Kraft, Steven E.

English

Research Papers in Economics

2  CHOICES  2nd Quarter 2008 • 23(2) 
The magazine of food, farm, and resource issues
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A publication of the
American Agricultural
Economics Association
Ecosystem Services: A 21st Century Policy 
Challenge
Steven E. Kraft
In the 31 years since Walter E. Westman (1977) published 
“How much are nature’s services worth?” there has been 
extensive research into the nature of ecosystem services, the 
ways in which past and existing public policies influence 
the viability of ecosystem services, the valuation of such 
services (see NRC 2005), and the challenges of developing 
markets in which ecosystem services are traded (see Forest 
Trends 2008). While the scientific literature reporting this 
research is also extensive and found in the journals of a 
number of fields, ecological and economic, the informed 
discussion about ecosystem services by the lay public and 
policymakers is just beginning. 
Notwithstanding these early discussions, in its proposal 
for the 2007 Farm Bill, the Bush Administration included 
a program for a “market–based approach to conservation” 
structured around environmental benefits (i.e., ecosystem 
services) produced by rural landscapes (USDA 2007). In 
the final version of the 2008 Farm Bill approved by Con-
gress over the president’s veto, the USDA is directed “to 
establish a framework to measure environmental service 
benefits from conservation and land management activi-
ties” as well as to focus on carbon markets for producers 
(U.S. Senate 2008); both are references to ecosystem ser-
vices and rural lands.
While many in the research and academic communities 
are conversant about the nature of ecosystem services, the 
same cannot be said for those who are and will be impacted 
by them: landowners and operators, farmers, local agency 
personnel, policy designers and implementers, congressio-
nal staffers, and the members of the general public whose 
welfare  is  tightly  bound  to  the  continued  vitality  and 
availability of a diverse range of ecosystem services (MEA 
2005). In the following papers, the authors provide an in-
troduction to ecosystem services and the policy challenges 
they provide for the 21st century.
In his article, Scott Swinton describes agriculture as 
a managed ecosystem. As a consequence, agriculture has 
great potential to generate a broad mix of ecosystem ser-
vices, going beyond the traditional agricultural commodi-
ties of food, fiber and biofuels. However, Swinton points 
out that a better understanding is needed of how ecosystem 
services can be produced, measured and valued in order 
to design policy incentives to assure a for greater supply. 
J.B. Ruhl points out that landowners have incentives to 
maximize the production of food, fiber, and energy com-
modities, but little incentive to provide flows of ecosystem 
services that benefit other lands and members of the pub-
lic. Ruhl raises the question whether a renewed focus on 
agricultural  multifunctionality  using  ecosystem  services 
as its fulcrum can lead to new ideas about how to strike 
a more socially optimal balance for agricultural produc-
tion:  traditional  commodities  and  ecosystem  services. 
Rhonda Skaggs describes how the awareness of the broad 
array of ecosystem services from rangelands has grown in 
Articles in this Theme:
Reimagining Farms as Managed Ecosystems . . . . . . . .28
Farms and Ecosystem Services . . . . . . . .32
Ecosystem Services and Western U .S . 
Rangelands . . . . . . . .37
What’s Nature Done for You Lately: Measuring the 
Value of Ecosystem Services . . . . . . . .42
Ecosystem Services beyond Valuation, Regulation, 
and Philanthropy: Integrating Consumer Values 
into the Economy . . . . . . . .47  2nd Quarter 2008 • 23(2)  CHOICES  2
recent years. Rangelands are primar-
ily viewed as contributing to human 
welfare through primary production 
and  provisioning  services;  however, 
these  lands  also  provide  regulating 
and  cultural  services.  Skaggs  points 
out that rigorous economic analysis 
of nonprovisioning rangeland ecosys-
tem services remains elusive. Stephen 
Polasky in his paper points out that 
while nature provides a range of goods 
and services of value to people, these 
ecosystem services may not be provid-
ed optimally both because of the lack 
of information and because of pub-
lic  goods  problems.  Consequently, 
economists need to work closely with 
natural  scientists  to  understand  the 
ecological  production  functions  de-
termining the provision of ecosystem 
services, apply valuation techniques to 
generate estimates of the value of eco-
system services, and design policies to 
internalize  externalities  and  provide 
correct  incentives  for  the  provision 
of ecosystem services. Stephen Swal-
low, Elizabeth C. Smith, Emi Uchida 
and Christopher M. Anderson argue 
that while governmental and philan-
thropic actions have been useful for 
managing the environment and con-
serving some ecosystem services, little 
work has been doneto link people’s 
individual  values  for  ecosystem  ser-
vices directly into the economy. The 
authors show how experimental eco-
nomics could be used to develop new, 
market approaches based on demand-
side  values  for  ecosystem  services, 
which could stimulate entrepreneur-
ship built around ecosystem services. 
The  authors  conclude  with  an  pre-
liminary look at an experimental eco-
system  service  market  for  grassland   
nesting birds on farms.
For More Information 
Forest  Trends  and  The  Katoomba 
Group (2008), Payments for eco-
system  services:  Getting  started–A 
primer.  Nairobi,  Kenya:  Forest 
Trends, The Katoomba Group, and 
UNEP.  Available  online:  http://
ecosystemmarketplace.com/pag-
es/article.news.php?component_
id=5897&component_version_
id=8614&language_id=12
Millennium  Ecosystem  Assessment 
(2005),  Ecosystems  and  human 
well–being: Synthesis. Washington, 
DC: Island Press
National  Research  Council  (2005), 
Valuing ecosystem services: Toward 
better environmental decision–mak-
ing.  Washington,  DC:  National 
Academies Press
U.S.  Department  of  Agriculture 
(2007),  Administration’s  2007 
farm bill proposal. Available online: 
http://www.usda.gov/documents/
07finalfbp.pdf
U.S.  Senate  Committee  on  Agri-
culture,  Nutrition  and  Forestry 
(2008), The food, conservation, and 
energy act of 2008, Title II–Conser-
vation. Available online: http://ag-
riculture.senate.gov/ 
Westman,  Walter  E.  (1977).  How 
much are nature’s services worth? 
Science 197, 960–64. 
Steven  E.  Kraft  (sekraft@siu.edu)  is 
Professor and Chair of the Department 
of Agribusiness Economics, Southern Il-
linois University Carbondale.

Ecosystem Services: A 21st Century Policy Challenge

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