In Tall Cotton

This chapter examines neoclassical economics as it emerged during the Marginalist Revolution of the 1870s. Particular focus is given to how early neoclassical concepts and ideas would subsequently influence the development of environmental economics. The chapter surveys some of the significant refinements of economic theory, including the neoclassical criticism of the labor theory of value, which was ultimately replaced by subjective utility theory of value. Closely related to this is the concept of diminishing marginal utility and its profound importance to both neoclassical economics and eventually, environmental economics. The chapter also delves into Jevons’ Paradox and its implications for the relationship between productive efficiency and the consumption of natural resources. Finally, the chapter concludes by tracing the eventual embrace of consumer preference theory over the subjective utility theory of value. Preference theory holds high relevance for sustainability because it constitutes the primary lens through which economists understand consumer behavior. Preference theory furnishes the analytical framework that policymakers and economists utilize to understand and address nearly all of the world's major environmental and social problems.