Download Valuing Mangrove Conservation in Southern Thailand

The Value of the World’s
Ecosystem Services and Natural
Capital
Robert Costanza et al.
Main message of article …
• Services from the world’s ecosystems are worth
a lot
– Minimum of $16-54 trillion/yr (point estimate of $33
trillion/yr)
– 1.8 times global GDP
… and reaction by economists
• Toman (1998): “there is little that can usefully be done
with a serious underestimate of infinity”
• Smith (1997): “While the authors provide a litany of
caveats, their results should not be used in any form—
whether as measures of the importance of changes in
natural resources to human welfare; as yardsticks for
future project appraisals; or as sources of a road map for
future research”
• McConnell & Bockstael (2005): “an extreme example
[of inappropriate valuation]—so extreme that one
questions whether there could be a logically
meaningfully way to answer the question they pose”
Why the harsh reaction?
•
Not because economists doubt that ecosystem
services are important
–
–
Toman: “An economic assessment of ecosystem
benefits and opportunity costs is one important
element of the information set that must go into
social decision making”
McConnell & Bockstael: “it is especially important to
document the value of ecosystem services to
human well-being as these contributions are critical
but often unappreciated because they are indirect
and often obscure”
•
Rather:
1. Criticisms of study’s scientific validity and policy
value
2. Decision by Nature not to print follow-up
correspondence (despite stated desire by Costanza
et al. to “stimulate additional research and debate”)
What’s your reaction?
Arguments against valuation
Arguments against valuation
1.
“impossible or unwise … cannot place a value on such
‘intangibles’ as human life, environmental aesthetics,
or long-term ecological benefits”
Arguments against valuation
“impossible or unwise … cannot place a value on such
‘intangibles’ as human life, environmental aesthetics,
or long-term ecological benefits”
1.
–
Costanza et al.: “we do so every day” (construction standards);
“we can choose to make these valuations explicit or not”
Arguments against valuation
“impossible or unwise … cannot place a value on such
‘intangibles’ as human life, environmental aesthetics,
or long-term ecological benefits”
1.
–
2.
Costanza et al.: “we do so every day” (construction standards);
“we can choose to make these valuations explicit or not”
“we should [protect ecosystems] for purely moral or
aesthetic reasons”
Arguments against valuation
“impossible or unwise … cannot place a value on such
‘intangibles’ as human life, environmental aesthetics,
or long-term ecological benefits”
1.
–
Costanza et al.: “we do so every day” (construction standards);
“we can choose to make these valuations explicit or not”
“we should [protect ecosystems] for purely moral or
aesthetic reasons”
2.
–
Costanza et al.: “there are equally compelling moral
arguments that may be in direct conflict with the moral
argument to protect ecosystems” (no one should go hungry);
moral arguments make “choice more difficult and less explicit”
but should go on in parallel with economic arguments
What are the steps in their study?
What are the steps in their study?
1. Classify ecosystem services into 17 categories
(Table 1)
What are the steps in their study?
1. Classify ecosystem services into 17 categories
(Table 1)
2. Classify earth’s surface (marine and terrestrial)
into 16 primary ecosystems
3. Obtain valuation estimates from literature (>
100 studies)
4. Construct unit values by dividing each estimate
by the area of the ecosystem valued
5. Multiply the area of the ecosystems by the
corresponding unit values, and add up (Table
2)
Costanza et al. claim that resulting
estimate is an underestimate: why?
Costanza et al. claim that resulting
estimate is an underestimate: why?
• Various reasons, including:
– Omit some services (atmosphere)
– Omit some ecosystems (desert, tundra, ice/rock,
cropland)
What valuation measures
do they use?
What valuation measures
do they use?
• Where possible, total social surplus (consumer
plus producer surplus)
• If not, producer surplus (“net rent”)
• If not that, revenue (price times quantity)
Can global WTP > global GDP?
Can global WTP > global GDP?
• According to Costanza et al., yes: because of
consumer surplus
Do they think marginal analysis—
valuing changes—is important?
Do they think marginal analysis—
valuing changes—is important?
• p. 255: “it is not very meaningful to ask the total value of
natural capital to human welfare …. Their value is infinite
in total.”
– Instead of valuing natural capital, they value flows of services
from this capital
• 3rd sentence: “The economies of the Earth would grind to
a halt without the services of ecological life-support
systems, so in one sense their total value to the
economy is infinite. However, it can be instructive to
estimate the ‘incremental’ or ‘marginal’ value of
ecosystem services (the estimated rate of change of
value compared with changes in ecosystem services
from their current levels).”
Why is their analysis
not a marginal analysis?
Why is their analysis
not a marginal analysis?
1. Fail to specify the change they are analyzing:
what is their “thought experiment” (treatment
vs. control)?
–
–
Cf. theory: E0  E1
Cf. applied studies: Hodgson & Dixon, Suthawan &
Barbier
2. Improper aggregation
–
If experiment is total elimination of world’s
ecosystems, then by author’s own admission no
need to do valuation study
2. Improper aggregation
–
–
If experiment is total elimination of world’s
ecosystems, then by author’s own admission no
need to do valuation study
Underlying studies did not all consider total
elimination of ecosystems studied
2. Improper aggregation
–
–
–
If experiment is total elimination of world’s
ecosystems, then by author’s own admission no
need to do valuation study
Underlying studies did not all consider total
elimination of ecosystems studied
Even if they did, sum of WTP across individual
environmental changes  WTP for a package of
changes
•
•
Former involves ceteris paribus assumption: income,
prices, all other ecosystem services remain constant
WTP can exceed revenue for an individual good, but not
for all goods collectively
–
•
 upward bias in Costanza et al.’s global estimate
Eliminating the world’s ecosystems is not a marginal
change!
3. Average values  Marginal values
Costanza et al.:
Marginal analysis
•
• Measure shaded area created
by unit shift in supply curve
• Yields marginal value (smaller)
•
•
Divide shaded area by q
Yields average value (large)
Upward bias
Toman: “Is the ‘value of everything’
valuable?”
Toman: “Is the ‘value of everything’
valuable?”
•
No, because it ignores tradeoffs
–
–
“One particular danger of this simple calculation is that it could
suggest to some decision makers that all aspects of nature in
all places warrant the same level of safeguarding.”
“So long as priorities must be set among competing claims for
ecosystem protection and/or amelioration, it is necessary to
understand how specific changes in different ecosystem states
are affecting social interests and value. One needs a specified
baseline, a specified measure of changes, and a set of criteria
for evaluating and comparing these changes.”
• Heal’s critique of valuation