Easy debt and the environment.

• Author: Dodson, Edward J.
• Position: FROM READERS - Letter to the editor

Jim Cochran ("Carbon on Credit," May/June, p. 14) points us to a corner of the global economy not well understood by most of its participants and a good many of its analysts. Few economists are able to accurately forecast changes in any economy, for one main reason: neoclassical economic theory has evolved to describe almost everything as a form of capital. The environment is described as natural capital, just one more category of assets brought to the market by the price mechanism. But nature is more accurately described as the first factor of production. Economists ignore the fact that as price increases, those who control locations on the Earth tend strongly to hoard them and their resources in anticipation that curtailment of supply will drive up price (and profits) even higher.

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Global financial instability is intimately linked to speculation in land and in natural resources. Bankers periodically forget about the repeating...