Let us begin with a theme that formed the core of Hayek’s own thinking about the environment. According to this first narrative, the problems presented by humanity’s relationship with the natural world instantiate more general challenges concerning the production and use of economic capital. As we will see, applying this narrative to environmental problems yields important difficulties that will occupy us in the sections to come. For now, however, it will be helpful to present this first Hayekian theme uncritically, reserving needed caveats and qualifications for later.

Natural Resources and the Structure of Capital

Hayek’s discussion of environmental issues begins in The Pure Theory of Capital. Here he observes that societies prosper by employing productive assets that can be deteriorated or used up (1941, 72-76). This generates what he calls the “peculiar problem” of capital: how “a stock of non-permanent resources enables us to maintain production permanently at a higher level than would be possible without them” (74). On Hayek’s understanding, society’s “non-permanent” capital includes tools and facilities created to assist production as well as human capacities cultivated for the same end. But it also includes “the greater part of the natural resources. Some . . . such as the fertility of the soil, can only be expected to endure permanently if we take care to preserve them. Others, such as mineral deposits, are inevitably exhausted by their use and cannot possibly tender the same services forever” (72).

Hayek observes that natural resources are not unique in their vulnerability to being destroyed. In fact, it is a feature of all capital assets that they can be exhausted or degraded through use (1941, 75-77). Given this, Hayek insists that natural resource issues should be analyzed in terms of the more general problem of maintaining and reproducing capital to permanently elevate prosperity (102). In The Constitution of Liberty, he reemphasizes this point against what he sees as an “unreasoned prejudice” for maintaining natural resources in their existing forms (1960, 322-23):

[I]f we want to maintain or increase our income, we must be able to replace each resource that is being used up with a new one that will make at least an equal contribution to future income. This does not mean, however, that it should be preserved in kind or replaced by another of the same kind, or even that the total stock of natural resources should be kept intact. From a social as well as from an individual point of view, any natural resource represents just one item of our total endowment of exhaustible resources, and our problem is not to preserve this stock in any particular form, but always to maintain it in a form that will make the most desirable contribution to total income. (323)

Driven by this assessment, Hayek concludes that “all resource conservation constitutes investment and should be judged by precisely the same criteria as all other investment” (323).

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