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The Price is Right?

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Abstract:

Consider the following example: town officials in a small town in rural Washington State have to make a choice; they can allow clear cutting of an old growth forest as has been requested by a local timber-company, or they can allow the forest to persist. The question is, which option is more valuable to the town in the long run. These kinds of questions represent a practical dilemma for economists because their craft consists of elaborate frameworks that use the market to realize market value for virtually anything that is exchanged in markets. But, what about things that are not exchanged in markets? Is it possible that the value of the forest simply is given by the market price of extracted lumber? If that were the case, then it most likely would be economically beneficial simply to allow clear cutting rather than allow the forest to persist. But, what if there is something more to this forest with regard to value? And if so, how do we value it? This last question is the topic of this chapter—the ways in which economists value nature.

In the valuation literature two approaches are most commonly cited when defining frameworks for valuing nature; the biocentric and the anthropocentric. Biocentric values are directly linked to ecological criteria and deep ecology where it is argued that species have intrinsic value and intrinsic rights. As a result, species and other natural things have intrinsic rights to exist and prosper, independent of whether human beings derive satisfaction from them. In essence this approach puts all living creatures on a moral plane comparable to that of humans. Economists usually do not subscribe to the biocentric approach and since the focus of this chapter is on economic value we do not discuss this approach further.

Anthropocentric values are directly based on utilitarianism and create what we have called economic value. According to this perspective, human satisfaction is the source of all value, and as such species or ecosystems only have value as they fulfill human wants and needs. In many cases those wants and needs are revealed by the market, creating a market price and ultimately market value. Nature and nature's goods and services frequently are considered non-market goods, since they are rarely exchanged in markets. As a result, economists cannot only directly rely on the market to provide valuation of nature but must rely on indirect anthropocentric valuation methods.

Document Type: Research Article

DOI: http://dx.doi.org/10.5848/CSP.0891.00011

Publication date: January 1, 2006

More about this publication?
  • Art, Ethics and Environment: A Free Inquiry Into the Vulgarly Received Notion of Nature
    The aim of this collection is to bring together different trends in thinking about nature and value that are distinctive of these changing moods in art and philosophy and to juxtapose them with some other ways of thinking about these issues, such as economics and religion. The authors include Holmes Rolston III, Antje von Graevenitz, Roger Pouivet, Eric Palazzo and Emily Brady. The essays and artworks in this volume derive from the conference Nature in the Kingdom of Ends held in Selfoss, Iceland, on June 11th and 12th 2005.
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