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Pricing nature's freebies

External Reference/Copyright
Issue date: 
Jul 13th 2012
Publisher Name: 
The Economist
Author e-Mail: 
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FREE lunches, economists insist, are rare. In one sense—related to the opportunity cost of sitting down to eat when you could be doing something more productive—they are right. In another, though, complimentary feasts are rather common. As are free clean water, fuel, air-conditioning, pest control and pretty views. All these are “ecosystem services”, provided by nature to mankind at no cost.

Push nature too hard, though, and this generosity may end. A new paper by John Dearing, of the University of Southampton, and his colleagues, looks at how long-term trends in "regulating" ecosystem services, as those that keep the environment stable are known in the jargon, relate to economic growth. It highlights the deleterious effects on environmental balance that accompanies unchecked development.

Long-term records of ecosystem services rendered by nature are hard to come by. In rich countries, chances are some environmental agency might have partial data going back to the 1950s. In poorer ones, official figures are virtually non-existent. Fortunately, some services, such as ensuring water quality and soil stability, leave unofficial records. The researchers therefore studied sediment, one such unofficial source, from two lakes in the Lower Yangtze Basin, in China. They then compared what they found to published data about Chinese land use, population and economic development from 1930 onwards. 

The results are startling. A broad index reflecting the quality of services fell as China's GDP began to take off in the 1980s. A more fine-grained analysis revealed clear links between specific services and particular economic and agricultural policies. For example, soil stability plummeted by the end of Mao Zedong's disastrous Great Leap Forward in 1961, as reflected in increased erosion. It recovered soon after, as the Chinese economy shrivelled in the wake of Mao's collectivist experiment. Water quality, which started falling a few years after the Chinese economy began a steep ascent in the mid-1990s, dropped off the scale by the mid-2000s. 

The paper does not argue against development. Not does it seek systematically to establish development as a cause of environmental degradation, though the conclusion that policies involved in pushing economic growth—in particular the sort driven by rapid industrialisation—affect the ecosystem seems neither implausible nor especially controversial. But it introduces a measure of ecosystem services that can be used to examine long-term trends.

Ecosystem services were long been considered priceless. As a consequence, no one bothered to put a figure on them. More recently, ecologists and economists have argued that assigning an explicit monetary to the services will make humans appreciate them more. In a seminal paper published in Nature in 1997, Robert Costanza and his colleagues estimated that ecosystem services are annually worth roughly twice the world's economic output. The researchers admitted that calculating this figure is “certainly difficult and fraught with uncertainties”. But the sooner policymakers incorporate even those rough figures into their economic sums, the better.

Download the paper here as well...



Extpub | by Dr. Radut