Ecological economics
-new discipline that integrates biodiversity and economics
-environmental degradation and species loss occur as a by-product of human
economic activities
-economics are based on Smith's (1909) Principle of Free Exchange:
"It is not upon the benevolence of the butcher, the baker, or the brewer that
we eat our daily bread, but upon his own self-interest". All parties
involved in an economic exchange expect to improve their own situation.
-those that participate in economic exchange generally accept its cost and
benefits. Costs or benefits that are hidden in economic exchanges are
called externalities
-externalities can result in market failure and often occur in industry that
affect biodiversity Exs. Some types of logging, some types of farming,
commercial overfishing, energy companies that pollute, urban sprawl
-natural resources such as clean air, water, soil quality, biodiversity, and
scenic beauty are considered to be externalities that are common property
resources
-misuse of common property resources has resulted a market failure called
tragedy of the commons (Hardin, 1968; 1985)
Tragedy of the commons
-common property resources are used for private gain and a market failure
ensues
-often involves large companies and government
-regulation in large bureaucracies will always involve people with a "get mine
and get out" mentality
Classic examples of tragedy of commons:
1) leasing of publicly owned grazing lands
-stockmen in the western USA can raise his cattle on government land
managed by the Forest Service often leasing it for about 1/5 of the cost of
surrounding private land
Ex Idaho, 1990
-Forest Service paid out 35 million for maintaining grazing lands but took in
only 11 million as fees
-some stockmen receive subsidies to raise the beef
-costs were commonized (to taxpayers) while profits from the sale of beef
were privatized (to stockmen)
2) clear cutting instead of ecological forestry in national forests
commonized costs: lost opportunities to visit wilderness areas, lost ecosystem
services, payment of subsidies to timber companies
privatized benefit: huge profits for a few large timber companies
3) pollution by industry
commonized costs: health risks to individuals, cost of clean-up by EPA or
private companies
privatized benefit: savings by companies that use land, water or air for free
disposal of waste
4 Some solutions to Tragedy of Commons:
-before these kinds of things can be done, a value must be
assigned to biodiversity
Types of Economic Value
1. Direct use value (private goods, commodity values)
-products harvested by people
2 categories:
a. consumptive use value
-products consumed locally
b. productive use value
-products sold in non-local markets
2. Indirect use values (public goods or nonconsumptive use value)
-products that are not harvested
3. option value
-future products that may benefit humans
4. existence value
-amount people are willing to pay to insure the existence of biodiversity.
Related to bequest value, which is what people are willing to pay to protect
something for their children
4.5 Evaluating the success of a development project must incorporate the full range of its
environmental effects
Direct use value (private goods, commodity values)
-products harvested by people
2 categories:
a. consumptive use value
-products consumed locally
-often obtained by rural peoples
-Exs. 80% of world's population relies on traditional medicines, protein
from wild animals, fuel from plants
4.6 (A) Wild animals provide people with a crucial source of protein and income in many areas of
the world; (B) Wild animals provide a crucial source of protein in a South Korean market
4.7 One of the most important natural products required by local people in India is fuelwood
b. productive use value
-products sold in non-local markets
Several major types:
1) forest products
-135 billion per year from timber
-non-timber products include game, fruit, gums, resins, honey, and medicinal
plants
2) natural pharmacy
-rose periwinkle and taxol used in treating cancer and many others
-horseshoe crab blood contains chemical to detect bacterial contamination of
medicines administered by injection
-all of 20 most frequently used pharmaceuticals are based on a chemical first
identified in natural products = 6 billion per year
4.68 The timber industry is a major source of revenue in many tropical countries-logs, honey, & fruit
4.9 Medicines are often derived from natural products like plants growing in the local area
4.10 Horseshoe crabs in shallow coastal waters-bait, wildlife food, bacterial contaminant detection
indirect use values (public goods or nonconsumptive use value)
-products that are not harvested
-some estimate that ecosystem services (production of food, water, fiber and fuel;
climate controls; primary production; filtering pollutants; soil formation; ecotourism)
are worth about 33 trillion per year.
Since the global gross national product (total value of global annual output of goods
and services) is 18 trillion, human societies are totally dependent on ecosystem services
-ecotourism has increased greatly in last few decades Ex. Box 4.1 US National Parks
Box 4.1 In the greater Yellowstone region, real income from extractive industries vs. real income
from the rest of the economy
4.2 Agricultural ecosystems, forestry activities, and industries are usually valued by the products
that they produce
3 Results of studying ecological economics: