Tom Pickering
Pat Fleming
Chapter 13: Biodiversity and Habitat Preservation
Introduction:
-Extinction of plant and animal species  loss of biodiversity
-Biodiversity is important for ecosystem function
-Natural and anthropogenic sources of extinction
-Anthropogenic sources  MKT failure
-Social costs of actions ignored
-Natural extinction  competitive disadvantage
Anthropogenic Causes of Species Extinction:
-Open-Access Harvesting
-Common Property vs. Open-Access Resource
-American Bison (Buffalo)  over-hunting
-Native Americans regarded as common property
-Culture dictated conservation
-Both intertribal and intratribal rules prevented open-access
problems
-Introduction of Non-Native Americans  Open-access resource
-Individual hunter had no incentive to restrain behavior
-Meat was often left on carcass
-Current issues
-Game theory application
-Loss of Habitat
-Habitat conversion, destruction, or pollution threaten residents
-Current Issues
-Open-Access Habitats
-Firms/People do not consider social costs of actions on a habitat
-Example: Coral reefs (pollution, boaters, explosive fishing)
-Privately Owned Habitats
-Owners make decision based on MPC = MB (ignore MSC)
-Society bears cost of externalities from such decisions
-Competition from Nonnative Species
-Nonnative species introduced based on someone’s private benefit
-Social and ecological costs not considered (negative externalities)
-Imperfect information
-Examples
Importance of Biodiversity
-Stability (i.e. Genetic Variation)
-Diversity helps ecosystems to manage shocks and stresses
-Promotes overall health and function
-Protection of freshwater supplies
-Absorption of carbon dioxide
-Nutrient cycling
-Provision of habitat
-Economic Value
-Healthy plants and animals have economic value (medicines, natural
chemicals and compounds)
-Genetic Information
-Genetic engineering
-Personal Utility from Biodiversity
-Intrinsic value
Costs of Losses of Habitat
-Individual benefits of habitats listed in other chapters
-Generally, provide environment for healthy plants and animals
-Example: Wetlands
-Nutrient cycling
-Origin of aquatic food webs
-Buffer against storms / Lessen effects of droughts (sponge)
-Rare species
Policies for Maintaining Biodiversity
-Policy Focus
-Commercial Benefits of Biodiversity
-Non-market benefits
-Policies to Reduce Open-Access Exploitation
-Assign property rights
-Owners have incentive to preserve a resource (like an elephant)
-Property rights assignment is sometimes unpopular
-Fish and game resources in the U.S.
-Certain rules on when, how, and what can be hunted with penalties
-If demand is inelastic enough, supply side restrictions can fail
- Needs to be combined with demand intervention
-Policies to Reduce Competition from Nonnative Species
-Command and Control
-Liability system  not always practical
-Permits
-Ban species introduction
-Policies to Reduce Loss of Habitat
-Traditional MPC not equal to MSC problem *
-Incentive
-Suggested Solution: Royalties for medicinal discoveries
-Internalizes cost of loss of habitat
-Does not deal with other public good benefits of preservation
-Internationalized system of marketable carbon permits  forest
preservation
-Make costly to not preserve or give benefits to preserve?
-Equity question
-Command and Control
-Difficulty in incorporating all values of habitat preservation into private
costs and benefits
-Policy
-NGO’s buy land for preservation
-Public goods usually will not be privately provided
-Private landowner cannot capture benefits
-Free rider problem prevents individuals from paying
-Reduces transaction costs
-Command and Control
-Create protected areas
-Restrict use of privately owned lands
-How do you define land?
-Endangered Species Act of 1973
-No federal funds used in projects that might endanger species
-Focus on species my not be best way to protect (snail darter)
-Reactive Policy