Economic Values of

Diversity
 Abstract
In order to get the attention of policy makers, conservation
policies must show the economic values of biological resources.
Economists have devised different methods in assigning values
for biodiversity. These values may be set as either direct or
indirect. Direct values, including consumptive use value and
productive use value, are placed on biological resources that
provide direct enjoyment and satisfaction to consumers. On the
other hand, indirect values which include non-consumptive use,
option, and existence values are those that deal with the
functions of the ecosystem wherein biodiversity is reflected at a
larger scale.
 Introduction
• Biological resources are the
physical manifestation of
biodiversity

• Conservation of these
resources is one of humanity’s
priorities

• Government intervention is
crucial in making policies for
the prevention of the over-
exploitation of these biological
resources
Type to enter a caption.
 Economics as a Tool in
Conservation Biology

• Economists have devised different methods for assigning

values for biological resources

• Why is there a need to demonstrate the value of biological

diversity in economic terms?
 Economics as a Tool in
Conservation Biology

• Policies must show the economic value of biological

resources to compete for the attention of government
decision-makers
 Classification of Values of
Biological Resources

• Direct Values - Consumptive Use Value & Productive Use

Value

• Indirect Values - Non-consumptive Use Value, Option

Value, & Existence Values
 Direct Values of Biological
Resources

• Values placed on biological

resources that provide direct
enjoyment and satisfaction
to consumers

• Easily observed and

measured through pricing
Consumptive Use Value

• concerned with products

consumed directly, without
passing the market

• is the value placed on the

whole recreational experience
when it comes to activities like
hunting and sport fishing

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Consumptive Use Value
• Example:

• market price of 5kg salmon

represents only a fraction of
the value placed by the
individual on the whole fishing
experience

• Harvested biological resources

in Africa contribute greatly to
the locals in the form of food
without passing through the
market
Consumptive Use Value

• Can also be priced as if the

product were to be sold in the
market instead of direct
consumption

• Ex: Wild pigs harvested in

Sarawak, Malaysia are
estimated to have a market
value of about $100 million per
year
 Productive Use Value
• Assigned to commercially
harvested products (e.g. fish,
timber, medicinal plants, etc)
which can have a major impact on
national economies

• Only value reflected in national

income accounts

• Estimates are usually made at the

production end, not retail (ex:
production value of cascara in US
is $1 million per year compared to
the $75 million per year retail
value)
 Productive Use Value
• Can be derived from the
market demand curve for the
resources consumed

• Demand curve - schedule of

consumers’ willingness to pay
for various of the resource

• When close substitutes are

available - fairly flat demand
curve, PUV can be
approximated by market price
 Productive Use Value

• When close substitutes are not

available - “consumer surplus”
is higher than the actual
market price, productive use
value may be severely
underestimated
 Productive Use Value

• Market price is not always the accurate representation of

the true economic value of the resource

• Consumers may value resources differently compared to

producers (ex: California redwoods can be valued in terms
of scenic beauty or may be values as lumber products)
 Indirect Values of Biological
Resources
• Deal primarily with the
functions of ecosystems

• Not normally accounted in

national economic systems but
they far outweigh direct values

• Reflect biodiversity at a larger

scale (to society rather than to
individuals or corporate
entities)
 Indirect Values of Biological
Resources
• “Direct values often derive from
indirect values, because
harvested species of plants and
animals are supported by the
goods and services provided by
their environments”

• Species with no direct value may

indirectly support those with
consumptive and productive use
values by having important roles
in the ecosystem (ex: wild birds
limit the abundance of
caterpillars in commercial
plantations in Sabah)
 Non-consumptive Use Value

• Deals with environmental resources -

nature’s functions and services
(rather than goods) such as:

• Photosynthetic fixation of solar energy

and thereby providing the support
system for other species, maintaining
water cycles, regulating climate,
production and protection of soil,
absorption and breakdown of
pollutants, recreational (very
significant to tourism), aesthetic,
sociocultural, scientific, educational,
spiritual, and historical values of
natural environments
 Option Value
• Since the future is uncertain, a
safety net for biodiversity
should be considered to
prepare for unpredictable
events

• “Safety net” - maintaining as

many gene pools as possible

• Option value is concerned with

assigning a value to risk
aversion in the face of
uncertainty
 Existence Value

• Value attached to the

existence of a species or
habitat which humans have no
intention of ever using or
visiting

• Hope for future benefits

derived from these resources