Economic and ecological concepts for valuing ecosystem services
Ecological Economics 41(2002)375–392
SPECIAL ISSUE:The Dynamics and Value of Ecosystem Services:Integrating
Economic and Ecological Perspectives
Economic and ecological concepts for valuing ecosystem
services
Stephen C.Farber a,*,Robert Costanza b,1,3,Matthew A.Wilson c,2,3
a
Graduate School of Public and International Affaris ,Uni 6ersity of Pittsburgh ,Pittsburgh ,PA 15260,USA
b
Center for En 6ironmental Science and Department of Biology ,Institute for Ecological Economics ,Uni 6ersity of Maryland ,
Box 38,1Williams St .,Solomons ,MD 20688-0038,USA
c
Institute For Ecological Economics ,Uni 6ersity of Maryland ,0216Symons Hall ,College Park ,MD 20742-5585,USA
Abstract
The purpose of this special issue is to elucidate concepts of value and methods of valuation that will assist in guiding human decisions vis-a `-vis ecosystems.The concept of ecosystem service value can be a useful guide when distinguishing and measuring where trade-offs between society and the rest of nature are possible and where they can be made to enhance human welfare in a sustainable manner.While win-win opportunities for human activities within the environment may exist,they also appear to be increasingly scarce in a ‘full’global ecological–economic system.This makes valuation all the more essential for guiding future human activity.This paper provides some history,background,and context for many of the issues addressed by the remaining papers in this special issue.Its purpose is to place both economic and ecological meanings of value,and their respective valuation methods,in a comparative context,highlighting strengths,weakness and addressing questions that arise from their integration.?2002Elsevier Science B.V.All rights reserved.
Keywords :Economic valuation;ecological valuation;ecological services;valuation
This article is also available online at:
https://www.wendangku.net/doc/d018409862.html, /locate /ecolecon
1.De?nitions
The terms ‘value system,’‘value’,and ‘valua-tion’have a range of meanings in different disci-plines.In this paper,we provide a practical
synthesis of these concepts in order to address the issue of valuation of ecosystem services.We want to be clear about how we use these terms through-out our analysis.‘Value systems’refer to intrapsy-chic constellations of norms and precepts that guide human judgment and action.They refer to the normative and moral frameworks people use to assign importance and necessity to their beliefs and actions.Because ‘value systems’frame how people assign rights to things and activities,they also imply practical objectives and actions.We use the term ‘value’to mean the contribution of an action or object to user-speci?ed goals,objec-tives or conditions (Costanza,2000).A speci?c value of that action or object is tightly coupled
*Corresponding author.Tel.:+1-412-648-7602
E -mail addresses :eofarb@https://www.wendangku.net/doc/d018409862.html, (S.C.Farber),costza@https://www.wendangku.net/doc/d018409862.html, (R.Costanza),mwilson@https://www.wendangku.net/doc/d018409862.html, (M.A.Wilson).1
Tel.:+1-410-326-7263.2
Tel.:+1-301-405-8952.3
As of 09/01/2002,this author can be reached at the Gund Institute for Ecological Economics,University of Vermont,School of Natural Resources,George D.Aiken Center,Burlington VT 05405–0088,USA.
0921-8009/02/$-see front matter ?2002Elsevier Science B.V.All rights reserved.PII:S 0921-8009(02)00088-5
S.C.Farber et al./Ecological Economics41(2002)375–392 376
with a user’s value system because the latter deter-mines the relative importance of an action or object to others within the perceived world.We de?ne‘valuation’as the process of expressing a value for a particular action or object.In the current context,ecosystem valuation represents the process of expressing a value for ecosystem goods or services(i.e.biodiversity,?ood protec-tion,recreational opportunity),thereby providing the opportunity for scienti?c observation and measurement.
The distinction between intrinsic and instru-mental value is an important one(Goulder et al., 1997).On the one hand,some individuals might maintain a value system in which ecosystems or species have intrinsic rights to a healthful,sustain-ing condition that is on a par with human rights to satisfaction.The value of any action or object is measured by its contribution to maintaining the health and integrity of an ecosystem or species, per se,irrespective of human satisfaction.Some interpret Leopold and Aldo(1949)land ethic as constituting an intrinsic value system,where something is‘right when it tends to preserve the integrity,stability and beauty of the biotic com-munity.It is wrong when it tends otherwise.’On the other hand,instrumental values re?ect the difference that something makes to satisfaction of human preferences.Instrumental values,such as economic values,are fundamentally anthropocen-tric in nature.Policies toward the environment will always tend to be based on a mix of intrinsic and instrumental value systems.In this paper,we deal with both.
2.Economic concepts of value
The history of economic thought is replete with struggles to establish the meaning of value;what is it and how is it measured.Aristotle?rst distin-guished between value in use and value in ex-change.The paradox of use versus exchange value remained unresolved until the16th century (Schumpeter and Joseph,1978).The diamond–water paradox observed that while water has in?-nite or inde?nite value,being necessary for life,its exchange value is low;yet unessential diamonds bear a high exchange value.Following this obser-vation,there was widespread recognition of the distinction between exchange value and use value of goods.Galiani de?ned value to mean a relation of subjective equivalence between a quantity of one commodity and a quantity of another.He noted that this value depends on Utility and Scarcity(utilita et rarita)(Schumpeter and Joseph,1978).Two hundred years later,Adam Smith distinguished between exchange value and use value of goods by citing the diamond-water paradox,but used it to dismiss use value as a basis for exchange value.Smith formulated a cost of production theory of value,whereby wages, pro?t and rent are the three original sources of exchange value.In his famous beaver–deer exam-ple he suggested a labor theory of exchange value: if it takes twice the labor to kill a beaver than to kill a deer,one beaver will sell for as much as two deer.He also suggested a labor-disutility theory of exchange value,noting that goods exchange based upon the unpleasantness of the labor required to bring the goods to market.However,it is signi?-cant to note that Smith limited his labor theory to ‘that early and rude state of society which pre-cedes both the accumulation of stock and the appropriation of land’.In other words,when labor is the only scarce factor,goods will ex-change based upon the ratio of labor use(Schum-peter and Joseph,1978).
In addition to formulating his hypothesis re-garding the origins of exchange value,Smith sought to establish a unit of measure of value,or what he termed the real measure or real price of a good.He proposed that‘labour alone…never varying in its own value,is alone the ultimate and real standard’of the values of all commodities. Hence labor could be a numeraire,and it had special properties of invariant value(Schumpeter and Joseph,1978).
Ricardo also sought an invariant unit of mea-sure for value.He felt that there was no commod-ity,including labor,whose exchange value could serve as an invariant standard to measure the variation in exchange values of other commodi-ties.And it was not possible to add up commodi-ties to measure national wealth or production with only exchange ratios.According to Ricardo,
S.C.Farber et al./Ecological Economics41(2002)375–392377
this measure must be invariant to changes in relative factor rewards,i.e.capital versus labor, and be a commodity whose capital and labor use did not vary over time,i.e.no technological change.He proposed that both wheat and gold possessed these properties(Blaug and Mark, 1968).While not creating value they could mea-sure value.
