Markets and Biodiversity

I review the nature of biodiversity as an economic commodity, and discuss the extent to which and mechanisms via which markets can be used to conserve biodiversity. 1 Markets for Biodiversity Biodiversity is being destroyed at a rate which is paralleled only by the rates of destruction in historical episodes such as the extinction of the dinosaurs. Today, however, the driving forces are mainly human economic and social organizations. In particular, markets, and the incentives which they generate, are playing a central role. This observation leads one naturally to question whether there is a basic antipathy between market forces and biodiversity. Can markets in fact capture the social value which resides in biodiversity? Do they provide incentives to maintain and develop this value? Or do we need di¤erent forms of economic and social organization to maintain the earth’s biological resources intact? In this paper I present a preliminary review of these issues, trying to classify biodiversity as an economic commodity, understand how it ...ts into the economic system and assess the actual and potential adequacy of market economic systems as institutions for managing the resources of biodiversity. The earth’s biodiversity is a characteristic of its biological resources: by biological resources I mean its total resources of naturally-occurring living entities, such as plants, animals, ...sh, insects, birds, bacteria, etc.. Biodiversity is a measure of the genetic variance contained within these biological resources: it increase with the number of distinct species. Many populations have critical masses or thresholds: their growth functions are such that once the population falls below a critical number the species is doomed to extinction. So biodiversity is not related simply to the total quantity of biological resources, but to the distribution of these relative to the threshold levels of the populations of the species represented. If all species are well above these levels, an increase in biological resources does nothing for biodiversity. On the other hand, if some are at or near these threshold levels, an increase in biological resources focused on these populations will increase or maintain biodiversity. I make this point so that it is clear that more forests, or more cod, or more tigers, are not per se bene...cial to biodiversity: this depends on populations relative to thresholds. The issue, then, is whether markets help or hinder the preservation of biodiversity. Certain cases come to mind immediately in which markets do in a limited sense place an economic value on biodiversity. Examples of these include 2 ecotourism, and in general tourism based on environmental assets such as coral reefs, unspoiled scenery, unique environments, etc. 2 biological prospecting InBio, Shaman Pharmaceuticals, and other attempts to exploit traditional knowledge of the medical properties of plants and insects. 2 ...sheries and forestry. Each of these is an example of a market in which one trades goods or services produced from biodiversity. But do these markets provide adequate incentives for the preservation of biodiversity? Do the incentives that they provide cover all important aspects of biodiversity?