Prices for Environmental Goods Are Fictions

This paper shows that an attachment of prices by courts or state agencies to environmental goods is without proper economic foundation and a fiction. A valuation in monetary terms of damages to biotopes in oil pollution cases is arbitrary due to the missing market exchange processes. It does not make sense to attach an exchange rate to non-exchangeable goods. There are no markets and prices for biodiversity and there is no monetisation by central banks for any good outside of markets. Money, nevertheless created by central banks for non-exchangeable goods would be used in exchanges on markets and not left unused, only passively reflecting given “values” to non-exchangeable goods. By valuing and monetizing environmental goods central banks will produce a too large monetary base for the exchangeable goods and affect prices on markets in an inflationary way. Cash prices in the form of damages for intangible goods are not market prices, but pure “prevention prices” which are similarly justified like penalties, fines, and compensations. At a reasonable amount, they are effective, useful, and recommendable as an incentive device even if their basic justification is not built on market valuations.