Download Biological diversity, ecosystem stability and economic

ECOLOGICAL
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Ecological Economics 16 (1996) 191-203
Methodological and Ideological Options
Biological diversity, ecosystem stability and economic
development
Fraser Smith 1
Department of Biological Sciences, StanJbrd University, Stanford, CA 94305-5020, USA
Received 16 January 1995; accepted 18 October 1995
Abstract
It is clear from the scale of anthropogenic resource use that economic systems should be brought within biophysical
limits as soon as possible. One might assume that this task is difficult because it would involve identifying these limits,
knowing when and where they are breached, and allocating responsibility. However, an intimate understanding of the natural
limits to economic development may not be necessary for achieving a biophysically sustainable economy. Certain
measurable features of the natural world are intimately connected with overall biophysical integrity, one such feature being
biological diversity. A growing body of ecological research gives compelling evidence that biodiversity confers stability on
ecosystems by buffering them against natural and artificial perturbations, and that it increases system productivity. It is well
known that the stability and productivity of ecosystems are fundamental components of the earth's biophysical integrity.
Therefore, biodiversity should act as a measure of biophysical integrity and biodiversity conservation might provide a viable
framework for policies that drive economic activity towards overall biophysical sustainability. Economic instruments to
implement a biodiversity constraint would penalise economic activities that directly or indirectly cause biodiversity loss and
favour those that conserve it. A biodiversity constraint would, of course, require new legal and institutional underpinnings.
What makes a biodiversity constraint doubly attractive is that it would also conserve the potentially large economic use and
option values of biodiversity itself, thus removing the need for separate measures for its conservation.
Keywords: Biodiversity; Stability; Sustainability; Futures
1. Introduction
As the human population grows, so does its total
impact on the world's biophysical systems (Vitousek
Present address: Decision Focus, Inc., 650 Castro Street, Suite
300, Mountain View, CA 94041-2055, USA.
et al., 1986; Holdren, 1991). Public concern about
the increasing strain on natural systems is manifested
in part in the form of political and other efforts to
protect endangered natural populations and species,
and to promote biodiversity conservation (World
Conservation Monitoring Centre, 1992; World Resources Institute, 1992, 1994; Angier, 1994). This
increase in public concern has come about because
the consequences of current biophysical changes for
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F. Smith/Ecological Economics 16 (1996) 191-203
human welfare are unknown and possibly highly
detrimental.
Of course, concern about species loss is almost as
old as the notion of a species itself. The loss of
species has, among other things, led to urgent calls
to bring economic activity within biophysical limits
(e.g., Ehrlich and Holdren, 1971). A biophysically
sustainable economy would at least ensure a less
uncertain future for people than an unsustainable
one. Among the many difficulties in achieving this
aim, two in particular stand out. The first is that
defining and establishing biophysical limits, and
knowing when particular kinds of human activity
breach them, are very difficult tasks; the second is
that a necessary conjunct to moving the global economy towards biophysical sustainability is a substantial increase in distributional equity, the political and
economic barriers to which are formidable.
Although ways are being found to steer local
economic development along paths that are more
biophysically sustainable than in the past, the intertwining of local and global economic processes requires that sustainable development be co-ordinated
to some extent at the global level. Sustainable development is unlikely to be successful if it takes place
piecemeal because the global economy must also
change from a system where the primary goal is
profit maximisation to a system where that goal is
subsumed within biophysical limits.
This paper outlines a framework that might be
used to guide the global economy (and, by extension,
local and regional economies) towards biophysical
sustainability. This framework is based on the conservation of biodiversity, which, as well as ensuring
its own continuing existence as a valuable resource
base, serves to stabilise whole ecosystems, thus
avoiding the leap into the unknown that would come
with global ecological degradation. The paper does
not explore individual policies that might be applicable in particular regions, but instead discusses the
advantages and disadvantages of using biodiversity
conservation as a benchmark for setting economic
policy, and provides a sense of the legalities and
institutional structures required to build this framework, as well as the long-term economic costs and
benefits. It is intended that the consistent application
of a "biodiversity constraint" on economic activity
- - o r what Perrings (1991) calls an ecological sus-
tainability constraint--would circumvent the problem of dealing with fundamental biophysical limits,
and would result in greater distributional equity.
There are several stepping-stones to be crossed
before assembling the framework of a biodiversity
constraint. First, we need to know why biophysical
sustainability is necessary for economic development; second, we need to know why biodiversity is a
good surrogate measure of fundamental ecological
processes; third, we need to understand why biodiversity conservation would be an effective motivator
of sustainable development; and fourth, we need to
understand the probable short- and long-term economic consequences of conserving biodiversity, in
order to know what must be added to biodiversity
conservation in order to construct a workable constraint on economic activity. Although the structure
and operation of a biodiversity constraint are outlined in this paper, an exhaustive analysis of these
areas is held in abeyance for future work. Instead,
the present paper concentrates on the rationale for
adopting a biodiversity constraint on economic development, and outlines in broad terms how the
constraint might work.