While Ricardo had several followers,including https://www.wendangku.net/doc/d018409862.html,l and Marx,labor theories of value and the pursuit of an invariant standard of value waned in the late19th century.This was partially in response to the logic of the utilitarians,such as Menger,Gossen,Jevons and Walras,who argued that exchange value was based on both utility and scarcity(Blaug and Mark,1968).Sraffa,a noted Ricardian scholar,sought to resurrect the classical pursuit of a theory of value independent of de-mand or value in use.In his book,Production of Commodities by Means of Commodities:Prelude to a Critique of Economic Theory,Sraffa(1960)es-tablished conditions under which exchange ratios between commodities can be determined based on their use in production;i.e.a set of commodity prices that would exhaust the total product.These exchange ratios were not based on any optimality or marginality conditions.Instead,Sraffa divided commodities into basic(goods which entered into all production processes)and non-basic,and showed that an invariant standard of value would be a combination of basic commodities re?ecting average input proportions in production.This contrived‘commodity’would then be usable as a measure of national wealth or income.3
The‘marginal’revolution in value theory origi-nated with the con?uence of several related streams of economic thought in the20th century. Menger proposed there were different categories of wants or desires,such as food,shelter,clothing, etc.,that could be ordered in terms of their sub-jective importance.Within each category,there is an ordered sequence of desires for successive in-crements of each good.He postulated that the intensity of desire for one additional unit declines with successive units of the good(Blaug and Mark,1968).Replacing the term‘desire for one additional unit’with the term‘Marginal Utility,’we thus have the economic principle of diminish-ing marginal utility.
The idea that people have different,but or-dered,categories of wants or desires raises the critical issue of whether trade-offs exist between categories.If individuals‘weight’categories,it implies a trade-off.At one extreme,categories may be lexicographically ordered,like words in a dictionary.One level of want must be satis?ed before a lower level becomes relevant in the pro-cess of valuation.There are no trade-offs between levels of wants.For example,the need for caloric intake is likely superior to that of recreational pleasure—no number of recreational opportuni-ties will likely substitute for an insuf?cient diet.In the lexicographic case,individuals would use their monetary resources hierarchically,satisfying higher order wants and needs?rst.When a higher order want or need is at risk,the individual would take resources away from lower level ones until higher level needs were satis?ed.Lexicographic preferences do not mean monetary valuation is impossible,as individuals would still be able to state how much of their resources they would be willing to sacri?ce for a good or service;but it may be all their resources if a high level need is at risk.
More problematic for valuation are instances where basic needs cannot be satis?ed by the re-sources at an individual’s disposal—i.e.time or money.Similar to Menger,Ekins et al.(1992) suggested the universality of basic human needs, including subsistence,affection,protection,under-standing,leisure,identity,and freedom.Although one can imagine needs like affection being‘pur-chasable’with money,or‘freedom’being pur-chasable by migration,many of these needs may not be satis?ed by money or time because individ-uals simply may not consider them to be pur-chasable by money or time.Thus,not only is it possible that trade-offs between needs will not be possible,but some needs may not be reducible to money or time.
3While accepting Sraffa(1960)mathematical proof,some reviewers(Harrod,1961;Reder,1961)noted that the exchange values would not be independent of demand as Sraffa claimed. It was further noted that Sraffa’s did not constitute a price theory in the sense of establishing the process of price determi-nation.
S.C.Farber et al./Ecological Economics41(2002)375–392 378
Lancaster and Kelvin(1971)introduced the concept of consumption technology,whereby con-sumers consider characteristics of goods.For ex-ample,food may be evaluated on caloric,protein or vitamin content.Different foods are substi-tutable depending on the composition of their characteristics.People allocate their budget across characteristics,purchasing goods that are ef?cient sources of desired characteristics.The technologi-cal inability to substitute characteristics may re-strict the margins on which environmental goods and services can be valued.For example,while health may be valued,and individuals would be willing to pay for it,the proper mix of calories, protein and vitamins may make marginal in-creases or decrements in one of these characteris-tics either very highly valued or of very low value. Building on this insight,multi-attribute utility theory formalizes the utility-generating technol-ogy by proposing that total utility is a function of the characteristics of goods or services.A simple example would be where utility,U,from food consumption is a linear function of the caloric,C, protein,P,and vitamin,V,content:
U=aC+bP+cV.(1) Here,the parameters a,b,and c re?ect the weighting of three factors in determining utility for food consumption.When utilities are measur-able in monetary willingness to pay(WTP)or willingness to accept(WTA)compensation,these parameters represent the marginal monetary value of each characteristic.This logic forms the basis for hedonic pricing models of valuation,discussed below,whereby the value of market goods,say a house,depends upon the characteristics of the house and its location,as well as surrounding environmental amenities or disamenities. Gossen proposed that in order to maximize satisfaction from a good,such as labor or money, an individual must allocate that good across dif-ferent uses to equate their marginal utilities in each use(Blaug and Mark,1968).Hence marginal utility would provide a basis for explaining ex-change value.If we treat things such as iron, cement,fertilizer,natural agents and labor as incomplete consumable goods,the marginal util-ity of the goods they produce can be used to explain their exchange value.This logic estab-lished a full theory of value.It also demonstrated that exchange values could be based on use value. While the diamond–water paradox had been solved many times,the classical economists,such as Smith and Ricardo,could not resolve it using their labor theories of value.It was resolved only by recognizing the importance of utility and scarcity in determining exchange values,and the role of margins in value determination.
While the classical theorists sought a standard physical commodity unit for measuring exchange value,neoclassical theorists did not need such a commodity.As value was assumed to be deter-mined by utility on the margin,and consumers were assumed to allocate money optimally across uses,the marginal utility of money was the same for an individual in all its uses.Money thus became the standard unit of measure.
The signi?cance of the marginal utility theory of value to the evolving concept of ecosystem service valuation is that it can be used to measure use values,not just exchange values,in monetary units.The general optimization model of labor/ leisure and consumption/saving given time and wealth constraints would yield equivalencies of goods for money,goods for time,and time for money.Time or money can thus be used as a standard of measure of use value;how much time or money will a person willingly sacri?ce to ob-tain commodity X?In sum,as the pursuit of an economic theory of value traversed the broad metaphysical terrain of economic thought,the answer appears to have been found in the concept of value in use.4
The utility-based values of goods and services are re?ected in people’s WTP to attain them,or their WTA compensation to forego them.WTP and WTA become measures of these values.They may be based on small marginal changes in the availability of these goods and services,or on larger changes including their complete absence or 4Since the marginal utility of a good depends upon how much the person possesses,we would expect a difference depending upon whether the person is asked how much they would sacri?ce to obtain X or how much would they accept in compensation to forego X(see Hicks,1939).
S.C.Farber et al./Ecological Economics41(2002)375–392379
presence.These valuations are re?ected in Fig.1. Let the curve D represent the WTP for each unit of the good or service,T,for an individual or group.This is a‘Marginal’WTP.The‘Total’WTP for T0units of T is the aggregated areas A+B.Area A may be very large for goods or services that have some utility threshold where the good becomes increasingly valuable as it becomes scarcer.This is true for many ecological goods and services,such as life support goods like oxy-gen and water;the‘Marginal’value is?nite but the‘Total’value is indeterminate.This is the distinction that lies behind the diamond-water paradox noted above.
Exchange-based values are re?ected in the prices,P,at which the goods or services are exchanged.When supply is T0,and the item is sold competitively,a price P is determined which clears the market.These prices also re?ect the ‘Marginal’valuations placed on available quanti-ties around T0.So prices re?ect‘Marginal’values when there are markets for the goods or services.5 The‘Total’exchange value of T0is P×T0.This is an observable market value when there are mar-kets to observe.But when there are no such markets,P must be determined indirectly,and P×T0would represent a pseudo-market value. This would be the‘‘Total’’exchange value of the good if there were a market with an available supply of T0.
