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Economic Theory for the Environment

Essays in Honour of Karl-Göran Mäler

Edited by Bengt Kriström, Partha Dasgupta and Karl-Gustaf Löfgren

Karl-Göran Mäler’s work has been a mainstay of the frontiers of environmental economics for more than three decades. This outstanding book, in his honour, assembles some of the best minds in the economics profession to confront and resolve many of the problems affecting the husbandry of our national environments.
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Chapter 5: Biodiversity Management under Uncertainty: Species Selection and Harvesting Rules

William Brock and Anastasios Xepapadeas


5. Biodiversity management under uncertainty: species selection and harvesting rules William Brock and Anastasios Xepapadeas 1 INTRODUCTION The significance of biodiversity and the value of resource conservation to society is an issue that has drawn considerable attention both from the economists’ and ecologists’ point of view.1 One of the major questions associated with this issue is the value of biodiversity loss due to anthropogenic influences. There is a high degree of uncertainty associated with species diversity, the rate at which diversity is lost and the implications of such loss, which makes the analysis of the problem extremely complicated. Given, however, the significance of the issue, there is an ever-increasing need to develop systematic models capable of dealing with some aspects of biodiversity. The purpose of this chapter is to develop a model for analysing biodiversity management. In particular we consider the problem of an ecosystem manager or planner that seeks to allocate a given amount of land to different species. Uncertainty is reflected in the stochastic growth rates of the species biomasses. We associate a total economic value with each species in the landscape. This value includes components such as ecological, genetic, social, economic, scientific, educational, cultural, recreational and aesthetic (Pearce and Perrings 1995). More compactly, biodiversity values can be classified in four broad categories (Ehrlich and Ehrlich 1992, Daily and Ehrlich 1995): (i) existence values, (ii) aesthetic values, (iii) direct economic values or direct use values, and (iv) nonsubstitutable ecosystem services. Direct economic values are mainly associated with harvesting...

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