The New Economy of Nature

The New Economy of Nature

Economists once wondered why diamonds had a higher market value
than water, when it is water that humans depend on for survival. As
we know now, it’s because of a concept termed ‘supply and demand.’
Yet at the end of the 20th century, with more than 3 million people
dying every year of diseases spread by water, including as many as
900 Americans, the demand for clean, safe water may very well edge
out the demand for diamonds.

In 1997, New York City’s natural filtration system–a system that
had been successfully delivering pure, filtered water for almost a
century–was in trouble: Byproducts of excessive new developments,
farming and forestry were contaminating the water. But instead of
spending $6-$8 billion on an artificial water filtration plant (not
to mention $300-$500 million in yearly maintenance expenses), city
officials voted to spend $1.5 billion to protect the watershed.
‘The agreement was a milestone–a major government body had acted
as if an ecosystem were worth protecting for the economic benefits
it gives society,’ write Gretchen C. Daily and Katherine Ellison in

In response, other governments around the world began to weigh the
costs of building plants against the costs of conserving
watersheds. In the process, ‘they were learning how ecosystems . .
. can be seen as capital assets, supplying human beings with
services that sustain and enhance our lives.’ This way of
appreciating nature could have a phenomenal impact on how we use
it. Since humans have traditionally considered services provided by
nature to be free, and in turn neglected to appropriate economic
value to these assets, many people have had little incentive to
protect them.

As economists and ecologists begin to work together to solve
environmental problems, assigning financial worth to our natural
assets just may be the ticket to ensuring their protection: The
owners would be motivated to protect their financial investments,
and users and polluters would be motivated by taxes and subsidies.
Richard Sandor, an environmentally minded financial innovator,
summed it up: ‘Without prices being set, nature becomes like an
all-you-can-eat buffet–and I don’t know anyone who doesn’t overeat
at a buffet.’
–Rebecca Wienbar
Go there>>

In-depth coverage of eye-opening issues that affect your life.