Measures of economic value are designed to re?ect the difference that something makes to satisfaction of human preferences.If something is attainable only at a cost,then the difference it makes to satisfy preferences is the difference be-tween its utility and the cost of attaining it.For-mal concepts of Compensating and Equivalent Variations are used to re?ect this difference (Varian and Hal,1992).For example,suppose in Fig.1that T0is available at a cost of P.Under these terms of availability,the welfare difference made by T0is area A.The‘Marginal’value that alterations in availability make to welfare would be re?ected by changes in https://www.wendangku.net/doc/d018409862.html,ing timber from trees as an example,suppose timber is harvested at a cost of P per unit of timber.The value of trees,per se,would be represented by area A, which is less than A+B.
Thus conceived,the basic notion of value that guides economic thought is inherently an-thropocentric,or instrumental.While value can generally mean the contribution to a goal,objec-tive,desired condition,etc.,the mental model used by economists is that value is based on want satisfaction,pleasure or utility goals.Things have value insofar as they propel individuals toward meeting pleasure and need objectives.Values of objects in the environment can be considered on the margin,as well as on the whole;i.e.the value of one additional tree versus the value of all trees. While value relates to the utility of a thing,the actual measurement of value requires some objec-tive measure of the degree to which the thing improves pleasure,well-being,and happiness.
In a?nite world,the resources people have available to meet their personal objectives are limited.Economists have thus developed an ex-tensive theory of how people behave in the pres-ence of constraints on feasible activities(Varian and Hal,1992).The working hypothesis is that people make decisions in order to optimize satis-faction,pleasure or utility.This optimization al-ways takes place in the presence of constraints, such as income,wealth,time,resource supply,etc. Optimization thus yields a deterministic set of possible decisions in most real-world situations—when constraints change,so do the decisions.
Fig.1.Utility and exchange based values of goods and ser-vices.
5Unfortunately,this is not the case for many unmarketed ecological goods and services—techniques that economists have developed for assessing the‘Marginal’values of goods are outlined below in Section5.
S.C.Farber et al./Ecological Economics41(2002)375–392 380
The essence of this perspective is that the eco-nomic world works largely deterministically,mov-ing from one equilibrium to another in relatively stable fashion,and responds to changes in con-straints in a predictable fashion.The determina-tion of equilibrium is a resultant of con?icting forces,such as supply and demand,or unlimited wants and limited means.While there are in-stances of instability,disequilibria and indeter-minism,these are treated as exceptions rather than the rule.
Since individuals can be observed making choices between objects in the marketplace while operating within the limits of income and time, economists have developed measures of value as imputations from these observed choices.While monetary measures of value are not the only possible yardstick,they are convenient since many choices involve the use of money.Hence,if you are observed to pay$10for a bottle of wine,the imputation is that you value wine to be at least $10,and are willing to make a trade-off of$10 worth of other things to obtain that bottle.The money itself has no intrinsic value,but represents other things you could have purchased.Time is often considered another yardstick of value;if you spend2h gol?ng,the imputation is that you value the golf experience to be worth more than2h spent in other activities.Value is thus a resultant of the expressed tastes and preferences of persons, and the limited means with which objects can be pursued.As a result,the scarcer the object of desire is,the greater its value will be on the margin.
Importantly,the‘technologies’of pleasure and production allow for some substitution between things.A variety of goods can induce pleasure and are thus treated conceptually as utility substi-tutes.A bear may substitute for an elk in con-sumption,hunting,and in a wildlife viewing experience even though bears and elk are not substitutes in terms of ecosystem function.On the production side,inputs are also considered to be substitutable for one another.Machines and tech-nology can substitute for people and natural in-puts.Clearly,economists recognize that the relations between goods and services are often more complicated than this.For malnourished people,sugar is no technological substitute for protein,even though they both provide calories. As discussed earlier,preferences may be lexico-graphic—some things are more important than others,and cannot be substituted for lower level wants or needs.On the production side,no num-ber of lumbermen is a substitute for timber when there is no timber.Production may require certain inputs,but at the same time there may be substi-tutability between others.As Krutilla and John (1967)suggests,there may be close substitutes for conventional natural resources,such as timber and coal,but not for natural ecological systems. The neoclassical perspective also assumes that tastes and preferences are?xed and given,and that fundamental economic‘problem’consists of optimally satisfying those preferences.Tastes and preferences usually do not change rapidly and,in the short run(i.e.1–2years),this basic economic assumption is probably not too bad.In the longer run,however,it does not make sense to assume tastes and preferences are?xed.People’s prefer-ences do change over longer time frames as the existence of a robust advertising industry attests. This observation is important because sustainabil-ity is an inherently long-run concept and ecosys-tem services are expected to continue into the far future.This fact is very disturbing for many economists because it takes away the easy de?ni-tion of what is optimal.If tastes and preferences are?xed and given,then we can adopt a stance of ‘consumer sovereignty’and just give people what they want.We do not have to know or care why they want it;we just have to satisfy their prefer-ences ef?ciently.
However,if preferences change over time and under the in?uence of education,advertising, changing cultural assumptions,and variations in abundance and scarcity,etc.,we need a different criterion for what is‘optimal’.Moreover,we have to?gure out how preferences change,how they relate to this new criterion,and how they can,or should,be changed to satisfy the new criterion (Norton et al.,1998).One alternative for the new criterion is sustainability itself,or more com-pletely a set of criteria:sustainable scale(size of the economic subsystem),fair distribution,and ef?cient allocation(Daly,1992).This set of crite-
S.C.Farber et al./Ecological Economics41(2002)375–392381
ria implies a two-tiered decision process(Page 1977;Daly and Cobb,1989;Norton et al.,1998) of?rst coming to a social consensus on a sustain-able scale and fair distribution and,second,using the marketplace and other social institutions like education and advertising to implement these de-cisions.This might be called‘community sover-eignty’as opposed to‘consumer sovereignty.’It makes most economists very uncomfortable to stray from consumer sovereignty because it raises the question:if tastes and preferences can change, then who is going to decide how to change them? There is a real danger that a totalitarian govern-ment might be employed to manipulate prefer-ences to conform to the desires of a select elite rather than the individuals in society.
Here,two points need to be kept in mind:(1) preferences are already being manipulated every day;and(2)we can just as easily apply open democratic principles to the problem as hidden or totalitarian principles in deciding how to manipu-late preferences.Viewed in this light,the afore-mentioned question is transformed:do we want preferences to be manipulated unconsciously,ei-ther by a dictatorial government or by big busi-ness acting through advertising?Or do we want to formulate preferences consciously based on social dialogue and consensus with a higher goal in mind?Either way,we believe that this issue can no longer be avoided,and is one that will best be handled using open democratic principles and in-novative thinking.Which leads us back to the role of individual preferences in determining value.If individual preferences change in response to edu-cation,advertising,and peer pressure then value cannot solely originate with individual prefer-ences.Values ultimately originate from within the constellation of shared goals to which a society aspires—value systems—as well as the availabil-ity of‘production technologies’that transform things into satisfaction of human needs.