2. Terms of reference, disclaimers and caveats
The problem of achieving biophysical sustainability is viewed here with an ecological-economic perspective. This perspective views the primary task in
economic development as understanding the limits of
natural systems to different kinds and combinations
of economic activity. Only once these limits are
known should allocative efficiency and distributional
effects be considered. In this context, a biodiversity
constraint would provide a measure of natural limits
within which allocative efficiency and equitable distribution of wealth could be pursued.
This approach is in sharp contrast with mainstream economics wherein cost-benefit analysis
would, in principle, provide a means to assess how
many species could be lost to economic activity. The
greatest economic efficiency would be achieved when
the marginal cost of extinguishing a species equals
the marginal benefit. But the mainstream approach is
hopelessly inadequate when applied to ecosystems
F. Smith/Ecological Economics 16 (1996) 191-203
because we have virtually no idea how the deletion
of particular species, or the sequence of their deletion, would affect particular ecosystems, or how the
dynamics of those altered ecosystems would impinge
on the economy, now or in the future. Not only is the
option value of biodiversity in relation to ecosystem
function potentially large, it is literally incalculable,
not least because the option values of individual
species depend on the presence or absence of other
species with which they are ecologically associated.
The complex, interrelated nature of the natural systems on which economies depend precludes our
knowing with any reasonable degree of accuracy
how long people can get away with disrupting them.
Advocating the adoption of ecological constraints on
economic activity is therefore based on the kind of a
priori precautionary stance taken in ecological economics (e.g., Page, 1977; Pearce and Turner, 1990).
Regarding option and use values of biodiversity,
the distinction is made in the previous paragraph and
hereafter between the option value of species and the
option value of biodiversity in relation to ecosystem
function. In addition to the current use value and the
future option value of existing genetic material, 2
biodiversity has option value at the ecosystem level
because it provides the option for future economic
benefit from the services of stable and productive
ecosystems.
A biodiversity constraint could not conserve all
remaining species on the planet. Many species are
already extinct from human activities and, as the
human population grows, so will more biodiversity
be lost. Even if ecologically disruptive activities
could be terminated immediately, the global rate of
anthropogenic extinctions would remain high for
years or decades because the effects of human activities often take a long time to work their way through
ecological systems. In addition, highly restricted or
rare species--for example, those with tiny geographical ranges on the order of a tennis court (Mayr,
1963)--could be sent extinct inadvertently by even
2 For example, medicinal plant species whose pharmacological
properties are currently known, and those whose properties are
currently unknown or for which there is currently no need.
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small-scale activities. While vigilance for inherently
vulnerable natural systems will be important in
achieving ecologically sustainable development, the
conservation of all remaining populations and species
on the planet is not a realistic venture; rather, it is an
ideal for people to strive towards.
In the present paper, all extinctions during this
century are assumed to be anthropogenic. The average background rate of extinctions in the geological
past is about one per year globally (see Wilson,
1992) and the rate of recorded extinctions since 1900
for which the cause is known is about 2 per year (see
Smith et al., 1993a). But only 0.1-1% of all described species have had their status re-assessed
since they were discovered. If, in any given region, a
species is known to have become extinct through, for
example, habitat destruction, then other ecologically
similar species are probably also at risk or extinct in
that region. Therefore, the true rate of anthropogenic
extinctions since 1900 is probably much higher than
2 per year, and the rate of recorded extinctions is
expected to climb by about two orders of magnitude
in the next century (see Wilson, 1992; Smith et al.,
1993b).
Certain terms relevant to the discussion are defined in detail in the Appendix. In short, "biodiversity" is taken to mean the total genetic, morphological and functional diversity of all individual organisms that are members of an ecological community
or ecosystem; "species richness" is taken to mean
the number of species per unit area; "ecosystem" is
one or more biological communities plus its abiotic
environment; "stability" is the tendency for a system to return to its original state; and "sustainability" is here taken as the "stronger" biophysical
definition rather than the " w e a k e r " intergenerational definition (the ability of the present generation
to meet its needs without compromising the needs of
future generations) because we are considering how
to make the full transition to an economy within
biophysical limits, for reasons given below. The term
"biophysical limits" is used to refer to limits to
economic development that are either biological (such
as the amount of sunlight fixed by plants) or physical
(such as the capacity of the atmosphere to absorb
and recycle greenhouse gases), or a combination of
both.
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F. Smith / Ecological Economics 16 (1996) 191-203
3. The need for biophysically sustainable economic development
3.1. The scale o f the global economy
Most of the time, economists do not think about
what the world might be like a century or two from
now if current patterns of resource use were to
continue. This would be perfectly reasonable in a
world where the material or energetic throughput of
the global economy were small relative to the overall
scale o f the w o r l d ' s biogeochemical cycles. But the
global economy is now large relative to these cycles
(see Vitousek et al., 1986; Holdren, 1991) and this
forces us to consider how current patterns of resource use impinge on future economic welfare.
