The Economics of Biodiversity

• Author: C. Baird Brown
• Pages: 377-391

Chapter 22

The Economics of Biodiversity

by C. Baird Brown

I. Introduction

As our ecological understanding has deepened, we have become accus-

tomed to thinking that human activity is part of a larger biological environ-

ment. We have recognized that the human occupation of the earth has had

and is having profound and often harmful effects on systems and species that

collectively constitute that environment. We have begun to try to manage

our economic activities to limit their harmful effects on the environment,

and we have begun to imagine a human culture that lives within its solar and

geothermal energy budget and in balance with the biosphere.

As our ecological understanding has grown, it has sometimes been tempt-

ing to think that economic development is the enemy. It is easy to forgetthat

preservation of the biological environment and sustaining biodiversity are

human activities that take place in a larger economic environment. Under-

standing human systems and motivations is necessary to preserving biodi-

versity. Accordingly, the ecological and economic aspects of our actions

must be considered simultaneously. Moreover, biology provides useful

models for understanding economic behavior and economics provides use-

ful insights into sustaining biodiversity.

This chapter will focus upon designing the rules to promote sustainable

economic activity, with a particular focus on sustaining biodiversity. It first

discusses the nature of economic activity and of sustainable economic activ-

ity. It contrasts self-organizing and managed economic activity and exam-

ines the incentive structure for both types. The incentives of organizations

(managed activity) can be modified by partnerships between different kinds

of organizations, and appropriate behavior can be encouraged through tar-

geted funding mechanisms. Incentives in markets (self-organizing activi-

ties) can be modified by changing property rights. In each case economic ac-

tors will be led to preserve and enhance biodiversity.

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