In addition to income and education,time places constraints on value creation.Constraints of time and intertemporal substitutabilities create temporal implications for value.Economists pre-sume that a present time preference exists due to limited time horizons and concerns for uncer-tainty in the future(Fisher,1930).This means individuals will discount values of things in the future in comparison to the same things in the present.If I have an equal endowment of apples now and a year from now,I would place a greater value on having an apple now than on having an apple1year from now.The ability to convert things to money in the presence of positive?nan-cial interest rates will,therefore,result in the ‘optimizing individual’discounting things in the future.
In contrast to economists’traditional assump-tions of positive time preferences,or positive dis-count rates,psychologists suggest time preference is more complicated.For example,Loewenstein and Prelec(1991)?nd that in some circumstances people behave as if they have negative time prefer-ence,preferring more in the future to more now. The authors suggest this is due to dread,the anticipation of savoring better conditions in the future,and the aversion to loss.However,this negative time preference may not be operative when the time period is ambiguous.The implica-tions of such experimental results for discounting in environmental policy settings are not clear,but they do raise serious questions about the standard practice of discounting future environmental bene?ts(Clark,1973).
3.Ecological concepts of value
‘Value’is a term that most ecologists and other natural scientists would prefer not to use at all, except perhaps in its common usage as a reference to the magnitude of a number—e.g.‘the value of parameter b is9.32’.Using the de?nition of value provided earlier,ecosystems and non-human spe-cies are presumed not to be pursuing any con-scious goals,and,therefore,they do not have a ‘value system’.Likewise,one cannot talk about ‘value’as the degree to which an item contributes to achieving a goal in this context since there is no conscious goal being pursued.Nevertheless,some concepts of value are important in the natural sciences,and are in fact quite commonly used, and we try brie?y to elucidate them here.
If one limits the concept of value to the degree to which an item contributes to an objective or
S.C.Farber et al./Ecological Economics41(2002)375–392 382
condition in a system,then we can see how natu-ral scientists use the concept of value all the time to talk about causal relationships between differ-ent parts of a system.For example,one could talk about the value of particular tree species in con-trolling soil erosion in a high slope area,or the value of?res in recycling nutrients in a forest. There are other ways in which the concept of ‘value’is used in the natural sciences.For exam-ple,a core organizing principle of biology is evo-lution by natural selection.Evolution in natural systems has three components:(1)generation of genetic variation by random mutations or sexual recombination;(2)natural selection by relative reproductive success;(3)transmission via infor-mation stored in the genes.While this process does not require conscious,goal-directed behavior on the part of any of its participants,one can still think of the overall process as being‘goal-di-rected’.The‘goal’of‘survival’is embedded in the objective function of natural selection.While the process occurs without consciousness of this goal, species as a whole can be observed to behave‘as if’they were pursuing the goal of survival.Thus, one often hears evolutionary biologists talk about the‘survival value’of particular traits in organ-isms.Natural selection models,which maximize the?tness of species,are not only testable,they bear close similarities to economic utility maxi-mization models(Low,2000).
Beyond this,the idea of‘co-evolution’among a whole group of interacting species(Ehrlich and Raven,1964)raises the possibility that one species is‘valuable’to the survival of another species. Extending this logic to the co-evolution of hu-mans and other species,we can talk of the‘value’of natural ecosystems and their components in terms of their contribution to human survival. Ecologists and physical scientists have also pro-posed an‘energy theory of value’,either to com-plement or replace the standard neoclassical theory of value(Odum,1971,1983;Slesser,1973; Gilliland,1975;Costanza,1980;Cleveland et al., 1984;Hall et al.,1992).It is based on thermody-namic principles where solar energy is considered to be the only primary input to the global ecosys-tem.This theory of value represents a return to the classical ideas of Ricardo and Sraffa(see above),but with some important distinctions.The classical economists recognized that if they could identify a‘primary’input to the production pro-cess then they could explain exchange values based on production relationships.The problem was that neither labor nor any other single com-modity was really‘primary’.
The classical economists were writing before the physics of thermodynamics had been fully devel-oped.Energy—or,more correctly,‘free’or‘avail-able’energy—has special characteristics which satisfy the criteria for a‘primary’input:(1)En-ergy is ubiquitous.(2)It is a property of all of the commodities produced in economic and ecological systems.(3)While other commodities can provide alternative sources for the energy required to drive systems,the essential property of energy cannot be substituted for.Available energy is thus the only‘basic’commodity and is ultimately the only‘scarce’factor of production,thereby satisfy-ing the criteria for a production-based theory that can explain exchange values.
Energy-based concepts of value must follow the basic principles of energy conversion.The?rst law of thermodynamics tells us that energy and matter are conserved.But,this law essentially refers to heat energy and mechanical work(raw energy or the bomb calorimeter energy).The abil-ity to do work is related to the degree of organiza-tion or order of a thing relative to its environment,not its raw energy content.Heat must be organized as a temperature gradient be-tween a high temperature source and a low tem-perature sink in order for useful work to be done. In a similar fashion,complex manufactured goods like cars have an ability to do work that is not related to their raw energy content.The second law of thermodynamics tells us that useful energy (organization)always dissipates(entropy or disor-der always increases)within a closed system.In order to maintain organized structures(like an economy)one must constantly add organized,low entropy energy from outside the system. Estimating total‘energy’consumption for an economy is not a straightforward matter because not all fuels are of the same quality—i.e.they vary in their available energy,degree of organiza-tion,or ability to do work.Electricity,for exam-
S.C.Farber et al./Ecological Economics41(2002)375–392383 ple,is more versatile and cleaner in end use than
petroleum,and it also costs more energy to pro-
duce.In a oil-?red power plant it takes from3–5
kcal of oil to produce each kcal of electricity.
Thus,adding up the raw heat equivalents of the
various forms of fuel consumed by an economy
without accounting for fuel quality can radically
distort the picture,especially if the mix of fuel
types is changing over time.
An energy theory of value posits that,at least
at the global scale,free or available energy from
the sun(plus past solar energy stored as fossil
fuels and residual heat from the earth’s core)are
the only‘primary’inputs to the https://www.wendangku.net/doc/d018409862.html,bor, manufactured capital,and natural capital are‘in-termediate inputs’.Thus,one could base a theory of value on the use in production of available energy that avoids the problems the classical economists encountered when trying to explain exchange values in economic systems.There have been a few attempts to empirically test this theory using both timeseries data and cross-sectional data.Studies that have tried to adjust for fuel quality have shown a very close relationship be-tween‘available energy’consumption and eco-nomic output.Cleveland et al.(1984)and more recently Kaufmann(1992)have shown that al-most all of the changes in E/GNP(or E/GDP) ratios in the US and OECD countries can be explained by changes in fuel quality and the per-cent of personal consumption expenditures(PCE) spent directly on fuel.The latter effect is due to the fact that PCE is a component of GNP and spending more on fuel directly will raise GNP without changing real economic output.Fig.2is an example of the explanatory power of this relationship for the US economy from1932to 1987.Much of the apparent gain in energy ef?-ciency(decreasing E/GNP ratio)is due to shifts to higher quality fuels(like natural gas and primary electricity)from lower quality ones(like coal). Renewable energy sources are generally lower quality and shifts to them may cause signi?cant increases in the E/GNP ratio.
