Incommensurability and property rights in the natural environment

Cost–benefit analysis has been criticised on the grounds that it cannot compute the value of environmental goods whose value constitutively defies monetary valuation. Two forms of incommensurability make monetary valuation problematic: constitutive incommensurability and quantitative incommensurability. These pose a threat only to shadow pricing, and not the formation of prices in an actual market. Where property rights to environmental goods are appropriately assigned, the prices that form reflect the actual uses persons put them to, given their value commitments. In a real market, the formation of prices does not depend upon the assignment of cardinal values via monetary valuation; rather, the formation of prices is a side effect of the way in which environmental goods are used. A property right gives one the right to reject terms of exchange one deems inappropriate. Where sale of an environmental good is deemed inappropriate, it is kept out of the cash nexus. Incommensurability therefore precludes cost–benefit analysis, but not markets in environmental goods where property rights are appropriately allocated.