This article describes some fundamental changes in the ways we look at and measure wealth. It could lead eventually into an economic revolution globally. Here are a few excerpts:
"Amid the dark clouds of the 2008 financial crisis, as the media documented a litany of bank failures, collapsed credit markets, and growing panic well beyond Wall Street, there was a brighter headline: For the first time since scientists began tracking them, carbon emissions in the United States decreased. The drop was marginal, but this environmental success, when juxtaposed with the crippled economy, raised a troubling point: Two important objectives—mitigating climate change and reviving the economy—were at cross-purposes. And it now appears likely that this contradictory relationship extends far beyond atmospheric carbon and climate change. In area after area, issue after issue, economic growth appears to be whittling away at the very foundations of the global economy: the ecosystems that supply our food, fuel, clean water, and stable climate. Our principle measure of success, the gross domestic product, or GDP, excludes the worth and loss of ecosystems and the services they provide, because as valuable as they are, they have no price."
"The global public good that both epitomizes and encompasses the challenges that the world faces today is biological diversity, the variety of life on Earth. “Biodiversity loss is, in a sense, the big problem of which all others are relatively small applications,” says Charles Perrings, an environmental economist at Arizona State University and a fellow of the Beijer Institute in Stockholm. Biodiversity is the foundation of ecosystems that capture carbon and energy, and that cycle water and nutrients through the biosphere. These processes, in turn, enable all of the activities—from plant photosynthesis to potato farming—that make human life on Earth possible. Another way of looking at it, says Perrings, is that most human activity boils down to changing the mix of organisms with which we interact. Public health, for instance, is the control of which pathogens come into contact with humans. Farming is simply the tweaking of wild species to suit human tastes and energy needs. Science, medicine, and global agriculture rely heavily on the barely explored cornucopia of the world’s genetic resources. The loss of biodiversity, then, is the loss of everything.
To begin putting a price on such global public goods, says Perrings, we must understand that biodiversity has a dual nature. A healthy forest, for example, provides an array of public services, such as carbon sequestration and water filtration. The components of forestland, however—the trees, animals, and soil—are often privately owned. According to Perrings, this creates large externalities: Private actions, such as cutting down trees, have an effect on public well-being that isn’t reflected in the price of that timber. Clean water that benefits the region, medicinal plants that could benefit the nation, and carbon sequestration that is valuable to the entire world are all at risk of destruction because they are invisible to the market."
***"Ecologies, we’re now beginning to understand, are best described as complex adaptive systems, with biodiversity as the key to their ability to absorb shocks and stresses. And the economic value of such resilience is likely to be extremely high. Experts have surmised, for example, that mass erosion of Louisiana’s coastal wetlands was largely to blame for the billions of dollars in damage from Hurricane Katrina. Some scientists now say that the worldwide push toward monoculture and away from crop diversity could create huge vulnerabilities in the global food supply."
"So today’s more sophisticated assessments don’t just attempt to quantify the benefits that ecosystems provide to humans; they also figure in the costs of foregone economic development and the expenses of conservation. A major 2002 review of 300 case studies published in the Proceedings of the National Academy of Sciences found that by investing $45 billion per year in a global reserve program, we could protect natural services worth some $5 trillion—a benefit-cost ratio of 100:1. In other words, even when the steep costs of non-development are figured into the equation, nature’s services emerge as the ultimate bargain.
It is increasingly evident that safeguarding ecosystems makes solid financial sense, yet biodiversity and the services that ecosystems provide have long been overlooked by classical economists. That is all about to change."
***"Using more holistic metrics, we may unearth some telling truths. The US is an unrivaled powerhouse when it comes to per capita GDP: $47,500 per person as of 2008. Take into account life expectancy, “life satisfaction,” and ecological footprint, however, and suddenly the top ranking goes to Costa Rica, a nation with a per capita GDP of just $11,600. The global public value of Costa Rica’s forests, coupled with its robust PES* program to keep those forestlands healthy, is a major contributor to its top-notch ranking. In short, biodiversity and ecosystems can become a large slice of a poor nation’s development pie."
* Payments for Ecosystems Services
"Valuing ecosystems will strike some as a heartless utilitarian approach, tantamount to slapping dollar signs on species, soils, oceans, and air. What it presages, however, will be a change in the very shape of the global economic system: by valuing our landscapes and the services they impart, by recalibrating incentives toward their preservation, and by respecting the needs of communities most closely dependent on them. We will not just value what nature provides, but also reorganize around a new definition of what is valuable. "