In Part I of this essay, I argue that environmental legislation, at least during the past twenty years, fails to make economic "common sense," that is, it fails to maximize the satisfaction of consumer demand over the long run. Laws like the Endangered Species Act flout this conception of economic efficiency. This is how most Americans would have it: most Americans reject the notion that the natural environment should be made over to serve the wants of the self-interested consumer. Part II describes the way that economists have attempted to take account of citizen or community-regarding preferences. I suggest that they do this primarily by giving these convictions and beliefs shadow or surrogate prices as if they were market externalities. In Part II, I argue briefly that this shadow pricing of political, moral, and cultural convictions vitiates cost-benefit analysis. Shadow pricing allows the analyst to justify virtually any policy by assigning the appropriate prices to the opinions of the political constituency that favors it. There is, then, no popular public policy that cannot then be justified on "economic" grounds.

In Part III of this essay, I extend my criticism of cost-benefit analysis to show that it confuses statements of principle or opinion with wants and interests of the kind that are properly revealed in and satisfied by markets. I argue that it is a mistake to treat views or convictions that merit the dignity of a hearing as if they were only wants or interests deserving of a price. I conclude that attempts to base environmental law on economic theory must fail.