'You will only treasure what you can measure.'

Does economic valuation make nature more visible and hence lead to better decisions for nature conservation?

New Economy of Nature: Nature Capital and Biodiversity

Supporters of valuation of nature argue that putting an economic value on ecosystem services – such as regulation of the hydrological regime or carbon storage in vegetation and soils – enhances awareness of the impacts of human consumption and investment decisions on nature. This, so the argument goes, would ensure that nature conservation is accorded higher priority in political decision-making. Pavan Sukhdev, leader of the TEEB study (The Economics of Ecosystems and Biodiversity), refers to this line of argument when he says that “the economic invisibility of nature must end”. This is based on the assumption that nature is being destroyed because economic decision-making is based on economic values and that consequently, decision-makers fail to see the value of the functions being performed by nature if these are not expressed in economic terms.

Furthermore, supporters of the valuation of nature claim that economic valuation not only helps people see nature as a scarce resource but that it also enables them to understand the role of nature conservation in preserving this 'scarce resource'. For example, it is said that economic valuation "can ensure that we as a society use our resources 'sparingly' and with an awareness of their scarcity", and that economic valuation can incentivise consumers, producers and public policy-makers to conserve nature.

It’s not quite like that. Nature has an intrinsic value.

Economic valuation is based on the assumption that nothing has value unless it benefits humans in some way. The fact that nature has an intrinsic value is ignored.

Nature cannot be fully measured

Furthermore, it is unclear who should decide which ecosystem functions are assigned an economic value – and which are not. Who determines for which functions of nature such a valuation is too expensive, too methodologically complex or too uncertain? But if certain functions are not measured in economic terms, they remain invisible in the economic valuation process. This selective measurement also affects both the overall functioning of natural habitat and the functions whose importance we do not yet appreciate. The problem is that economic valuation can capture only a small segment of nature’s complex habitats and ecosystem functions. Supporters of economic valuation, however, are rarely open about this limitation. They pretend that it is possible to calculate an economic value for the whole of nature.

Economic valuation undermines democracy

Furthermore, economic valuation of nature has consequences for democracy: it represents part of the growing trend for political decisions to be based – at least on the surface - on economic parameters. The problem with this is that the general public are unlikely to be in a position to evaluate the underlying assumptions and calculations, and these assumptions and computational principles are often not disclosed.

Methodological issues have not been clarified

More than 30 years after the first tools for calculating the economic value of nature were introduced (e.g. to determine the area to be rehabilitated as compensation for the destruction of protected wetlands in the USA), many of the methodological approaches remain controversial and fundamental questions are still unresolved. Geographer Morgan Robertson, for example, points out that the economic valuation of nature demands of the natural sciences a knowledge of ecosystem services that they cannot provide without controversy. This is because there are still major gaps in our knowledge of the complex relationships within and between natural habitats.

Political decisions are not necessarily based on rational economic principles

Finally, the questionable assumption that nature is being destroyed because of a lack of tools for making its economic benefits visible is based on the theoretical ideal of homo oeconomicus (see also our publication "The New Economy of Nature", PDF). This ideal assumes that in real life, policy decisions about the conservation or destruction/overuse of nature are based solely on consideration of factual information. The large number of infrastructure projects that go ahead despite the fact that they do not make economic sense exposes the fallacy of this assumption. This demonstrates that economic arguments often play only a limited role in political decision-making (In: Tools for what trade? Analysing the Utilisation of Economic Instruments and Valuations in Biodiversity Management, PDF).

The English journalist George Monbiot highlights this by citing an example from the TEEB study:

The TEEB for Water and Wetlands study calculates the economic benefits of mangroves in Southern Thailand for coastal protection and local fish nurseries. It contrasts this with the economic benefit of commercial shrimp farming, which destroys mangroves. The TEEB study describes the situation as if a policy decision in favour of commercial, export-oriented shrimp farming could have been prevented if policy-makers had been aware of the economic value of the multi-facetted ecosystem services of the mangrove swamps.

Monbiot contradicts this argument, pointing out that knowing the price does not alter local power relationships. Even if we didn’t have a number to slap on them, we’ve known for centuries that mangrove swamps are of great value for coastal protection and as breeding grounds for fish. But this has not stopped people from bullying and bribing politicians to let them turn these forests into shrimp farms. If a hectare of shrimp farms makes $1,200 for a rich and well-connected man, that can count for far more than the $12,000 it’s worth to downtrodden coastal people. Knowing the price does not change this relationship: again, it’s about power.’

In short, then, the economic valuation of nature does not change the fact that some stakeholders have privileged access to decision-makers and therefore more influence on political decisions that lead to the destruction of nature. Assigning an economic value to nature does not make it more visible but merely puts a price on destruction and overuse[1]. In combination with instruments such as compensation credits, the economic valuation of nature makes it possible for companies to internalise some environmental costs – their goal, however, is not that the prices of their products tell the ecological truth but that they obtain planning certainty for construction projects in protected or particularly species-rich habitats. Economic valuation is the tool that helps provide this planning certainty.

This article is part of our dossier "New Economy of Nature".



[1] Jutta Kill: Economic Valuation and Payment for Environmental Services. Recognizing Nature's Value of Pricing Nature's Destruction?; 2015. E-Paper Heinrich Böll Foundation.