Definitions of Biodiversity and Measures of Its Value

The destruction of natural habitats has prompted concerns about the loss of biological diversity. Regrettably, however, there is no consensus among either biologists or economists on the most meaningful measures of biodiversity. Fundamentally different definitions are useful in asking fundamentally different questions. Considerable attention has been given to the value of diversity in search models. A measure of “aggregate variability” is appropriate to such models. Values derived from search models tend to be well behaved; they exhibit diminishing returns in diversity. In contrast, a definition of diversity as “relative abundance” is more appropriate to more complex objective functions. Values derived in these models are not necessarily well behaved. The differences between diversity values arising in search models and those arising from more general objectives are demonstrated. An example shows that “consistency tests” applied to measures of valuation may not be useful when diversity per se is being valued.Biological diversity; biodiversity; diversity index, abundance; search; variability, consistency; contingent valuation; diminishing returns; increasing returns

A Note on the Valuation of Ecosystem Services in Production

There has been considerable recent interest in the valuation of ecosystem services. We focus here on the value of such services in the production of market goods. Although the conceptual basis for conducting such exercises is straightforward, the data with which to implement them empirically is generally not available. An upper bound on the value of ecosystem services arises when the production technology exhibits constant returns to scale in ecosystem services and market inputs jointly. There are compelling reasons to suppose that the existence of fixed factors of production would imply that production technologies exhibit decreasing return to scale. Under these circumstances, no general conclusions can be drawn. We show in an illustrative example that a range of outcomes is possible, depending on the substitutability between ecosystem services and other inputs and the scarcity of ecosystem services relative to other factors of production.ecosystem services, returns to scale, elasticity of substitution

Tax Rules, Land Development, and Open Space

Concern about “open space” is growing. Conservation advocates worry that private land use decisionmakers preserve too little open space. Yet private land developers are deciding on their own to preserve open space in new developments because it provides amenities to purchasers of lots. Moreover, tax provisions provide incentives for preserving more open space than would be privately optimal. Many jurisdictions have adopted “use-value assessment” standards granting favorable tax treatment to lands maintained in open space. Also, donations of open space can be deducted from income in computing tax liabilities. Both factors may be empirically important, although tax deductibility may have larger conservation effects than does use-value assessment. These conclusions raise several unanswered questions: How important are tax incentives in practice? Do they motivate enough conservation of open space? Do tax incentives target the right conservation priorities?income tax, property tax, tax deductions, use-value assessment, ecosystem services, open space, conservation, amenity value

Valuation of Biodiversity for Use in New Product Research in a Model of Sequential Search

We develop a model of search in which a researcher chooses the size of sequential batches of samples to test. While earlier work has considered similar questions, the contribution of this paper is to use the search model to place a value on the marginal research opportunity. The valuation of such opportunities may be of little interest or relevance in many of the contexts in which search models are employed, but we apply our analysis to an area of considerable societal interest: the valuation of biological diversity for use in new product research. While data from which to make inferences are limited, we find that, using plausible estimates of relevant parameters, the value of biodiversity in these applications is negligible.

The Cost-Effectiveness of Conservation Payments

Intact ecosystems provide important global services. Many valuable ecosystems are located in low-income countries in which citizens are not in a position to provide global public goods gratis. To address this problem, international conservation and development donors have been making substantial investments in habitat conservation. Among the more common conservation schemes are interventions aimed at encouraging commercial activities that produce ecosystem services as joint products. We argue that it would be more cost-effective to pay for conservation performance directly. We use a simple yet general model to establish three conclusions. First, the overall cost of conservation is least when direct payments are employed. Second, the donor will generally find direct payments more cost-effective. Third, the preferences of donors and eco-entrepreneurs are opposed: when the donor prefers direct payments, the eco-entrepreneur prefers indirect subsidies. There are a number of reasons why direct incentive programs may be difficult to implement. We argue, however, that any approach to conservation will face similar challenges. Furthermore, we demonstrate with an empirical example that direct payment initiatives can offer spectacular cost-savings relative to less direct approaches. We therefore believe that continued experimentation with direct conservation incentives in the developing world is warranted and will prove successful.

The Social Value of Using Biodiversity in New Pharmaceutical Product Research

Biologists and conservation advocates have expressed grave concern over perceived threats to biological diversity. "Biodiversity prospecting"—the search among naturally occurring organisms for new products of agricultural, industrial, and, particularly, pharmaceutical value—has been advanced as both a mechanism and a motive for conserving biological diversity. Economists and others have attempted to estimate the value of biodiversity for use in new pharmaceutical project research. Most of these existing approaches are incomplete, however, as they have not yet considered full social welfare, i.e., both consumer surplus and profit. This paper addresses social welfare by calibrating a model of competition between differentiated products with data from the pharmaceutical industry. We find that the magnitude of losses from even catastrophic declines in biodiversity are negligible in comparison to the value of world production. While social values of biodiversity prospecting might motivate habitat conservation in some areas, these values are likely to be small relative to land value in other uses in even some of the more biologically rich regions of the world.