There are two problems. The first is that in a
world where the scale of resource use by people is a
substantial fraction o f the global scale of resource
cycling, the costs of appropriating natural resources
should be high. For the most part, these costs are
currently too low (see Pearce and Warford, 1993).
The second problem is that, even if natural resources
were priced appropriately, the cost of their use is
discounted into the future at far too high a rate.
Because biogeochemical processes, such as the cycling of nutrients through ecosytems, usually operate
over many years or decades, the full effects of
economic activities on natural processes are unlikely
to be seen within a lifetime. It is therefore inappropriate to discount the future at the standard 5% per
year. In a world where future human welfare depends so heavily on the future state of natural systems, it is more sensible to discount the future at a
rate commensurate with the time for biogeochemical
cycles to absorb anthropogenic perturbations, rather
than at a rate commensurate with human lifetimes.
The interplay between economic systems and natural systems is so complex that it is virtually impossible to know how long a biophysically unsustainable economy could continue to exist, or even how
unsustainable the current global economy is, if at
all. 3 However, precaution dictates that biophysical
3 The combination of the size of the global economy and its
critical dependence on fossil fuels (as opposed to current energy
flux) is one of many--albeit weak--indicators of its current
biophysical unsustainability.
sustainability should be a long-term goal (i.e., over
decades or centuries). It is not enough to achieve
intergenerational sustainability, as defined above, because the needs of even the next generation are
unclear and, even if they were clear, meeting them
with the m a x i m u m possible current resource use
would be foolishly risky. Biophysical sustainability
is a safer long-term bet, and intergenerational sustainability is an important shorter-term goal towards
achieving it.
3.2. The problem o f measuring sustainability
H o w do we know whether or when biophysical
sustainability is achieved, and what is the best route
towards it? There are two layers o f ignorance which
must first be peeled away before this question can be
addressed. The first is establishing whether natural
systems have thresholds beyond which they flip to
new states. W h e n perturbation experiments on whole
ecosystems are carried out (e.g., Persson et al., 1993),
ecologists are often little the wiser about the possible
existence of thresholds because either the system has
no distinct states or the perturbation was of the
wrong type to take the system to a new state. Even if
this first layer of ignorance can be overcome, a
second presents itself, which is that because ecological-economic interactions are complex, we do not
know how to properly establish biophysical limits on
economic activities. Although this problem may be
soluble, it is necessary also to consider surrogate
measures o f biophysical integrity.
4. Biodiversity and ecological processes
4.1. The solution: a surrogate measure
Surrogate measures of biophysical integrity should
work in a consistent way in all geographical regions
and be easily quantifiable. One candidate might be
the stability of nutrient or energy flows through
ecosystems. These flows are a substantial element of
overall biophysical integrity and powerful tools have
been developed by ecologists for characterising an
e c o s y s t e m ' s energetic condition (Odum, 1983;
Jorgensen, 1988; W u l f f et al., 1989; Wagensberg et
F. Smith/Ecological Economics 16 (1996) 191-203
al., 1990), as well as ecosystem stress from nutrient
perturbations (Schindler, 1990; Asbury et al., 1991;
Carpenter et al., 1992; Persson et al., 1993; Rudstam
et al., 1993). However, these flows are not easily
quantifiable and, moreover, ecosystems are not always easy to delineate (see Appendix). A more
practical measure of biophysical integrity is the
amount of biological diversity in an e c o s y s t e m - specifically, species richness because species are distinct biological entities, and because most ecosystems have yet to lose the majority of their species.
Other measures of biodiversity (genetic diversity,
population diversity) would be equally good indicators of biophysical integrity if they were as easily
quantifiable as species richness.
4.2. Biodiversity as a measure of biophysical integrity
For biodiversity to be a measure of biophysical
integrity it must be demonstrated to show a clear
association with ecosystem processes, such as nutrient cycling. The relationship between biodiversity
and ecosystem processes has been an area of fertile
debate among ecologists for nearly 40 years. While
the prevailing wisdom was for a long time that
systems with f e w species are the most stable, recent
research gives compelling evidence to the contrary.
Coming from studies of food web models, the
prevailing view in the 1970s and 1980s was that
ecosystems with a high degree of internal connectivity (associations among species) tend to be dynamically unstable: an oscillation in the abundance of one
species could lead to perturbations in the populations
of many others. By contrast, ecosystems with low
internal connectivity tend to be dynamically stable.
The corollary of this view is that most species in an
ecosystem are functionally redundant. Therefore, an
ecosystem's stability would not be significantly reduced if most of its component species were removed (see May, 1972, May, 1973, May, 1981;
McMurtrie, 1975; Pimm, 1979; Beretta et al., 1987;
So16 et al., 1992). However, a mixture of theoretical
and experimental work since the 1970s has produced
a smaller body evidence to show that the internal
complexity of an ecosystem is positively correlated
with its stability (DeAngelis, 1975; McNaughton,
195
1977; Begon et al., 1986, Table 21.1; Pilette et al.,
1990; Wagensberg et al., 1990; Frank and McNaughton, 1991; Moore et al., 1993).
