Natural Resource Valuation

To achieve sustainability, we need to incorporate eco system goods and services into economic accounting. The economic values we seek for ecosytem managment are much broader than financial values or merely the cash flow generated by a resource. For any good or resource to have an economic value it must meet two conditions:

1. provide at least some agents (but not necessarily all) with improved well being;
2. the resource is considered scarce in that agents desire more than is currently available.

Fish, wildlife, recreation, wetlands, old growth forests, native grassland communities, etc., all meet this definition of having an economic value to society even if none of these resources or the services they provide are marketed. While old growth forests on public land can provide timber, timber will be provi ded by private lands due to the profit motive. But old growth forests also provide for recreation (a direct use) and habitat for unique species such as the Spotted Owl, something the private lands often underproduce.

The case of the spotted owl highlights the "passive use" or existence/bequest values that ecosystems provide to members of the general public who may never set foot in the forest. Existence value is the satisfaction gained from knowing that a particular species or entire ecosystem continues to exist and function. Bequest value is the satisfaction gained from knowing that protection today will provide future generations with a particular species or ecosystem. Randall and Stoll (1983) describe the recreation use, existence and bequest values as "Total Economic Value" as it captures many of the motivations people have for caring about resources. As can be seen these motivations are quite broad and can arise from a variety of concerns and may partially include such important but overlooked sour ces of benefits as spiritual and cultural values.

Using the contingent valuation methodology in surveys of the general public Bishop and Welsh (1993) and Brown (1993) have shown that these existence and bequest values can be 2-10 times larger than the d irect on-site recreation use values. In some respects this is not surprising. While per person, visitors have much higher benefits that non-visiting members of the general public, the number of visitors is often limited to a few thousand and almost never larger than a few million. Yet, nearly every member of the general public could recieve satisfaction from simply knowing an ecosystem exists. While the value per household may be small ($5-40), there are literarlly millions of households depending on the geographic extent over which people care. Thus an important research topic in ecosystem valuation is just how wide is a ecosystem's drawing power? This of course depends on the uniqueness of that ecosystem. The Grand Canyon has a geogrpahic extent of Nort h American and possibly worldwide. Whereas a common type of wetland might have a value just locally as similar wetlands exists in other counties or states.

It is also worth noting that while humans may appear to only directly value the "charismatic mega vertabrates" that such a valuation, implies an indirect valuation for the components of the ecosystem that supports these high profile species. For example, humans may value watching raptors and are unware or indifferent toward pocket gophers. But if pock et gophers are a critical part of the raptors food supply then humans have a derived value for the pocket gophers and their habitat. Thus while an anthropocentric valuation paradigm might on the surface seem to ignore many underlying and important ecologi cal functions, this may often not be the case. The ecological inter-relationships necessary to support the high profile species, may mean that the entire ecosystem must be protected.

But what this also means is that values expressed in human preferences represent only a part of the total. We need to look beyond current human preferences to get at the total economic value of ecosystems (Gren et al. 1994). We offer one further distinction into "preference based" (PB) values and "non-preference based" (NP B) values (figure 4). PB values include all those marketed and non-marketed values mentioned above for which humans have enough information to form preferences. But there are also many functions of natural ecosystems which meet the criteria for having e conomic value stated above (they contribute to well being and are scarce) but for which humans have not developed preferences. This lack of preferences can be due to simple ignorance of the contribution of ecosystem functions to well being, or because cu ltural or social mores tend to preclude preference formation. There are links between PB and NPB values as mentioned above, and as humans gain information and form preferences there can be migration from NPB to PB values. One additional point is that, a s we mentioned earlier, preferences can and do change and thus cannot be taken as "given" and the starting point of all valuation as has often been assumed in the past.

The point that must be stressed is that the economic value of ecosystems is connected to their physical, chemical, and biological role in the long-term, global systemÑwhether the present generation of humans fully recognizes that role or not. If it is accepted that each species, no matter how seemingly uninteresting or lacking in immedi ate utility, has a role in natural ecosystems (which do provide many direct benefits to humans), it is possible to expand the focus to include not only our imperfect short-term perceptions and preferences, but also long-term estimates of ecosystem servic es that may be derived from scientific studies of the role of ecosystems in the overall system, without direct reference to current human preferences. Using this perspective we may be able to better estimate the values contributed by, say, maintenance o f water and atmospheric quality to long-term human well-being.

Obviously, these services are vital and of infinite value at some level. The valuation question relates to marginal changes, incremental tradeoffs between, say, forested land and agricultura l land on a scale of hundreds of acres rather than hundreds of square miles. The notion of safe minimum standards championed by a few economists seems relevant to the protection of critical levels of natural capital against excess myopic marginal convers ion, or large-scale conversion, into manmade capital. Of course, in a perfect system, marginal valuations would become prohibitive if the safe minimum standard were transgressed. But systems are far from perfect and redundancy in the interest of prudence is not extravagance. The overriding research issue is to find the most sensible ways of assigning value to natural resources and natural capital (King 1994). Related are the role and value of biodiversity and how to protect the opportunities of choice f or future generations (Barbier 1994; d'Arge 1994, Golley 1994; Perrings 1994).

Successful attempts to integrate ecological and economic research requires that ecological systems be viewed as sets of processes rather than a collection of resources and that we focus on ecosystem behavior and discontinuities (Holling 1994). The points of discontinuity in ecosystems occur around a set of system thresholds which mark the limits of system resilience. A challenge for ecological economics is to incorporate th e dynamic components of ecological systems in economic analysis (Maler et al. 1994; Perrings 1994).

In valuing biodiversity, the major challenge is to maintain that level of biodiversity which will ensure the resilience of ecosystems. To date, we have t ended to invest too much in preserving individual species and not enough in broad categories of ecosystem components. From a policy perspective three important questions need to be analyzed. What is the significance and value of biodiversity? What a re the social and economic forces driving the loss of biodiversity? What can be done to reduce or even to reverse the current rate of biodiversity loss? What are the priorities within biological conservation? (Perrings et al. 1992; Perrings 1994)

Back...