Another way of looking at the relationship between available energy and economic output uses cross-sectional rather than time-series data. This avoids some of the problems associated with Fig.2.The energy/GNP ratio for the US economy from1932 to1987.The predicted ratio(PRED)is based on a regression model with percent of primary energy from petroleum(%PET) from electricity(%ELEC)and percent of Personal Consump-tion Expenditures spent on fuel(%PCE)as independent vari-ables(R2=0.96).From Cleveland et al.(1984),Kaufmann (1992).
changes in fuel mix and distortions in GNP.For example,Costanza(1980),Costanza and Herendeen(1984)used an87-sector input–output model of the US economy for1963,1967,and 1973,modi?ed to include households and govern-ment as endogenous sectors(to include labor and government energy costs)to investigate the rela-tionship between direct and indirect energy con-sumption(embodied energy)and dollar value of output.They found that dollar value of sector output was highly correlated(R2=0.85–0.98) with embodied energy,though not with direct energy consumption or with embodied energy cal-culated excluding labor and government energy costs.Thus,if one makes some necessary adjust-ments to estimates of energy consumption in or-der to better assess‘available energy’,it appears that the empirical link between available energy and economic value is rather strong.
Some neoclassical economists have criticized the energy theory of value as an attempt to de?ne value independent of consumer preferences(see Heuttner,1976).This criticism is axiomatic as the stated purpose was to establish a biophysical the-ory of value not completely determined by social preferences.The energy theory of value over-comes some of the problems with production-
S.C.Farber et al./Ecological Economics41(2002)375–392 384
based theories of value encountered by the classi-cal economists discussed earlier and does a rea-sonable job of explaining exchange values empirically in the few cases where it has been tested.Despite the controversy and ongoing de-bate about the validity of an energy theory of value(Brown and Herendeen,1996),it seems to be the only reasonably successful attempt to oper-ationalize a general biophysical theory of value (see Patterson,this volume).
4.Ecological thresholds,uncertainty,and economic value
Ecosystems can be highly non-linear within cer-tain regions,and changes can be dramatic or irreversible(see Limburg et al.,this volume).The availability of ecosystem services may be dramati-cally altered at these non-linear points for only minor changes in ecosystem conditions.A valu-able service provided to humans by naturally functioning ecosystems is their avoidance of ad-verse threshold conditions,or what Ciriacy-Wantrup(1963)referred to as‘Critical Zones’for resource conservation.For example,trees in a forested ecosystem provide a hydrologic service of moderating water?ows into streams during peak storm events.As Fig.3below shows,let us sup-pose there is a relationship between the density of trees in a landscape and physical severity of downstream?ooding.At tree densities exceeding the‘Critical Threshold,’marginal changes in den-sity can be evaluated using measures such as expected increases in?ood damages.Under this marginal regime,there is a substitute for nature’s services,?ood protection or property replace-ment.Below the critical threshold,however,?ood severity increases substantially as tree density di-minishes.Economic values change substantially for slight alterations in ecosystem conditions be-cause human lives and communities may be at substantial risk.Under these conditions,tradi-tional monetary measures of value may not be able to adequately capture the impact of severe ?oods.Traditional valuation methods may not be acceptable as measures of the values of trees in proximity of the‘Critical Threshold’.
Due to the probabalistic nature of storm events, human society may wish to maintain tree densities well in excess of the critical threshold,say at T*. There would be a welfare loss if tree densities fell below T*,and this loss would be attributable to both the marginal increase in?ood severity and to the fact that now the system is closer to a catastrophe.There would be an insurance pre-mium that society would pay to avoid such a dramatic change in ecological states.Additional trees would have value both for their role in reducing expected?ood damages,and as in-surance for avoiding a natural catastrophe.
The example above illustrates that ecosystem service value has both ef?ciency and sustainability components.In the linear,marginal region,where the actual states of the economic and ecological systems are not dramatically altered,the values of changing tree densities are rationally based on ef?ciency goals;in this case avoiding having to repair?ood damages.In the non-linear,non-mar-ginal region,however,the value of trees is a sustainability value,as they protect the economic and ecological systems from collapse.Sustainabil-ity values may be more important than ef?ciency values around and below threshold limits.In short,sustainability values may be lexicographi-cally superior to ef?ciency values.
The example in Fig.3has the property of reversibility.Even when tree densities fall below the Critical Threshold level and place society at high risk,planting more trees reverses the expo-sure to risk.This may not be the case with some ecosystem conditions.For example,reductions in tree densities below the Critical Threshold may alter landscape conditions for a long period of
Fig.3.The?ood protection value of trees.
S.C.Farber et al./Ecological Economics41(2002)375–392385 Fig.4.Flood protection values of trees with ecosystem irreversibilities.
time even after tree densities have been increased to pre-threshold conditions.
In Fig.4,the ecological–economic system moves along path cd rather than ba once the threshold of irreversibility has been violated.This irreversibility would likely increase the value soci-ety would pay to avoid the threshold compared with conditions of relatively easy reversibility.The insurance value would include not only a pre-mium to avoid a catastrophe,but an option value to avoid the irreversibility of?ooding(Arrow and Fisher,1974).
The recent wild?re in Los Alamos,New Mex-ico,in the summer of2000,provides a dramatic, tragic example of the catastrophes and irre-versibilities associated with being near critical thresholds.The?re was started as a controlled burn of several hundred acres by the US National Park Service.Years of improper forest manage-ment,such as natural?re suppression and grazing of understory vegetation created a circumstance in which a minor change,the small controlled burn, had disastrous consequences,destroying300 homes and temporarily displacing30000people. To make matters worse,the destruction of groundcover over nearly50000acres will likely permanently alter soil conditions as erosion will be very severe.The former forest system may never be replicated.This situation is similar to conditions illustrated in Fig.4.
Another example may be the value of trees in a landscape.In Fig.5,alterations in tree densities above the‘Critical Threshold’level only mar-ginally change the visual appeal of the landscape. However,below this critical threshold the land-scape is no longer a forest;the state of nature is altered substantially.Changes in tree densities above the critical threshold can be valued on the margin using traditional economic valuation tech-niques.However,suppose the forest is a critical visual element to a community,or the loss of forest has dire impacts on the state of the local Fig.5.The value of trees for visual appeal.
S.C.Farber et al./Ecological Economics41(2002)375–392 386
economy or social fabric.Changes in tree densi-ties below the critical threshold may not be mean-ingfully valued using traditional techniques. Furthermore,the same type of insurance value as in the case of?ooding will give a premium to remaining above the critical threshold.Given there are probabalistic events such as storms and infestations,the community may wish to keep densities above T*.Increases in density in the region around the critical threshold have value both for improving the visual appeal of the land-scape as well as providing insurance that tree densities will not fall below this threshold.
In all of the above examples,critical thresholds in ecosystem structure or function do not neces-sarily imply economic thresholds for values.For example,if?ooding impacts on communities were never severe or people were not highly dependent on the existence of a forest,marginal economic valuation methods would be appropriate across the whole range of tree densities.This is in spite of the fact that there may be thresholds of densi-ties at which ecosystem structures and functions are substantially altered.The natural world may be in a non-linear,non-marginal condition,but the economic world remains a smooth one where substitutes readily mitigate signi?cant ecosystem change.Of course,the opposite may be true also—i.e.gradual changes in natural conditions may lead to non-linear changes in economic con-ditions.For example,water quality may gradually fall below certain standards and a lake is‘sud-denly’closed to swimmers.
