more conscious about the distributional impacts of their decisions. Initiatives
such as pro-poor tourism are a good example of how alternative approaches to
economics might work in practice, with the emphasis less on the profit of one
140 N. Ravenscroft

individual or company, and more on meeting the needs of all those involved with, or
affected by, the economic decisions being taken.

Acknowledgements
An earlier version of this paper – ‘The economics of leisure development’ – was presented to
the joint Commonwealth Association of Surveying and Land Economy/European Council of
Construction Economists conference, 5–7 November 2009, in Limassol, Cyprus.

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