Recent alterations to the prevailing view have
come from studies on the functional redundancy and
productivity of ecosystems.
4.2.1. Functional redundancy
An alternative hypothesis from the prevailing view
runs as follows. Although an ecosystem's stability
against small perturbations might be unaffected by
species deletion, the same cannot be said about its
stability against large perturbations. In a system from
which many species have been deleted, the remaining species would be critical to the system's integrity, and a full complement of species gives an
ecosystem a kind of "buffering capacity" (Jorgensen, 1990) against large perturbations (see also
Walker, 1992). Tilman and Downing's (1994) work
on grasslands supports this hypothesis. The primary
productivity (amount of sunlight converted to plant
tissue) of grassland communities with a full complement of species shows a greater resistance to drought,
and a greater resilience in recovering from it, than
communities with less than the full complement of
species. They derive a curvilinear relationship between species richness and stability such that each
species lost has a progressively greater negative impact on drought resistance. In grassland plots with a
bare minimum of species, a stressful perturbation
that eliminates one or more species risks destabilising the system within a plot because no surviving
species of a similar functional type will be present to
take the place of the lost species. In cases like this,
recovery is limited by the rate at which the lost
species can recolonise from elsewhere.
In economic language, this buffering capacity is a
kind of substitutability among species within functional groups. But just as goods of a similar functional type have differential utility, so species have
differential importance. So-called " k e y s t o n e "
species provide critical support to wide arrays of
other species with which they interact. If they are
removed from an ecosystem, many others will follow
(see Gilbert, 1980). The sequential removal of species
from an ecosystem would therefore not necessarily
produce a smooth reduction in stability.
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F. Smith/Ecological Economics 16 (1996) 191-203
4.2.2. P r o d u c t i v i t y
Tilman and Downing's (1994) work on grasslands
shows not only that a full complement of species
buffers ecosystems against large perturbations, but
also that it enhances productivity. Experimental
grassland plots with a full species complement recover faster from perturbations than those with a
minimal or near-minimal complement. Tilman and
Downing (1994) hypothesise that the "fully loaded"
plots are more efficient at processing water and
nutrients. This hypothesis is confirmed by Naeem et
al. (1994) using the so-called Ecotron, a macrocosmic, climate-controlled, laboratory ecosystem (see
Lawton et al., 1993). Ecotron units containing relatively more species in each functional group (producers, consumers, decomposers) are relatively more
productive, processing nutrients and waste relatively
faster and more efficiently.
Based on the supposition that these macrocosmic
patterns reflect the dynamics of whole ecosystems,
the view now emerging about biodiversity (species
richness) in relation to ecosystem stability is that
there are two evolutionary forces at work. As Robert
May puts it, " O n e [force] is to pump up species
diversity to allow an ecosystem to make the most of
its resources. The other is to reduce species diversity
to avoid generating fragility. History ... may have
selected a subset of complex ecosystems that balance
these two pressures" (see Cherfas, 1994). 4
5. T h e efficacy o f biodiversity conservation as a
m o t i v a t o r for sustainable d e v e l o p m e n t
With strong evidence that species richness stabilises ecosystem processes, it is logical to propose
biodiversity as a measure of biophysical integrity.
Ecosystems that are "fully loaded" in terms of
biodiversity will be at their most resilient and productive, playing their full part in the global biogeo-
4 One possible test of this hypothesis would be a comparison of
the deciduous forests of Europe, North America and Asia. The
European forests have reduced species richness compared with the
others, and Schulze and Mooney (1993) hypothesise that the
European forests might be more susceptible to the effects of acid
rain and stratospheric ozone depletion.
chemical processes on which the global economy is
based. More particularly, they will be able to provide
the widest possible array of resources to regional and
local economies. The conservation of ecoystem processes would in principle ensure the conservation of
biogeochemical cycles because the former is a very
significant part of the latter. However, without specific measures to conserve biodiversity, a wellstocked larder of species that protects ecological
processes would not be guaranteed. Biodiversity conservation not only ensures the "option value" of
continued ecological stability, but also guarantees the
current use, plus options for future use, on the widest
possible variety of genetic resources. As a motivator
for sustainable development, biodiversity conservation would therefore be highly effective. This is not
to say that the economic costs would be low, but that
biodiversity conservation would have a high degree
of leverage over the transition to biophysical sustainability, and over the maintenance of sustainability
once achieved.
6. E c o n o m i c c o n s e q u e n c e s o f c o n s e r v i n g biodiversity: the distribution o f resource use
Biodiversity conservation by itself could not act
as a biodiversity constraint. The problem is that
economies would respond differentially to the conservation of biodiversity. Consider, for example,
Papua New Guinea and California. 5 Papua New
Guinea has a few large extractive industries (e.g.,
gold, copper, timber), but no heavy manufacturing
industry to speak of, relatively basic financial industries, and a growing service sector based largely
around tourism. The vast majority of Papuans are
rural and derive most of their living from the natural
resources around them by farming and hunting. The
population growth rate is 2.3% per year (Population
Reference Bureau, 1993). The supposition is that a
constraint on economic activity that prevents species
loss in Papua New Guinea would probably steer the
country's economic development not very far away
from its current path. Growth industries might in-
5 These examples are chosen only to illuminate an argument
and are not based on empirical research.
