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The economic analysis of biodiversity: an assessment

Helm, Dieter and Hepburn, Cameron (2012) The economic analysis of biodiversity: an assessment. Oxford Review of Economic Policy, 28 (1). pp. 1-21. ISSN 0266-903X

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Abstract

Biodiversity is complex, difficult to define, difficult to measure, and often involves international and intergenerational considerations. Biodiversity loss presents significant economic challenges. A great deal of economics is required to understand the issues, but a simple and important observation is that most species and ecosystems are not traded in markets, so prices are often absent and biodiversity is under-provided. Despite the formidable obstacles to high-quality economic analysis, economics has plenty to offer to biodiversity policy. First, economic valuation techniques can be employed to roughly estimate the value of the benefits provided by biodiversity and ecosystems. Second, assessing the ‘optimum’ amount of biodiversity involves recognizing that the conversion of natural capital into manufactured and human capital has so far generated vast amounts of wealth. While there may have been ‘too much biodiversity’ in the past, economic analysis suggests that this is a difficult position to hold now. Third, econometric techniques and carefully designed policy studies can assist in determining what policies are most suited to different contexts to cost-effectively reduce biodiversity loss. Fourth, political economy is helpful because international coordination is often required—ecosystems do not respect national borders and many biodiverse ecosystems are in poorer countries. This paper synthesizes the issues and proposes a research agenda, which includes improving the measurement and accounting of natural capital, improving valuation techniques and theory to provide greater guidance as to the ‘optimum’ biodiversity, and developing our understanding of the merits of different alternatives for government intervention to reduce biodiversity loss.

Item Type: Article
Official URL: http://oxrep.oxfordjournals.org/
Additional Information: © 2012 The Authors
Library of Congress subject classification: G Geography. Anthropology. Recreation > GE Environmental Sciences
H Social Sciences > HC Economic History and Conditions
Journal of Economic Literature Classification System: Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q1 - Agriculture > Q10 - General
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q2 - Renewable Resources and Conservation > Q20 - General
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q3 - Nonrenewable Resources and Conservation > Q30 - General
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q50 - General
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q57 - Ecological Economics: Ecosystem Services; Biodiversity Conservation; Bioeconomics
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q58 - Government Policy
Sets: Research centres and groups > Grantham Research Institute on Climate Change and the Environment
Collections > Economists Online
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 22 Oct 2012 08:45
URL: http://eprints.lse.ac.uk/46894/

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