Valuation, capital and income are central to sustainability economics. But the theoretical approach to valuation [in sustainability theory] is fallacious and the concepts of capital and income are only metaphorical.

The public is presumed to have an ethical responsibility to maintain a ‘broadly defined capital stock’ to sustain a ‘broadly defined income’ for future generations. This ‘capital stock’ agglomerates incommensurable features of the environment such as the atmosphere, oceans, exhaustible resources, and eco-systems.

The ‘broadly-defined income’ is an imputation of all benefits yielded by this ‘capital stock.’ Both ‘capital’ and ‘income’ are defined in a way that ignores the critical roles of private property and monetary exchange. Hence, sustainability is treated as a ‘market failure.’

Moreover, imputation and incommensurability are not viewed as barriers to implementing ‘corrective policy’ since value is assumed to be measurable and inferable. But, in reality, value is only an individual’s subjective ranking of alternatives implying that the ‘income imputations’ are illegitimate.

What is more, only objects capable of private ownership can become capital goods. Without private property and monetary exchange, sustainability theory yields no valid theory for reckoning depreciation, depletion, resource despoliation, rational capital maintenance or replacement of capital.

Also, legitimately conceived and enforced property rights assure tort protection from pollution and an ethical reckoning of costs associated with resource use.

In addition, property rights and monetary exchange foster an evolution in the resource base as economic scarcities emerge.

The paper also notes that increased government regulation, taxation and expenditure will raise private time preference and reduce private incentives to save and provide for the future. True sustainability requires privatization of resources that are not privately owned and institutions that foster monetary reckoning.

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