Tariff Liberalization, Wood Trade Flows, and Global Forests

This paper examines the question of the likely effects on global forests of a further reduction in wood products tariffs including both solid wood products and pulp and paper, as has been proposed to the World Trade Organization (WTO) by the Asia Pacific Economic Community (APEC). The tariff reductions would be an extension of the tariff reductions associated with the Uruguay Round (Federal Register 1999). The questions include both how international trade is likely to change in response to further tariff reduction and also the implications for timber harvests and forests generally of such trade liberalization in the various forest regions. The paper finds that the evidence suggests further reductions in tariffs on forest products are likely to generate only very modest increases in worldwide trade and production, and the increased harvest pressures on forests due to tariff reduction should be quite modest. The major countries likely to experience export and production increases are found largely in the northern hemisphere and are likely to be able to facilitate additional harvests with minimal effects on the forests due to the modest nature of the impact, new forest practices laws, new forest set-asides, and movement toward improved practices designed to achieve multifaceted sustainable forestry. Furthermore, there is little reason to expect that tariff reductions will significantly increase harvests from tropical forests. Earlier tariff reductions appear to have had minimal impacts on tropical harvests or exports. Nevertheless, tropical forests will remain under deforestation pressure due to land conversion objectives, commonly to provide additional agricultural lands.

Investments in Biodiversity Prospecting and Incentives for Conservation

There is considerable interest in biodiversity prospecting (the search for valuable new products from natural sources) as a conservation strategy. In an earlier paper, we have argued that the value of the marginal species (and, by extension, the incentives for the conservation of the habitat on which it is found) is small. In this paper, we show that investments in biodiversity prospecting are unlikely to increase incentives for conservation by much. If the value of the marginal species were appreciable, researchers ought already to have made investments to exploit it. If it is not, it is doubtful that additional investments will generate any substantial increase. It is important to be clear about our findings: we are not saying that none of the myriad uses of biodiversity is important. Quite to the contrary, we are saying that if biodiversity is important, more effective strategies for its conservation must be found.

Non-Filippov dynamics arising from the smoothing of nonsmooth systems, and its robustness to noise

Switch-like behaviour in dynamical systems may be modelled by highly nonlinear functions, such as Hill functions or sigmoid functions, or alternatively by piecewise-smooth functions, such as step functions. Consistent modelling requires that piecewise-smooth and smooth dynamical systems have similar dynamics, but the conditions for such similarity are not well understood. Here we show that by smoothing out a piecewise-smooth system one may obtain dynamics that is inconsistent with the accepted wisdom --- so-called Filippov dynamics --- at a discontinuity, even in the piecewise-smooth limit. By subjecting the system to white noise, we show that these discrepancies can be understood in terms of potential wells that allow solutions to dwell at the discontinuity for long times. Moreover we show that spurious dynamics will revert to Filippov dynamics, with a small degree of stochasticity, when the noise magnitude is sufficiently large compared to the order of smoothing. We apply the results to a model of a dry-friction oscillator, where spurious dynamics (inconsistent with Filippov's convention or with Coulomb's model of friction) can account for different coefficients of static and kinetic friction, but under sufficient noise the system reverts to dynamics consistent with Filippov's convention (and with Coulomb-like friction).Comment: submitted to: Nonlinear Dynamic

The Law and Economics of Habitat Conservation: Lessons from an Analysis of Easement Acquisitions

There is a growing interest in incentive-based policies to motivate conservation by landowners. These policies include full- and partial-interest land purchases, tax-based incentives, and tradable or bankable development rights. Using legal and economic analysis, this paper explores potential pitfalls associated with the use of such policies. Incentive-based policies promise to improve the cost effectiveness of habitat preservation, but only if long-run implementation issues are meaningfully addressed. While the paper compares conservation policies, particular attention is devoted to the use of conservation easements and in particular a set of easement contracts and transactions in the state of Florida. The easement analysis highlights the importance of conservation policies' interactions with property markets, land management practices, and bureaucratic incentives. Specific challenges include difficulties associated with the long-term enforcement and monitoring of land use restrictions, the lack of market prices as indicators of value for appraisal, and the way in which incentives target specific properties for protection.