Valuing Ecosystems

Environmental economists measure environmental value by identifying "commodities" — units of goods and services derived from nature that can be purchased in markets. Economists measure preferences of individuals as behaviorally measurable "willingness-to-pay" ("wtp") and then use these prices as a guide to the welfare individual consumers seek. In the standard case, consumers signal their preference for a commodity and the individual welfare associated with it by purchasing units of that commodity, while balancing the unit price against all of the other preferences they have. These preferences are revealed in the purchase of commodities

While economists are most comfortable when their estimates of price values are revealed in actual behaviors, either direct or indirect, they also recognize that there are many things of value — especially natural systems and their parts — that are seldom traded in markets. Economists have therefore extended their effort to evaluate aspects of nature that have "non-market" value by supplementing revealed preferences with stated preference methods (Krutilla, 1967). Stated preference methods, spoken of generally as "contingent valuation studies," are designed to elicit estimates of individuals' wtp for a commodity if it were available in markets (Mitchell and Carson, 1993; Freeman, 2003). Techniques can involve bidding games, interviews, questionnaires, etc., and their purpose is to represent the wtp value of commodities, such as improved views in a national park or the knowledge that polar bears can continue to exist in the Arctic, even though the valuer never expects to visit the Arctic. Economists have thus greatly expanded the range of goods and services that can be considered to be "environmental values."

This approach, anchored in the traditional concept of market prices as behavioral indicators of individual value, and supplemented by contingent valuations of nonmarket goods, has encouraged some to evaluate environmental change as increments or decrements in the aggregated wtp's of all relevant consumers. On this approach, the value of ecosystems can be represented as an aggregation of the commodity-values that all consumers can derive, directly or indirectly, from those systems. To evaluate a proposed or actual change in an ecosystem, one would simply aggregate and compare the total commodity-values available to humans before and after the change.

Thinking of the problem of ecosystem valuation in this way may encourage basing evaluations of actions using a "Cost-Benefit Analysis" (CBA). In the extreme case, some advocates of this approach claim or imply that it should be possible in principle to list all the costs and benefits of a given policy or action, and thus to make decisions based strictly on a monetary criterion whereby the best policy is the one that exhibits the largest ratio of benefits to costs. Such optimism, however, is belied by the daunting task of identifying all the possible commodities that would have to be listed and estimated, and by the apparent inability of measures of economic preference to express many of our values, including values felt for loved ones or deeply spiritual commitments to natural places. In fact, no practitioners have claimed to have completed this daunting task in even one case, and most advocates of economic aggregation in the valuing of ecosystems suggest a CBA as only a starting point, a partial accounting that helps to call attention to valued items and to possible risks of loss (Freeman, 2003). Thus the bold promise of providing an accounting of ecosystem values in a single, aggregative measure recedes. What is left is recognition that economic values are of course relevant and important in evaluating changes in ecosystems, but an accompanying sense that these methods must be supplemented with a great deal of either hand-waving over gaps, or a commitment to temper any economic indicators with a great deal of judgment and good sense.

By the middle of the 1980s, a number of economists and ecologists, expressing doubts about the ability of standard economic analyses (in terms of wtp) to capture the whole range of values humans derive from ecosystems, created a transdisciplinary field of "ecological economics" (Gomez-Baggethun et al., 2010) At first, ecological economists criticized mainstream economists for ignoring ecological principles and the importance of the scale of impacts on ecosystems, but ecological economists did not go beyond the standard economic methods of measuring market and nonmarket values. Then, frustrated by the lack of awareness of how ecological systems and processes support human well-being and the failure of economists to take into account the regulative functions that stabilize systems and allow human adaptation to them, it was suggested that ecologists could identify processes that provide "services" to human beings (Daily, 1997; World Health Organization, 2005). The idea of "ecosystem services" has rapidly gained in popularity and it is now a widely used concept in the evaluation of ecosystems.

This concept is clearly important in raising awareness of human dependencies on nature as it includes three major areas of services: 1. Provisioning (food and fiber); 2. Regulation (maintenance of energy flows and maintaining resilience of systems): and 3. Cultural ecosystem services (such as the values of place). While cultural ecological services are regularly mentioned, few methods exist for either characterizing or measuring these values.

Efforts have been made to estimate the total value humans derive from ecosystem services (Costanza et al., 1997) and ecological economists have been criticized for introducing monetized measures that are not based on the methodologies of mainstream economics, creating ambiguity in the measures used. These controversies, however, need not obviate the usefulness of ecosystem services as long as one does not aggregate monetized ecosystem service estimates with the wtp values of mainstream environmental economists. Ecosystem service identifications will be seen to be an important aspect of more procedural approaches to evaluation in Section 2, below.

The approach that aggregates commodity values to indicate the value of nature to humans is strongly criticized by environmental ethicists who insist that all measures of economic value are unacceptably anthropocentric, based on the utilitarian theory that all value can be represented as human welfare. According to environmental ethicists, what morally demands protection in ecosystems is not value instrumental to human well-being, but values intrinsic to nature itself. These ethicists believe that elements of nature have intrinsic values and that these values often trump values instrumental to humans.

Nonanthropocentrists attribute intrinsic value to natural entities: some identify individual organisms, others identify species, and others ecological systems as the loci of such value (Taylor, 1986; Rolston, III, 1988; Callicott, 1989). In whichever case this approach aggregates the value of elements of nature that are taken to have intrinsic value. While there is little agreement about how, exactly, to keep the books with respect to intrinsic value, intrinsic value theorists aggregate toward decisions by maximizing the protection and flourishing of all elements of nature, human and nonhuman, which have intrinsic value.

The confrontation between environmental economists and environmental ethicists has blocked the emergence of a unified approach to evaluating ecological change because each attempts to aggregate and maximize a single value — human welfare and total intrinsic value, respectively — and these values are apparently incommensurable. As a result, discussions of ecosystem values are polarized around two opposing theories about the nature of ecological value. No unified field or discipline for evaluating ecological change has emerged.

Perhaps neither of these aggregative approaches is likely to succeed in unifying the discourse of ecological valuation. Unless this intellectual dilemma is somehow resolved, the future of valuing ecosystems is likely to remain in chaos. Aggregative approaches are monistic: they assume that ecosystematic values can be expressed in a single currency. Since they advocate incommensurable values, however, no final accounting is possible. The poor performance of monists in evaluating change, and the intellectual dilemmas created by the interaction of economists and ethicists have led a number of environmental theorists to explore moral pluralism.

According to moral pluralism, humans value nature in many ways not easily made commensurate, but all of these values are important and the goal should be to find an adequate balance in protecting multiple values rather than trying to maximize a single value. Pluralism does not offer a single best answer, but rather seeks a fair and reasonable balance among competing values. Pluralism, however, is not conducive to aggregation, so commitment to pluralism suggests an alternative to aggregative approaches.