Erasmus Journal for Philosophy and Economics,

Volume 4, Issue 2,
Autumn 2011, pp. 130-134.
http://ejpe.org/pdf/4-2-br-10.pdf

Review of The economics of ecosystems and biodiversity:

ecological and economic foundations, edited by Pushpam
Kumar. London: Earthscan, 2010, 400pp.

JOHN LIVERNOIS
University of Guelph

This book provides an encyclopedic review and synthesis of the

literature on the economics of ecosystems and biodiversity. It is a
must-have reference book for anyone doing valuation studies of
environmental resources and for instructors and scholars in this
area. In addition to what one would expect of any exhaustive review of
the economic valuation literature, it provides appendices containing
compilations of more than a thousand monetary values gleaned from
the literature (more on this below), and a number of chapters linking
biodiversity, ecosystems, and ecosystem services to one another, to
socio-cultural contexts, to measurement, and to economics.
The book has its roots in a declaration by the environment ministers
of the G8 plus five major newly industrializing countries in a meeting
that took place in 2007. The ministers called for a study that would
evaluate the “global economic benefit of biological diversity, the costs
of the loss of biodiversity and the failure to take protective measures
versus the costs of effective conservation”.1 The result was a major
research undertaking involving a huge international team that is hosted
by the United Nations Environment Program and receives financial
support from the European Commission and a number of countries.
This book is one part of the culmination of that undertaking. It provides
the technical and scientific basis for four companion works: a book
containing recommendations for national policy-makers, another for
local and regional policy-makers, another for business leaders, and an
internet resource for citizens (www.teebweb.org).
There are seven chapters in the book, each written by a different
team of researchers; in addition, there are three appendices also written
by different teams of researchers. Finally, there is a preface written

1
See: http://www.teebweb.org/AboutTEEB/Background/HistoryofTEEB/tabid/1247/Default.aspx

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by the study leader Pavan Sukhdev, and an introduction written by

Pushpam Kumar, the book’s editor. Despite the large number of authors
(12 coordinating lead authors, 20 lead authors, and more than 50
contributing authors) the book is cohesive, organized, and flowing.
This must not have been an easy task.
Chapter 1 discusses the challenges of integrating the disciplines of
economics and ecology. As the introductory chapter, it also presents
the framework and backbone for thinking about the linkages between
ecosystems and the economy to be used throughout the book. Chapter 2
discusses the current understanding of the relationships between
biodiversity, the structure and functioning of ecosystems, and the
provision of ecosystem services. Chapter 3 explores the strengths
and weaknesses of available measures and indicators of biodiversity and
ecosystem status and concludes that most of the available indicators are
not useful for economic valuation studies per se. Chapter 4 discusses
concepts of valuation including economic valuation. Chapter 5 provides
a review of the literature on economic valuation methods. Chapter 6
discusses the issues surrounding the choice of discount rate to use in
valuation. Finally, Chapter 7 summarizes and synthesizes the previous
six chapters.
I will declare at the outset that I am a mainstream environmental
economist. Therefore, the heart and soul of the book for me are in
Chapters 5 and 6, “The economics of valuing ecosystem services and
biodiversity” and “Discounting, ethics and options for maintaining
biodiversity and ecosystem integrity”, respectively. These chapters
present excellent summaries of the state of the art and provide a
thorough and concise review and synthesis of the literature. The authors
cover the usual topics such as valuation methods (direct, revealed,
and stated preference approaches), benefits transfer and scaling-up
issues, the Ramsey discounting approach of growth theory, and
implications for discounting of uncertainty and time frame. At the same
time, the authors do not shy away from tackling the most troubling
issues and obstacles in valuation such as preference uncertainty, the
problem of valuing ecosystem resilience, dealing with option value and
valuation in developing economies. There are not answers to all
problems, but it is important that the limitations of valuation are clearly
laid out and understood by practitioners and stakeholders.
In economics, value is an anthropocentric concept. Thus, ecosystems
and biodiversity have value because of their worth to humans. And this

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makes it possible to operationalize valuation studies: one can estimate