F. Smith/ Ecological Economics 16 (1996) 191-203
clude (i) timber extraction, with an emphasis on
minimal disturbance (loggers in many parts of the
country already use portable sawmills); (ii) the licensing of the country's genetic resources internationally, leading towards a domestic biomedical industry; and (iii) tourism. It is possible that the growth
in GDP per capita in Papua New Guinea might not
suffer significantly in the transition to sustainability,
and might actually increase if distributional equity
among nations improves at the same time (see below).
By contrast, California already has a biodiversity
constraint of sorts, in the form of the Federal Endangered Species Act, one of the first enactments of
which was to restrict housing developments on San
Bruno Mountain near San Francisco to protect an
endangered population of the Mission Blue butterfly
( lcaricia icarioides missionensis). However, the Endangered Species Act has had arguably no effect on
restructuring the Californian economy towards sustainability because the Californian economy simply
has too many economic links with the rest of the
world for that to be possible, and because most of
the state's industries do not directly affect its domestic biodiversity.
The California example shows that domestic
moratoria on species loss would by themselves probably fail to restructure the economies that contribute
most to global environmental change. A global moratorium would be equally useless because, except in
rare cases, it would be impossible to apportion blame
for the extinction of a particular species to economic
players far removed from the species' home. Therefore, a workable biodiversity constraint would need
more than just the conservation of biodiversity.
7. The biodiversity constraint: a framework for
policies towards sustainable development
The logic of the biodiversity constraint runs as
follows. Because economic activities that deplete
biodiversity are likely to destabilise natural systems,
and because instability in natural systems is economically risky given the current scale of economic
activity, biodiversity depletion should carry financial
penalties and its conservation should carry financial
incentives. In this way, economic activities that do
not destabilise natural systems will be favoured and
197
biophysically sustainable economies will gradually
develop.
The evolution towards biophysical sustainability
in regions that are economically poor and ecologically rich will take place only if the w o r d ' s economically wealthy regions also develop in the same
direction. Wealthy regions would probably not make
the transition to sustainability on biodiversity conservation alone but, crucially, they are linked to poorer
regions by international trade. The hypothesis is that
the transition to sustainability in economically poor
countries would be driven largely by biodiversity
constraints that guide the design of economic instruments to favour the most efficient long-term extraction of biological resources 6. In contrast, the transition to sustainability in wealthy countries would be
driven largely by a global biodiversity constraint
based on international trade. However, a biodiversity
constraint would not be a policy mechanism. It
would be a set of organising principles--a framew o r k - - t o tailor policies to regional economic and
ecological conditions.
7.1. Economic structure o f a biodiversity constraint
The two main elements of the global constraint
are, first, that trade in ecologically sustainable goods
(those whose production and delivery do not deplete
biodiversity) would be free of import and export
tariffs, and second, that trade in ecologically unsustainable goods would be penalised to gradually eliminate these goods from the economy over a period of
decades. It is the second component that would
directly link to economic policies formulated under
domestic biodiversity constraints. These policies may
regulate activity based on a mixture of commandand-control and market mechanisms.
In principle, formulating a policy mechanism to
conserve biodiversity would be comparatively
straightforward. Consider a market-based policy. The
task is to make the extraction of a given species,
population or genetic resource increasingly uneconomic as that resource becomes depleted. Roughgar-
6 The impetus for biodiversity conservation in poor countries
might come from the global biodiversityconstraint itself or from
internal efforts, or from a combination of the two.
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F. Smith / Ecological Economics 16 (1996) 191-203
den and Smith (1996) show that, for fisheries, a tax
on the market price of landings that increases as the
size of the fish stock decreases will protect the stock
from overharvest. 7 All that is required is to know
the size of the stock at any time, the size of the
harvest at that time, and the tax rate that makes
harvesting uneconomic at low (unstable) stock sizes,
plus a buffer against natural fluctuations. This kind
of policy is equally applicable to the harvesting of
other natural resources, like timber or medicinal
plants. It would apply even to the conversion of land
from its natural state to human use. If such a conversion were to diminish the population of a species to a
point where it became significantly more vulnerable
to other perturbations, then the tax on the earnings
from that land should be so high as to make the
conversion uneconomic 8.
