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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
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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