The Common Pitfall of Valuing

Ecosystems
Tomohide Yasuda
Department of Environmental, Earth
and Ocean Sciences
University of Massachusetts at Boston

Austrian Scholars Conference,

March 12-14, 2009
Ludwig von Mises Institute,
Auburn, Alabama
The Nature Article by Costanza et al. (1997)
Nature 387, 253 - 260 (15 May 1997)

“The entire biosphere = US$16-54 trillion/year” !

ISI Web of Knowledge Citations
Total: 1257 citations
No. of citations

Feb. 2009

Year

Robert Costanza
University of Vermont
Content

A. The article’s fundamental flaws

B. Why do we care?
A. The Article’s Fundamental Flaws

• Objective vs. subjective value

• Willingness-to-pay ≠
Total replacement costs
• Double counting
Costs to Totally Replace the
17 Ecosystem “Services”
of Their Choice
• Gas regulation • Pollination
• Climate regulation • Biological control
• Disturbance • Habitat/refugia
regulation • Food production
• Water regulation • Raw materials
• Water supply • Genetic resources
• Erosion control • Recreation
• Soil formation • Cultural
• Nutrient cycling
*Services
• Waste treatment
 Functions
Objective vs. Subjective Value
• An ecosystem’s value depends on:
– How much people actually pay for it.
– How many people pay for it.
– How much these people can afford.
• An individual’s valuation of an
ecosystem is unique.

www.ragionpolitica.it/testo.578.html

–Carl Menger–
Willingness-to-pay ≠
Total Replacement Costs

Costanza et al. (1997)

Willingness-to-pay ≠
Total Replacement Costs
∞

Costanza et al. (1997)

Willingness-to-pay ≠
Total Replacement Costs

Costanza et al. (1997)

Costanza et al.’s Arbitrary and
Capricious 17 Ecosystem “Services”
• Gas regulation • Pollination
• Climate regulation • Biological control
• Disturbance • Habitat/refugia
regulation • Food production
• Water regulation • Raw materials
• Water supply • Genetic resources
• Erosion control • Recreation
• Soil formation • Cultural
• Nutrient cycling
*Services
• Waste treatment
 Functions
Double Counting of
Ecosystem “Services”
• Gas regulation • Pollination
• Climate regulation • Biological control
• Disturbance • Habitat/refugia
regulation • Food production
• Water regulation • Raw materials
• Water supply • Genetic resources
• Erosion control • Recreation
• Soil formation • Cultural
• Nutrient cycling
• Waste treatment
B. Why Do We Care?
• Political use of the estimates
“Societies need to overhaul their
environmental and economic policies,
for example, by taxing the loss of
wetlands, to avoid facing a bill of this
magnitude.” (Costanza et al. quoted in
Science, 1997)
*Robert Costanza’s life-time funding: $21,760,265
Funding from government: $19,716,215
(=90.6% of total)
Why Do We Need to Criticize?
• The journal Nature decided not to
publish follow-up to the Costanza et al.
article.
 The readers of the journal have not
been exposed to the article’s
criticism.

Lack of communication
between scientists and
real economists
Consequences of the Political
Use of the Wrong Estimate
• Coercive misallocation of
individuals’ resources away
from ecosystems they value
• Prevention of technological
advancement