An economic valuation of nature

‘In the kingdom of ends’ wrote Kant, ‘everything has either a price or a dignity.  What has a price can be replaced by something else as its equivalent; what on the other hand is above all price and therefore admits of no equivalent has a dignity’.

Historically, nature has been viewed as having a dignity, as priceless.  Though I believe that biodiversity should be preserved for its own sake, that it is an end in itself and therefore has a dignity, I also believe this attitude has been partly responsible for the overexploitation of nature.  Businesses are fundamentally concerned with profits.  They weigh up costs and benefits of potential actions and chose those which yield the highest benefits at the smallest costs.  When a mangrove forest (for example) is felled and replaced by aquaculture conservationists could protest that a ‘priceless’ habitat is lost.  This approach does not help inform business’ decisions; accountants can only enter this cost into their calculations as £0.  As a result, when weighing up the costs and benefits of a business decision, the costs of ecological damage are not taken into account.  There are two possible solutions to this problem: change the world economic system so that objects of dignity are protected at all costs, or quantify the economic costs of ecological damage so that businesses can take them into account when weighing up potential costs and benefits.  The first option is not viable, even human life is not protected at all costs (otherwise the NHS would be extremely costly).  This leaves us with the second option.  It is an option which many people are uncomfortable with for reasons I will explore.  First I will start with an example.

Take the example of the felling of a mangrove forest to replace it with aquaculture.  Not taking ecological costs into account, a business may generate a profit from converting to aquaculture and growing shrimp.  However, this does not take into the account the costs of felling a mangrove forest.  These costs include the services the intact mangrove forest provides humanity with such as: flood prevention, timber production and a habitat to species which can be sustainably exploited as food.  Having taken this information into account it is more likely that a business will choose to maintain the mangrove forest in its pristine form to sustainably harvest timber.  Alternatively there are benefits which are shared between people who do not own the resource such as flood prevention.  If the benefits of flood prevention are made clear to the government then they will have the option to pay a business not to cut down the mangrove and to protect it instead, saving themselves the costs of dealing with flood damage.

A problem with the argument is that it ‘admits’ biodiversity has ‘equivalents’.  Thus, this approach can be used to rationalise and justify the loss of species.  However, these species will go extinct anyway with no value attached to them if they are only deemed priceless.  Therefore we have nothing to lose.

Another possible solution is to use markets, again many people are sceptical and distrustful of markets but first it is important to understand what markets are and what they are good at.  Markets facilitate the transfer of goods between people.  They ensure that those who value the good highest receive the good and the seller gains the highest possible price, thus markets create efficient solutions.  Markets can be applied to conservation where the benefits an ecosystem provides are shared over everyone in the world.  For example trees act as Carbon sinks, reducing the CO₂ in the atmosphere.  Deforestation releases this CO₂ into the atmosphere, a cost paid by everyone in the world.  A mechanism which is being considered and trialled is the payment for people to protect forests (REDD).  In this way a market is established in which money is paid for the protection of forests.

In conclusion, many are instinctively wary of attempts to put economic values on nature, however, until now nature has been given no value at all.  By giving it a value we have nothing to lose.

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