Critical thresholds where ecological conditions and dynamics are uncertain require valuation un-der uncertainty.Uncertainty may range from knowing the probabilities of conditions and their values,to only being able to identify the condi-tions but not their probabilities.There are several methods for dealing with such valuation dilem-mas.For example,suppose an ecosystem under State A would provide$200in services,but in State B would provide$0in services.If the prob-ability of each state occurring is0.5,the expected value of the ecosystem services is$100.An exam-ple would be the storm protection value of an acre of coastal barrier islands under a hurricane(State A)or no hurricane(State B).Table1
Net income from coastal storm damages with and without barrier islands
Barrier island conditions
No barrier
Barrier island present
island
Storm occurs I?C+$200I?C
No storm I I
Expected value I+0.5($200?C)I+0.5(?C)
I?C+$200I?C
Worst case
Under these conditions,the valuation of ecosys-tem services is not quite so simple.Individuals may be averse to risks and a loss may be weighted more heavily than a gain of comparable magni-tude.Given this,what would be the WTP to preserve the barrier islands;what are they worth? The answer depends on whether the decision maker is risk averse.There are two uncontrollable states:Storm versus No Storm,each occurring with a0.5probability.There are two ecological conditions:Barrier Island and No Barrier Island. When base incomes are I and the base damages from a storm with no barrier protection are C,the matrix shown below in Table1represents net income conditions under the storm and barrier island options.
Using expected values,the value of the barrier islands is$100.However,the WTP to maintain the islands is given by:
0.5U(I?C+$200?WTP)+0.5U(I?WTP)
=0.5U(I?C)+0.5U(I)(2) or an amount such that the expected utility,net of WTP,of maintaining the barrier islands just equals the expected utility without the islands.It can be shown that under conditions of risk aver-sion,where the utility function is concave,WTP would be greater than the expected value of the loss,$100in this case,but less than the full damage of$200.6The excess of WTP over the expected value of the loss is the‘premium’that
6When WTP=$100,rearranging terms shows that U(I?C+100)?U(I?C)\U(I)?U(I?100)for any concave util-ity function.
S.C.Farber et al./Ecological Economics41(2002)375–392387
risk averters would pay rather than risk a full loss.
This example can be generalized in several ways.First,if the barrier islands have some addi-tional value,such as recreational or aesthetic en-joyment,the value of the islands measured by WTP would be additi6e to the storm protection values.Second,when altering ecological condi-tions increases the probability that a loss will occur,risk averting individuals should be willing to pay something to avoid the increase in proba-bility of loss.This WTP would re?ect what the ecosystem is worth insofar as insuring against crossing thresholds and encountering adverse irre-versible conditions.
When uncertainty consists of not knowing the probabilities of various ecological states,e.g.of a hurricane,the above matrix can be used to illus-trate valuation under this pure risk situation.If society is risk averse,a useful decision rule is to assume the worst will occur,and seek to minimize the worst-case scenario.For example,maintaining the barrier islands results in a worst-case scenario under a hurricane of I?C+$200;while the worst case if islands are not maintained is I?C. The implied value of the barrier islands for plan-ning purposes is$200under this risk averse deci-sion rule,as society would be willing to pay up to $200to maintain these islands.
In this example,the ability to estimate storm damage cost savings provides guidance to valuing the resource as well as developing a decision rule.
A simple decision rule would be to maintain and conserve an ecosystem service when the cost of doing so is not too great.This is the‘safe mini-mum standard’proposed by Ciriacy-Wantrup (1963),and elaborated on by others(Bishop, 1978).Under this standard,conservation practices avoid Ciriacy–Wantrup’s‘Critical Zone’of dra-matic,irreversible change in ecosystems.For ex-ample,soil conservation would avoid gulleys or maintain a maximum acceptable erosion rate; forest conservation would establish a maximum deforestation rate;rangelands conservation would maintain a minimum level of plant material after grazing;or species conservation would establish a minimum breeding stock or habitat condition. These standards are ecologically based,not eco-nomic;although violating them may be prudent if the economic costs are too high.
5.Con?icts between economic and ecological values
We also recognize that economic and ecological measures of value may at times be at odds with one another.As humans are only one of many species in an ecosystem,the values they place on ecosystem functions,structures and processes may differ signi?cantly from the values of those ecosystem characteristics to species or the mainte-nance(health)of the ecosystem itself.The intrin-sic values of natural system features and processes within the natural system itself may possess differ-ent abundance and functional value properties than their corresponding economic values.Dimin-ishing returns and utility would suggest some economic saturation in the demands for particular ecosystem services and conditions.For example, the marginal economic value for additional sun-light may be zero or possibly negative—skin can-cer from excessive sunlight,excessive heat,etc. The differences between ecological and eco-nomic values relate to the relative abundance of ecosystem services within naturally functioning ecosystems and economies.Clearly,a service can be more abundant or scarce in one than another. While it is likely that speci?c ecosystem structures and processes have some functional role in an ecosystem,and,therefore,have‘value,’they may not have direct or indirect value in market economies.There may be instances where an ecosystem is so isolated from human economic activity that what happens in it is irrelevant to human activity,even when all possible spatial and temporal connections are considered—i.e.only the intrinsic value remains.Of course,as humans continue to increasingly inhabit the planet,these instances become increasingly rare.As our under-standing of connections between and within ecosystems expands,we?nd more and more in-stances of signi?cant implications for human be-ings.These changing conditions in knowledge make it increasingly incumbent upon us to avoid the quick dismissal of isolated or presumably
S.C.Farber et al./Ecological Economics41(2002)375–392 388
economically irrelevant ecosystems or their prop-erties as irrelevant to human welfare.
6.Economic valuation methods
The exchange value of ecosystem services is the trading ratios for those services.When services are directly tradable in normal markets,the price is the exchange value.The exchange-based,wel-fare value of a natural good or service is its market price net of the cost of bringing that service to market.For example,the exchange-based value of timber to society is its‘stumpage rate,’which is the market price of timber net of harvest and time allocated management costs.Ex-change-based valuation is relatively simple,as trades exist from which to measure values. Market prices re?ect the valuation of goods and services,but only on the margin.For exam-ple,the price of a board foot of timber re?ects what another board foot is worth to buyers.It does not re?ect the whole value of all timber used by the buyers.You may pay only$2per board foot and that is all you would be willing to pay for the last of,say,the5000board feet you buy. But you may be willing to pay considerably more than$10000for the opportunity to buy all5000 board feet.Of course,the timber re?ects only a portion of the full social value of a tree,which also provides an array of services such as soil amendment and stabilization,water storage and ?ood control,species habitat,aesthetics,climate control,etc.In limited cases,markets for environ-mental services have been formed that tend to re?ect the valuations of those services (Chichilnisky and Heal,1998).
While exchange value requires markets or ob-servable trades,the social value of services is much more broad and dif?cult to measure.These social values are what have captured the attention of environmental and resource economists.They have developed a number of techniques for valu-ing ecosystem services(Freeman,1993;Kopp and Smith,1993).The underlying concepts for social values that economists have developed are what a society would be willing and able to pay for a service,WTP,or what it would be willing to accept to forego that service,WTA.The two valuation concepts may differ substantially in practice(Hannemann,1991).
The economic valuation methodology essen-tially constructs WTP for a service;or constructs the adequate compensation for a service loss, representing WTA.Suppose the service is?ood control provided by a wetland.Suppose damages from?ooding were$1million.Society would then be willing to pay$100000to reduce the probabil-ity of?ooding by10%if the society,as a whole, is risk neutral.Suppose the wetlands reduce?ood-ing probabilities by20%.When wetlands services are free,society receives$200000million in ser-vices for nothing.In principle,the owner of a wetland providing such a service could capture up to this amount of social value if there was a capture mechanism.Markets for resource services provide capture mechanisms.They work relatively well for‘private’goods,where owners can deny access to the service if payments are not made and if making access available to one person essen-tially makes it unavailable to others.Raw materi-als and food production are good examples of these‘private’goods or services.