Although the exact values of these population
thresholds may be known only with hindsight, enough
is known about the population dynamics of species
in various ecological groups to build realistic simulation models. Estimates of fundamental parameter
values as well as the effects of other species can be
easily derived from sample population data (see
Roughgarden and Smith, 1996). It would not matter
that the estimates were not perfectly accurate, only
that the instruments to which they are linked protect
the population from overexploitation. However, for
every species with economic value, the same calcula-
7 This is like a severance tax on natural resources of the
specific rather than ad valorem type (see Page, 1977). Of course,
market mechanisms of this type are not restricted to taxes. If a
market exists for a natural product, then in principle that product
could be conserved by applying a wide range of financial instruments. Solow (1971) considers environmental bonds as fees levied
on the use of environmental resources at a rate equal to the
"social cost to the environment if the material were returned to
the earth in the most harmful way possible." An instrument easier
to implement might be an option to harvest a species or other
resource on or after specified dates where the value of the option
depends on the size of the stock at the maturity date.
8 For any sustainable harvest rate, there are two equilibrium
population sizes at which that harvest may be made (see Begon et
al., 1986, Fig. 10.14). The lower equilibrium is dynamically
unstable whereas the upper one is stable to perturbations. The
object is then to set the tax rate on earnings from harvesting such
that the tax increases the further the population drops below the
upper equilibrium and approaches the lower one (Roughgarden
and Smith, 1996).
tions would be necessary for those species with
which it is associated (cf. Perrings, 1991). 9
This qualification raises the issue of the economic
costs of a biodiversity constraint, until now left
aside. The example of the Newfoundland cod fishery
is instructive. The Canadian government used stock
and harvest data in the 1980s to successfully configure the fishery at or near the economically optimal
equilibrium (Roughgarden and Smith, 1996). However, the ecological instability of this point spoke
doom for the fishery: relatively constant harvest rates
through several years of adverse environmental conditions (pushing the stock below its optimal size)
caused the stock to collapse through overfishing.
About 9 years will be required for the stock to
rebuild, at an enormous social cost (C$4 billion in
unemployment programmes alone). On balance, 10
years of fishing followed by 9 years of idleness will
leave the fishery in the red by millions of dollars.
The cost of maintaining the stock at a relatively high,
9 Perrings (1991) defines an ecological sustainability constraint
as an m-dimensional vector
h[x(t),u(t),t]<_O;
O<_t<T
where x(t) is the "state of nature" and u(t) is a control function
containing control parameters and prices. The role of the constraint is to restrict economic activities to "maintain ecological
populations within stable and .therefore sustainable bounds". Further, an ecological sustainability constraint would be based on the
critical depensatory point of a biological population. In this sense,
Perrings' constraint and the biodiversity constraint outlined here
are the same. However, they depart on two points: first, the
placement of the ecological sustainability constraint would "depend on the perceived significance of the future welfare effects of
the collapse of the population" (Perrings, 1991, p. 291) whereas
the biodiversity constraint is more stringent. It views the collapse
of a population as inherently bad and so economic instruments
would be designed to prevent it.
Second, Perrings believes that the ecological sustainability constraint would have limited use through pricing mechanisms because the global system is mostly uncontrollable, and cites fishing
quotas, game licences and other direct controls as evidence of this.
By contrast, under a biodiversity constraint, these things would be
among the levers to make natural systems accessible to prices.
Although phased in over many decades, the constraint outlined
here or by Perrings would appear in an eyeblink on the timescale
of biological evolution. On sub-evolutionary timescales, the natural fluctuation of populations decreases the control of economic
instruments to protect them, but if the economic system were
ecologically sustainable (that is, not significantly lowering ecological stability in the course of exploitation), then population collapses by def'mition would not be the fault of economic activity.
F. Smith / Ecological Economics 16 (1996) 191-203
stable level through a stock-dependent tax or other
mechanism is the foregoing of a certain volume of
fish harvested plus the support costs of estimating
stock size and harvests accurately enough for the
mechanism to work. The benefit is a stable, almostguaranteed revenue stream into perpetuity (Roughgarden and Smith, 1996). What applies to one species
in isolation extends naturally--although with greater
difficulty--to many species together.
The important feature of policies to implement a
biodiversity constraint is that the policy mechanisms
relate the costs of using ecological resources to the
state of those resources. As Daly and Goodland
(1994) correctly point out, the potential increases in
environmental damage caused by deregulated international trade stem from a lack of environmental
accountability at the global level. By contrast, a
biodiversity constraint would build global environmental accountability through international trade. In
the international arena, two side-effects of such policy mechanisms might be to bring incomes in poor
countries up towards those in wealthy countries and
to increase incentives for poor countries to export
products whose demand is relatively inelastic to
price. Suppose, for example, that the demand in
California for ebony from Papua New Guinea were
price-inelastic. If Papua New Guinea's exports of
ebony to California were depleting stocks of ebony
- - o r even of species that live on ebony trees--then
the price per cubic metre of ebony would be taxed
heavily, and Papuan ebony exporters would raise
prices to compensate. But if demand for ebony in
California were price-elastic, then substitutes for
ebony would be sought in Papua New Guinea. The
greater the biodiversity in the exporting country, the
greater the substitutability among natural products.
Either way, Californians would be paying Papuans
amounts much closer to the full environmental costs
for their products.
