In Introducing tobacco to civilization, Bob Newhart imagines a telephone conversation between Sir Walter Raleigh and his London office.
Walt explains that his latest discovery is a leaf. The guys in the office know he’s nuts, so they kindly tell him that in England they have quite a few leaves already. But Walt explains that in the American colonies, they’ve got this leaf they shove in their mouths and set fire to, or stick up their noses and sneeze out again.
The guys think this is hilarious, until Walt tells them he’s bought 80 tons of the stuff. Plus some magic beans called coffee you can boil to drink along with it.
Shortly after Raleigh’s death in 1618, Tulip Mania swept Europe, in what some economic historians call the first speculative bubble. The price of a single bulb reached 10 times the yearly wage of a skilled craftsman, before the bubble burst, which as John Kenneth Galbraith explains in A short history of financial euphoria, they always do.
Anyway, the idea of paying for what nature provides wasn’t weird, and is still the basis of trade in agricultural produce of course . So, in today’s service economy, why not pay for the services provided by biodiversity and ecosystems? Apart from food, there’s clean water, genetic resources, and climate regulation, among many others.
But how do you pay nature? And how can we reverse the worrying loss in global biodiversity?
Voluntary agreements called Payments for Ecosystem Services are one way. In a PES, a user or beneficiary of an ecosystem service pays farmers, foresters, or fishers for the additional costs of biodiversity and ecosystem service conservation and sustainable use, over and above whatever is required by any existing regulations.
There are now over 300 national PES worldwide, mainly concerning biodiversity, watershed services, carbon sequestration and landscape beauty, channelling over $6.5 billion, plus many smaller scale programmes. PES-like mechanisms are also being explored on an international scale through intitiatves like the Clean Development Mechanism and REDD+ (Reducing Emissions from Deforestation and forest Degradation).
A new OECD publication, Paying for Biodiversity, looks at the issues in detail, notably criticisms of the cost-effectiveness of PES.
The people in Safaa Fathy’s film Dardasha Socotra about an island off the coast of Yemen love talking (“Dardasha” means sweet conversation). They debate knowledge versus intuition, the interpretation of dreams, the meaning of death, and respect for life. One of the fishermen in the film talks about how God has blessed Socotra with mountains, rivers, and bees.
You might find such a statement quaint, but the teams of scientists who produced the third edition of the UN’s Global Biodiversity Outlook would agree with the fisherman’s reasoning.
Economics teachers the world over would applaud too. Bees are a favourite example of an “externality” – something that has a value not captured in the market price of goods. In this case, bees pollinate flowers and allow crops to flourish without getting paid, although this example is under threat from industrialised swarms hired out to orchards and other clients.
Today, the bees themselves and the ecosystems they support are threatened by environmental degradation due to human actions. And unfortunately massive loss of biodiversity is becoming increasingly likely according to the Outlook, and with it, a severe reduction of many essential services to human societies as well.
The report warns that important ecosystems including the Amazon forest, coral reefs and many inland waters are shifting to alternative, less productive states from which it may be difficult or impossible to recover.
This despite the target set by world governments in 2002 “to achieve by 2010 a significant reduction of the current rate of biodiversity loss at the global, regional and national level”. In fact, none of the 21 subsidiary targets accompanying the overall 2010 biodiversity target has been achieved globally, although some have been achieved partially or locally. Ten of 15 headline indicators developed by the Convention on Biological Diversity show unfavourable trends.
There is some hope though. Forward-looking scenarios developed for the report suggest that there are greater opportunities than identified in earlier assessments to address the biodiversity crisis while contributing to other social objectives, for example, by reducing the scale of climate change without large-scale deployment of biofuels and accompanying loss of natural habitats.
See this student guide to Superfreakonomics for an example of bees as an externality.
Pr May R. Berenbaum warns the US Congress of the dire consequences for agriculture, food security and quality of life of colony collapse disorder and pollinator decline