Economic research and the conservation of biodiversity

Economic theory provides an analytical method for diagnosing when inefficient use of environmental resources is likely to occur. It holds that resources will be allocated efficiently when prices reflect true resource scarcity, when there exists a right of ownership to resources so that free trading of resources is possible, and when consumers have access to information about the total amount of a resource available. Economists will continue to argue if and when these assumptions are met, but the expanding threats to biological diversity and other natural resources have raised fundamental concerns about the limits of this method as practiced.

First, natural resources provide nonmarketed goods and services as well as commodities. Usually, however, only commodities are openly traded, and therefore priced, by markets. For example, harvested wood may be priced in the marketplace, but trees also provide medicine and other minor products for local peoples, and control soil erosion and flooding regimes. Thus, trees simultaneously provide commodities
that may be traded on the world market (logs), goods available primarily through the local market (medicines), and services that are not traded (erosion and flood control).

Second, incentives, tax provisions, credits, subsidies, and other economic policies distort commodity prices and encourage massive environmental transformation. Many developing nations have institutionalized short-term profit taking through resource depletion via these and other economic policy instruments. Tax holidays, inadequate rent taxation, low stumpage charges, and no-interest loans for forest clearing to establish cattle ranches are examples of policies that have led to the loss of biodiversity (McNeely, 1988). Policy distortions such as these have contributed directly, to increases in deforestation rates in recent decades-not only in developing nations, but in the United States and other developed countries as well (Repetto and Gillis, 1988).

Third, some natural resources, such as biological diversity, are public goods that are used but not owned in the classical sense. Weak ownership, as in the case of nationalized resources or traditionally managed common property in many developing countries, can promote a rush to benefit from what one controls or has access to today, but may not control tomorrow-the "free-rider" problem (NRC, 1986b).

Finally, consumers do not have adequate access to information about the total value of natural resources. Much of this information-particularly regarding nonmarket services such as ecosystem functions, as well as most commodities in the tropics-simply does not exist. When information is inadequate or nonexistent, prices do not reflect resource scarcity.

As resources are depleted for short-term gain, the potential for future use, profit, and development is jeopardized, and when resource depletion involves or leads to reduced biological diversity, even the basic conditions underpinning potential change are compromised. If the present economic system allows only the conservation of what is currently too expensive to exploit (e.g., tropical forests in inaccessible mountain valleys) or too valuable to destroy (e.g., groundwater quality), then the conservation of biodiversity will require either that the present economic system change or that biodiversity be made too expensive to exploit or too valuable to destroy.

The economics of biodiversity conservation raises questions that demand carefully thought-out and often sophisticated answers. Simplistic research will not provide the required information. Research in this area should ideally identify the economic forces leading to the loss of biodiversity within a country; determine the role of international economic institutions and trends in promoting this depletion; elucidate the economic principles operant in cases of successful development and conservation; and develop and test economically viable mechanisms for slowing the rate of resource depletion while stimulating the conservation of biological diversity.

Such research should be multidisciplinary and, in particular, should bring together economists and ecologists. It should also be collaborative, with researchers from developing and industrialized countries participating as equal partners. Because economies operate at various spatial scales, research should occur at project (micro- or mesoeconomic), national (macroeconomic), and global (international economic) levels.