Of course, the economic disruption caused by the
full and immediate implementation of policy mechanisms like these could potentially be very large. In
the international arena, a gradual adjustment of import and export quotas might be needed in order to
phase-in policy mechanisms for a biodiversity constraint. In the example, Papua New Guinea and the
United States would agree to gradually reduce trade
in ebony produced unsustainably.
199
7.2. Legal and institutional underpinnings of a biodiversity constraint
Although the difficuly of instituting a biodiversity
constraint may seem great, the groundwork for phasing it in has already been laid with the signing of the
Biodiversity Convention at Rio de Janeiro in 1992.
The Convention is, however, non-binding and constructing binding agreements would clearly be a high
priority for building a biodiversity constraint. These
treaties might be formulated under an umbrella organisation--for example, a General Agreement on
Trade and the Environment (GATE), proposed by
DeBellevue et al. (1994) as a reform to the General
Agreement on Tariffs and Trade (GA'Iq'). Although
the DeBellevue et al. (1994) vision of a GATE
would bring environmental experts to the discussion
table on international trade, a bolder version of the
GATE might be necessary to institute a biodiversity
constraint, by defining a series of steps to bring the
economies of participating nations within biophysical limits. Leapfrogged by a GATE, the GATT's
activities would then be limited to cases external to a
biodiversity constraint, such as import duties on high
value added goods.
Once a treaty for a biodiversity constraint is in
place, participating countries would then be under
obligation to develop and implement policies to encourage economic activities that conserve biodiversity (e.g., by subsidies) and to penalise those that do
not. The monitoring and enforcement of the treaty
would be carried out by an independent international
body, and frameworks might be included in the
treaty to assist nations struggling to meet targets.
7.3. Challenges and limitations to the operation of a
biodiversity constraint
Many considerations have been ignored in this
discussion, particularly further requirements for a
biodiversity constraint to work, and limitations to its
scope. In particular:
1. A biodiversity constraint would require that
institutions regulating the use of natural resources be
effective. This is largely true in wealthy countries,
but not yet in most poorer ones. However, given
adequate property rights, the effective regulation and
enforcement of resource use by the people who
200
F. Smith/Ecological Economics 16 (1996) 191-203
directly use the resources is already taking place
(see, for example, The Economist, September 30th,
1995, p. 98) and so a biodiversity constraint would
become a feasible long-term objective as regulatory
institutions evolve.
2. Biodiversity loss is often caused by the "downstream" effects of human activities. For example,
the silting of rivers from logging can cause coral
reefs to die. Therefore, policy mechanisms that link
economic development with the state of natural
stocks, such as a stock-dependent tax on market
prices, must take account of these downstream effects, and may require international co-operation.
3. The biodiversity of some groups, especially
micro-organisms, is not easy to measure, yet these
groups may be very diverse (Barns et al., 1994;
DeLong et al., 1994) and vital to maintaining basic
ecosystem processes. Although recent improvements
have been dramatic (Barns et ai., 1994), techniques
for assessing microbial diversity are still in their
early days.
4. The role of the World Bank might be re-cast to
support a biodiversity constraint. Development loans
to be used as investment pools for ecologically sustainable businesses could be made available to needy
countries.
5. Biodiversity loss might be caused directly by
such global processes as climate change, for which
responsibility cannot easily be apportioned. For example, the abundances of many amphibian species
around the world have dropped sharply in the last 10
years, possibly in response to atmospheric changes
(Wake, 1991). In addition, climate change may cause
so-called community dislocation where species migrate at different rates in response to changes in
mean atmospheric temperature, and their geographical ranges cease to overlap (Root and Schneider,
1993). Hence, biophysical sustainability may require
economic measures beyond a biodiversity constraint,
such as taxes on resource throughputs in preference
to taxes on labour and income (Daly, 1994).
8. Summary
Because the global regulation of human economic
activity is becoming a necessity, a means of regulation must be sought. A biodiversity constraint is a
strong candidate because (i) the balance of ecological evidence indicates that the conservation of biodiversity conserves ecosystem stability and productivity; (ii) biodiversity (at least species richness) is a
comparatively straightforward ecosystem characteristic to measure and monitor; (iii) biodiversity has
value in its own right. A biodiversity constraint
would, over many decades, re-mould the economy to
avoid breaching biophysical limits. Command-andcontrol policies may be feasible for this purpose in
some instances, but the overwhelming majority of
policies probably would utilise market forces by
systems of incentives and penalties. The employment
of a biodiversity constraint would not only help to
secure humanity's long-term future, but also spawn
whole new industies; indeed, human technical ingenuity may yet bring us such wonders as a biophysically sustainable automobile.
Acknowledgements
Valuable comments on an earlier version of the
manuscript were received from Tim Swanson, Rob
Jackson, Bob Rowthorn, Bengt-Owe Jansson and
three anonymous reviewers. Thanks also to members
of Stanford University's Center for Conservation
Biology for helping to sharpen some of the ideas in
the early stages of this project. This paper is adapted
from Working Paper GEC 9 4 / 1 0 of the Centre for
Social and Economic Research on the Global Environment, University of East Anglia, UK.
