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1 June 2009 The Economic Value of Ecosystem Services
Mark Sagoff
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Luck and coauthors (2009) in their thoughtful article examine “the concepts of service-providing units (SPUs) and ecosystem service providers (ESPs).” In spite of their able analysis of these concepts, they concede that “the contribution that the protection of ecosystem services will make to biodiversity conservation is largely unknown.”

The problem may lie less in the concept of an SPU or ESP than in the concept of the economic value that applies to them. There are at least two possibilities: total and marginal value. To estimate the total economic value of an SPU, one may ask what losses an industry would suffer in its absence or what the industry would have to pay for a substitute. Losey and Vaughan (2006), whom Luck and colleagues cite in relation to the services of insects, take this approach. For example, they estimate at $380 million the losses that the cattle industry would endure in the absence of the activity of dung beetles.

A difficulty with this approach is that any industry may require many inputs. For example, farmers probably could not raise cereal crops, which are wind pollinated, without wind—nor conceivably in the absence of labor, tractors, fuel, rain, seed, fertilizer, and so on. Should we assess the economic value of each of these inputs on the basis of the cost of a substitute or the losses its absence would create? These valuations when aggregated could greatly exceed the price of the crops themselves.

The total economic value of an SPU—such as the wind that pollinates cereal crops—can be immense but at the same time irrelevant to conservation policy. No one need care about the total value of dung beetle services, for example, because the cattle industry, far from threatening the beetle, provides resources that help it thrive. Value of this kind provides a reason to protect an SPU only if (a) it is threatened with destruction and (b) nature will not provide as cheap and as good a substitute.

Marginal value is calculated in terms of the amount someone is willing to pay for the next marketable unit of a good—an additional dung beetle, gust of wind, bag of seed, or tractor. If SPUs are plentiful and free, their marginal value is effectively zero, however beneficial they may be. No farmer is willing to pay people to use bellows to provide a service the wind offers without charge or to grow additional dung beetles that nature like-wise provides gratis.

It is the scarcity of a good relative to effective demand that determines its competitive market price and thus its economic value in that sense. For example, in Thailand, dung beetles are considered delicacies. They are raised and sold like any marketable good. A large scarab well prepared can fetch $10 in a fine restaurant.

The concept of economic value presents a dilemma. If conservationists refer to total value, they must concentrate on just those SPUs that are in jeopardy. It serves no purpose to “valuate” services that are not threatened. If conservationists refer to marginal value, however, they tie themselves to the familiar conceptual framework of market failure, externalities, common pool resources, discounting, transaction costs, and so on. Conservationists then go down a long and weary road, at the end of which they will find mainstream environmental economists waiting for them.

References cited

1.

JE Losey , M Vaughan. 2006. The economic value of ecological services provided by insects. BioScience 56: 311–323. Google Scholar

2.

GW Luck , et al. 2009. Quantifying the contribution of organisms to the provision of ecosystem services. BioScience 59: 223–235. Google Scholar
Mark Sagoff "The Economic Value of Ecosystem Services," BioScience 59(6), 461, (1 June 2009). https://doi.org/10.1525/bio.2009.59.6.18
Published: 1 June 2009
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