Many ecosystem services do not qualify for market trading because they are not‘private’in nature.For example,?ood protection services of wetlands or trees,once made available to one person may indirectly become available to all. Wetlands and forest owners could not capture all the potential social WTP for this service.
When there are no explicit markets for services, we must resort to more indirect means of assess-ing economic values.A variety of valuation tech-niques can be used to establish the WTP or WTA for these services.There are six major ecosystem service economic valuation techniques when mar-ket valuations do not adequately capture social value:
Avoided Cost(AC):services allow society to avoid costs that would have been incurred in the absence of those services;?ood control avoids property damages or waste treatment by wetlands avoids health costs.
Replacement Cost(RC):services could be re-placed with man-made systems;natural waste treatment can be replaced with costly treatment systems.
S.C.Farber et al./Ecological Economics41(2002)375–392389
Factor Income(FI):services provide for the enhancement of incomes;water quality im-provements increase commercial?sheries catch and incomes of?shermen.
Travel Cost(TC):service demand may require travel,whose costs can re?ect the implied value of the service;recreation areas attract distant visitors whose value placed on that area must be at least what they were willing to pay to travel to it.
Hedonic Pricing(HP):service demand may be re?ected in the prices people will pay for asso-ciated goods;housing prices at beaches exceed prices of inland homes.
Contingent Valuation(CV):service demand may be elicited by posing hypothetical scenar-ios that involve some valuation of alternatives;
people would be willing to pay for increased ?sh catch or deer bag.
Each of these methods has its strengths and weaknesses.Also,each service has an appropriate set of valuation techniques.Some services may require that several techniques be used jointly. For example,the recreational value of an ecosys-tem will include not only the value that visiting recreationists place on the site(TC),but the in-creased incomes associated with site use(FI). Alexander et al.(1998)have suggested an extreme FI for valuing global ecosystem services,measur-ing the rents that a hypothetical monopolistic owner of nature’s services could charge the world’s economy.For example,an extreme mea-sure of rent from all natural system services would be the difference between global GDP and a global subsistence income.The paper by de Groot,Wilson and Boumans(this volume)dis-cusses the appropriate techniques for valuing dif-ferent ecosystem services.
Some valuation techniques,while intuitively ap-pealing,may misrepresent WTP or WTA valua-tion concepts in certain circumstances.This is especially a problem when using Replacement Cost(RC)methods.There may be circumstances when the social bene?ts that may be lost when ecosystem services are unavailable are less than the cost of replacement of those services;or when the bene?ts gained from enhanced services are less than alternative means of providing those ser-vices.For example,the Avoided Cost of illness under an ecosystem enhancement,such as wet-lands treatment of waste,may be less than the cost of comparable waste treatment facilities.In this case,Avoided Cost is a more appropriate measure of value than Replacement Cost.The Replacement Cost measure of value of the world’s coral reefs may far exceed the measure of bene?ts.
7.The challenge of aggregating economic values The traditional procedure of economic valua-tion is to establish individual-based values using one of the methods described in Section5above. Isolated individual values are then aggregated to represent a socially-relevant unit—a community, a state,a nation,or the entire planet.This is appropriate when the services provided are purely individually enjoyed,as is the case for‘private’goods and services that are not shared and where there are no substantial positive or negative(ex-ternality)impacts of one person’s use on another. This is also the case for‘public’goods where enjoyment remains individual-based without ex-ternality impacts.An example would be the recre-ational enjoyment of an uncongested forest. Isolated,individual-based valuation and aggre-gation are not appropriate,however,in instances where group values may hinge on group interac-tions,where preference formation is partially a social process,where shared knowledge is impor-tant,and where items valued have substantial interpersonal or social implications.Valuing a forest for timber,or even recreation is appropri-ately an individual-based process.However,other values of the forest may be more communal,are not well-de?ned in preference functions,or have substantial interpersonal impacts.For example, the value of forests to a community whose social system,folklore,etc.are intimately dependent on them is more than the sum of independent per-sonal values.
One approach to ecosystem service valuation that has gained increasing recognition in the liter-ature is small group deliberation(Jacobs,1997; Blamey and James,1999;Coote and Lenaghan, 1997).Derived from political theory,this evolving
S.C.Farber et al./Ecological Economics41(2002)375–392 390
set of techniques are founded on principles of deliberative democracy and the assumption that public decision making should result,not from the aggregation of separately measured individ-ual preferences,but from a process of open public debate(Fishkin,1991;Dryzek,1987; Habermas,1984).Thus,the application of a participatory democracy approach to environ-mental issues establishes two validity criteria that set it apart from traditional non-market valuation approaches:decentralized forms of en-vironmental policy formulation and the direct involvement of non-experts in small decision-making groups(see Wilson and Howarth,this volume).
The basic idea is that small groups of citizens can be brought together to deliberate about the social value of public goods and that the‘con-sensus’values derived in this open forum can then be used to guide environmental public pol-icy(Jacobs,1997).In this manner,discursive methods such as citizens’juries(Coote and Lenaghan,1997),consensus conferences(James and Blamey,1999),and deliberative CV tech-niques(Sagoff,1998)have increasingly been proposed and used in North America,Europe, and Australia to inform environmental decision making.One assumption common to all these techniques is that deliberative bodies of citizens can render informed judgments about environ-mental goods not simply in terms of their own personal utility,but also for society as a whole. The purpose of deliberation is to‘reach agree-ment on what should be done by or on the behalf of society as a whole’(Jacobs,1997).In sum,open discourse is assumed to perform a ‘corrective function’when each citizen alone has incomplete information,but acting together with others can piece together a more complete pic-ture of true social value for ecosystem goods and services.
For example,we might consider the recently proposed deliberative,or‘group’CV technique (Sagoff,1998;Jacobs,1997).While there is a long tradition of group research in CV,the goal of such research has generally been to use focus groups to increase the content-validity of hypo-thetical scenarios and diagnose potential prob-lems that individual respondents may have with the payment vehicle(Mitchell and Carson, 1989).With a group CV,on the other hand,the explicit goal would be to derive a group-consen-sus value for the ecological good or service in question.The valuation exercise is,therefore, conducted in a manner similar to a conventional CV survey—using hypothetical scenarios and re-alistic payment vehicles—with the key difference being that value elicitation is not done through private questioning but through group discus-sion and consensus buildiing.Thus,the delibera-tive CV approach treats small group deliberation not as a diagnostic tool,but as an explicit mechanism for value elicitation.
8.Conclusions
The concepts of‘value’,‘value system’,and ‘valuation’have many meanings and interpreta-tions and a long history in several disciplines. We have provided a survey of some of these meanings as they relate to the issue of ecosys-tem service valuation to serve as background and introduction to the remaining papers in this special issue.There is clearly not one‘correct’set of concepts or techniques to address this im-portant issue.Rather,there is a need for con-ceptual pluralism and thinking‘outside the box.’That is what the remaining papers in this special issue attempt to do.While they break some new ground and address the issues in interesting new ways,it is clear that much additional work re-mains to be done.After a long and interesting history,the issue of‘value’is now going through a period of development that should help us to make better,and more sustainable, decisions,not only as individuals,but also as groups,communities,and as stewards of the en-tire planet.
