It depends on the game - if you are making a story driven game with cut-scenes then you want the best looking characters you can make. If not then maybe the environment is the way to go.
As for people who say "both and no excuses" - that's not how it works. Sure, we have tech to do it (well we always had proper to each generation of hardware) but making it needs something different - money and time (which is actually the same). In this days making a great looking AAA character means that you need a ton of work and many people (one character needs artist for head, for body, for clothing, for hairs, for textures, technical artist for materials, technical animator for skinning and rigging, animator for animations, mocap crew, actors, lighting artist, etc.). Sure you can go with shortcuts but it will be visible in the final look/play or in numbers of characters.
In this regards environment is easier to do, needs less people. I'm not saying it's easy but it's easier to trick human mind with enviro then characters and nowadays you have many assets that you can buy and they'll work.
In the end it's all about balance not only in the budget for games but also in visuals themselves. I think the more importing thing is to have cohesive art quality. This is usually on good level in bigger games.