the value of an ecosystem service, for example, by looking to the
value humans place on it, revealed either through behaviour in market-
related activities or through questionnaire/stated-preference studies.
Economists are quick to point out that this is the methodological
starting point for valuation studies. This book does this too, but goes
well beyond merely stating the assumption. For example, the Chapter 5
authors state that “[t]his valuation approach […] should be used
to complement, but not to substitute for, other legitimate ethical
or scientific reasoning and arguments relating to biodiversity
conservation” (p. 187). And Chapter 4 provides an illuminating review
of alternative approaches to the origins and concept of value.
One of its key messages is that one’s concept of the value of nature
“functions as a system of cultural projection which imposes a way of
thinking and a form of relationship with the environment, a particular
notion of property and ownership” (p. 152). As well, it “can serve as a
tool for self-reflection which helps people rethink their relations to the
natural environmental and increased knowledge about the consequences
of consumption choices and behaviour for distant places and people”
(p. 152). The chapter points out that the anthropocentric approach
really views nature and human beings as being distinct from each other
and reveals a “[…] neglect of intrinsic values in economics—values of
nature simply for the sake of its existence, independent of any current
or future usefulness to humans” (p. 161). The authors say that the
question of whether or not nature has or should have intrinsic value is
related to the way in which we perceive human-nature relationships.
The authors distinguish two alternative approaches to eliciting
values for nature; the first is the stated preference or contingent
valuation approach. Implicitly, this approach assumes that people have
pre-existing and known values for nature that just need to be drawn out.
Moreover, the value of nature is then the aggregation of individual
values. On the other hand, what they call the “deliberative or social
process” approach, in which values emerge from a communicative social
process, implicitly assumes that individuals do not have pre-existing
and known values for nature; nonetheless, these values evolve during
the process of social deliberation. In this approach, value is not the
aggregation of individual values but is a group-determined value.
This approach, however, has been criticized for being open to influence
by power relations in social settings.

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Though the book justifiably calls attention to the potential negative

implications of the economic approach to valuation, it concludes that it
clearly has considerable appeal as a decision-making and awareness
mechanism. The authors concede that it is quite possible that “in the
long run this approach actually will lead to the internalization
of the environment into western thinking and economics” (p. 164).
In addition, there are a number of practical reasons to view valuation as
socially useful. As Pavan Sukhdev points out in the preface, valuation
can (1) serve as a tool for self-reflection, (2) it makes explicit what
would otherwise be implicit valuations made by policy-makers, and
(3) demonstrates the value that nature delivers to society in a unit of
account everyone understands and therefore is an important vehicle for
achieving policy changes that properly take into account the importance
of nature.
Pavan Sukhdev summarizes succinctly the philosophical approach to
valuation adhered to throughout the book:

[W]e should acknowledge the weaknesses of valuation methodology

[…] (due to insufficient understanding of ecosystem dynamics and
of biodiversity’s role in ecosystem resilience, valuing single benefits
one at a time rather than an ecosystem as a whole, not accounting
for the effects of climate change on the nature and extent of
ecosystem services and so on) but we should not shy away from
stating best available estimates of value using the most appropriate
of reviewed methodologies, strictly to help decision makers to make
better informed choices. This is because the alternative is in fact
ethically worse: to permit the continued absence of prices to seep
even further into human consciousness and behaviour as a ‘zero’
price, and thus no value (p. xxiii).

Some might take exception to this view and argue that putting a
wrong price on nature (which is a real possibility given all the
hindrances to valuation listed above) is not likely to lead decision
makers to make better choices. On the contrary, it could lead to bad
choices. While there is some merit in this viewpoint, I would tend to
agree with Sukhdev. Refusing to be explicit and therefore accountable
about valuation means we are leaving it to others who make decisions
about resource allocation that will affect the natural environment to
impose their own preferences and values on the decision-making
process.
As I mentioned earlier, one of the Appendices contains a valuable
summary of a data base created as part of the study of the monetary

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values found in the literature for 11 main biomes/ecosystem-complexes

(open-ocean, coral reefs, coastal systems, coastal wetlands, inland
wetlands, rivers and lakes, tropical forests, temperate and boreal
forests, woodlands, grasslands and polar and high mountain systems).
The Appendix refers the reader to www.teebweb.org for the complete
database, but at the time of writing, I was unable to find it. Nevertheless,
the Appendix provides a comprehensive summary of monetary values
screened from hundreds of publications. Combine this with the
information in Appendix 2 which provides references to the published
papers carefully categorized by the type of ecosystem service and
valuation technique and you have an impressive and valuable collection
of information.
The efforts taken in this volume and, indeed in the entire project,
to bring together all that we know about the value of biodiversity and
ecosystems to economies are to be highly commended. The information
is up-to-date, state of the art, balanced, and exhaustive. This book
is also big, both qualitatively and quantitatively. It presents an
overwhelming amount of information about biodiversity and ecosystem
values. Yet it also shows us how little we really know yet, and how much
more work needs to be done.

John Livernois is professor and chair of economics at the University of

Guelph. He received a BA (with honours) from the University of Toronto
(1976), and MA (1978) and PhD (1984) from the University of British
Columbia. His research interests are in the economics of natural
resources and the environment with a focus on issues related to
taxation, regulation, and enforcement. He has published scholarly
papers in many international journals, has served on the editorial
boards of the journals for both the American Association of Resource
and Environmental Economists (AERE) and the Canadian Economics
Association (CEA/ACE), and co-authored the textbook Mathematics for
economics (MIT Press, 2001).
Contact e-mail: <live@uoguelph.ca>

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