Acknowledgements
This work was conducted as part of the Work-ing Group on the Value of the World’s Ecosystem
S.C.Farber et al./Ecological Economics41(2002)375–392391
Services and Natural Capital;Toward a Dynamic, Integrated Approach supported by the National Center for Ecological Analysis and Synthesis,a Center funded by NSF(Grant c DEB-0072909), the University of California,and the Santa Bar-bara campus.Additional support was also pro-vided for the Postdoctoral Associate,Matthew A. Wilson,in the Group.
References
Alexander,A.,List,J.A.,Margolis,M.,d’Arge,R.C.,1998.
A method for valuing global ecosystem services.Ecologi-
cal Economics27(2),161–170.
Arrow,K.,Fisher,A.C.,1974.Environmental preservation, uncertainty and irreversibility.Quarterly Journal of Eco-nomics88,312–319.
Bishop,Richard C.,1978.Endangered species and uncer-tainty:the economics of a safe minimum standard.Amer-ican Journal of Agricultural Economics60(1),10–18. Blamey,R.K.,Rosemary, F.J.,1999.‘Citizens’Juries—An Alternative or an Input to Environmental Cost-Bene?t Analysis’.Conference of the Australian and New Zealand Society for Ecological Economics,Brisbane,Australia,7 July,Grif?th University.
Blaug,M.,1968.Economic Theory in Retrospect.Irwin, Homewood,IL.
Brown,M.T.,Herendeen,R.A.,1996.Embodied Energy Analysis and Energy Analysis:A Comparative View.Eco-logical Economics19,219–235.
Chichilnisky,G.,Heal,G.,1998.Economic returns from the biosphere.Nature391(6668),629–630.
Ciriacy-Wantrup,S.V.,1963.Resource Conservation:Eco-nomics and Policies.Division of Agricultural Sciences, University of California,University of California Press. Clark,C.W.,1973.The economics of overexploitation.Sci-ence181,630–634.
Cleveland,C.J.,Costanza,R.,Hall,C.A.S.,Kaufmann,R., 1984.Energy and the US economy:a biophysical perspec-tive.Science225,890–897.
Coote,A.,Jo,L.,1997.Citizen Juries:Theory into Practice.
Institute for Public Policy Research,London. Costanza,R.,1980.Embodied energy and economic valua-tion.Science210,1219–1224.
Costanza,R.,2000.Social goals and the valuation of ecosys-tem services.Ecosystems3,4–10.
Costanza,R.,Herendeen,R.A.,1984.Embodied energy and economic value in the United States economy:1963,1967 and1972.Resources and Energy6,129–163.
Daly,H.E.,1992.Allocation,distribution,and scale:towards an economics that is ef?cient,just,and sustainable.
Ecologial Economics6,185–193.Daly,H.E.,Cobb,J.B.,1989.For the Common Good:Redi-recting the Economy Toward Community,the Environ-ment and a Sustainable Future.Beacon Press,Boston. Dryzek John,S.,1987.Rational Ecology:Environment and Political Economy.Basil Blackwell,New York. Ehrlich,P.,Raven,P.,1964.Butter?ies and plants:a study in coevolution.Evolution8,586–608.
Ekins,P.,Max-Neef,M.(Eds.),1992.Real-Life Economics.
Routledge,London.
Fisher,Irving,1930.The Theory of Interest.Macmillan,New York.
Fishkin James,S.,1991.Democracy and Deliberation.Yale University Press,New Haven.
Freeman,M.,1993.The Measurement of Environmental and Resource Values:Theory and Methods.Resources for the Future,Washington,DC.
Gilliland,M.W.,1975.Energy analysis and public policy.
Science189,1051–1056.
Goulder,L.H.,Donald,K.,1997.Valuing ecosystem services: philosophical bases and empirical methods.In:Daily,
G.C.(Ed.),Nature’s Services:Societal Dependence on
Natural Ecosystems.Island Press,Washington,DC,pp.
23–48.
Habermas,J.,1984.The Theory of Communicative Action.
Beacon Press,Boston MA.
Hall,C.A.S.,Cleveland,C.J.,Kaufmann,K.,1992.Energy and Resource Quality:The Ecology of the Economic Pro-cess.University of Colorado Press,Colorado. Michael,H.W.,1991.Willingness to Pay and Willingness to Accept:How Much Can They Differ.American Eco-nomic Review81(3),635–647.
Harrod,R.,1961.Book review.The Economic Journal71, 783–787.
Heuttner,D.A.,https://www.wendangku.net/doc/d018409862.html, energy analysis:an economic as-sessment.Science192,101–104.
Hicks,J.R.,1939.Value and Capital:An Inquiry Into Some Fundamental Principles of Economic Theory.Oxford University Press,London.
James,R.F.,Blamey,R.K.,1999.Citizen participation—some recent Australian developments.Paci?c Science Conference,Sydney,Australia,4July.
Jacobs,M.,1997.Environmental valuation,deliberative democracy and public decision-making.In:Foster,J.
(Ed.),Valuing Nature:Economics,Ethics and Environ-ment.Rutledge,London,UK,pp.211–231. Kaufmann,R.K.,1992.A biophysical analysis of the energy/ real GDP ratio:implications for substitution and techni-cal change.Ecological Economics6,35–56.
Kopp,R.J.,Smith,V.K.,1993.Valuing Natural Assets:The Economics of Natural Resource Damage Assessment.Re-sources for the Future,Washington,DC.
Krutilla,John,V.,1967.Conservation reconsidered.Ameri-can Economic Review57(4),777–786.
Lancaster,Kelvin,1971.Consumer Demand:A New Ap-proach.Columbia University Press,New York.
S.C.Farber et al./Ecological Economics41(2002)375–392 392
Leopold,Aldo,1949.A Sand County Almanac.Oxford Univer-sity Press,New York.
Loewenstein,G.,Prelec,D.,1991.Negative time preference.
American Economic Review81(2),347–352.
Low,B.S.,2000.Why Sex Matters:A Darwinian Look at Human Behavior.Princeton University Press,Princeton,NJ. Mitchell,R.C.,Carson,R.T.,https://www.wendangku.net/doc/d018409862.html,ing Surveys for Value Public Goods:The Contingent Valuation Method.Resources for the Future,Washington,DC.
Norton,B.,Costanza,R.,Bishop,R.,1998.The evolution of preferences:why‘sovereign’preferences may not lead to sustainable policies and what to do about it.Ecological Economics24,193–211.
Odum,H.T.,1971.Environment,Power and Society.Wiley,New York.
Odum,H.T.,1983.Systems Ecology:An Introduction.Wiley, New York.Page,T.,1977.Conservation and Economic Ef?ciency.Johns Hopkins University Press,Baltimore.
Reder,M.,1961.Book review.American Economic Review51
(4),688–725.
Sagoff,M.,1998.Aggregation and deliberation in valuing environmental public goods:a look beyond contingent valuation.Ecological Economics24,213–230. Schumpeter,Joseph,A.,1978.History of Economic Analysis.
Oxford University Press,New York.
Slesser,M.,1973.Energy analysis in policy making.New Scientist 58,328–330.
Sraffa,P.,1960.Production of Commodities by Means of Commodities:Prelude to a Critique of Economic Theory.
Cambridge University Press,Cambridge.
Varian,Hal,R.,1992.Microeconomic Analysis.W.W.Norton, New York.