Resilience, Uncertainty, and the Role of Economics in Ecosystem Management

Abstract

Many natural systems have the potential to switch between alternative dynamic behaviors. We consider a system with two distinct equations of motion that are separated by a threshold value of the state variable. We show that utility maximization will give a decision making rule that is consistent with ecosystem-based management objectives that aim to reduce the probability that the system crosses the threshold. Moreover, we find that increasing uncertainty (both uncertainty embedded in the natural system and uncertainty of the decision maker about the location of the threshold) can lead to nonmonotonic changes in precaution. Although small increases in uncertainty may at first increase precaution, large enough increases in uncertainty will lead to a decrease in precaution.Resource /Energy Economics and Policy,