Appendix A. Definitions of terms
(i) Biodiversity. This term is widely used to describe the total diversity of living organisms. Hammer et al. (1993) identify four independent divisions
of "biodiversity": species diversity, genetic diversity, functional diversity (the range of functions of
species in an ecosystem), and spatiotemporal diversity (topography, climate, etc.). Odum (1983, Table
18. l) lists a wide array of diversity indices. Ehrlich
and Daily (1993) identify population diversity as an
alternative to species diversity in the measurement
and conservation of biodiversity. Although the
essence of the argument presented in this paper
F. Smith/Ecological Economics 16 (1996) 191-203
would be the same for all the above definitions of
biodiversity, the policy prescriptions depend to some
extent on the definition and therefore biodiversity is
taken to mean species diversity because it is usually
the easiest to measure in the field.
It is important to distinguish between diversity
within an ecosystem and the amount of diversity in
different ecosystems. If diversity is linked to stability, then by the latter meaning one would expect
boreal ecosystems--such as arctic tundras--to be
less stable than tropical rainforests. If there are stability differences among types of ecosystems, then it
is valuable from the point of view of sustainable
development to know why, but the reason may not
necessarily have anything to do with their component diversity, however measured. The results presented in this paper relate to the relationship between
diversity within an ecosystem and its stability.
(ii) Ecosystem. An ecosystem is a biological community or set of communities plus its abiotic environment. These are the two necessary conditions for
defining an ecosystem. They are supplemented by
the following sufficient conditions. Like the individual organisms that form ecological communities,
ecosystems are self-maintaining and self-regulating.
These properties arise because of feedback flows of
energy and nutrients within, and between, systems.
These feedback flows maintain ecosystems far from
thermodynamic equilibrium, and buffer them against
perturbations. In a thermodynamic sense, ecosystems
are orderly. In addition, ecosystems are thermodynamically open, receiving free energy from the sun
or from geothermal activity. But this external orderliness belies their internal complexity, because the
feedback flows that operate within ecosystems give
rise to non-linear dynamics--bounded c h a o s - - i n the
interactions of their components, such as among
populations (e.g., Hanski et al., 1993).
Ascribing geographical boundaries to ecosystems
is difficult and, in many cases, inappropriate.
Ecosystems may be nested within each other, for
example, freshwater ponds within a prairie. Some
regions of the world, such as the open ocean, contain
communities of organisms and exchange energy and
matter with the abiotic environment, and are therefore ecosystems, but they have no clear boundaries.
Thus, what constitutes a given ecosystem is often
definitional.
201
Ecosystem processes emerge from the interaction
of the biological and physical entities comprising an
ecosystem. These processes include nutrient and energy flows, succession, species turnover by immigration and emigration (/3-diversity), speciation and
species extinction. There are also certain static characteristics of ecosystems that can be measured: these
include numbers of entities per unit area (richness)
and richness weighted by entity abundance (a-diversity). The enormous internal complexity of ecosystems has led to attempts to describe their organisation in intelligible ways, perhaps most successfully
as nested hierarchies in time and space (e.g., Odum,
1983; Urban et al., 1987; O'Neill, 1989; Holling,
1992).
(iii) Stability. Stability is the tendency for a system to return to its original state. Local stability (or
Lyapunov stability) is the tendency for all system
components to return to their steady state equilibrium values following small perturbations (DeAngelis
et al., 1989). A large perturbation may therefore
push a system into the domain of attraction of another steady state, if such a state exists (Lewontin,
1969; Holling, 1973). This kind of stability is--perhaps misleadingly--referred to as "global stability."
The parameters used to describe stability vary from
study to study: they may be population sizes, nutrient
flows, connectivity of mathematical networks, but in
all cases stability is taken to mean low variance in
parameter values and instability is characterised by
high variance.
Stability is commonly viewed as comprising two
parts: resistance and resilience. Resistance is the
tendency for the parameter values describing a system to remain within the same bounds under a
perturbation, and resilience is the speed with which a
system returns to its original state following a perturbation. Much of the empirical work on ecosystem
stability has focused on observing the resilience of a
system following a measurable perturbation.
Finally, the hierarchical view of ecosystems accentuates the role of spatial and temporal scale in
considering stability. For example, a "stable"
ecosystem might contain numerous unstable populations over a given time-frame. Nutrient flows in one
part of an ecosystem may be unstable on a given
timescale, but those through the whole system may
nevertheless be stable. Therefore, it is usually infor-
202
F. Smith/Ecological Economics 16 (1996) 191-203
mative to define the spatiotemporal context when
discussing ecosystem stability.
(iv) Sustainability. Like biodiversity, this term
takes many meanings. Here, biophysical sustainability is used and this is, in essence, defined by the
biodiversity constraint itself. An economic activity is
biophysically sustainable if it does not damage
ecosystems by disrupting nutrient flows and/or depleting biodiversity.
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