Conflicts and choices in biodiversity preservation

Decisions about endangered species reflect the values, perceptions, uncertainties, and contradictions of the society that makes them. The defining limitation of the economics of biodiversity preservation is the lack of a common denominator or natural anchor. As a society, we have not even come close to defining what is the objective. What is biodiversity? In what units is it to be measured? By contrast, even such a morally loaded field as health economics has at least adopted, in practice, a common denominator of human lives saved as a natural anchor. Until we as a society-in the United States narrowly, and more broadly on the planet Earth-decide what is our objective, all the scientific data imaginable will not help economists to guide policy. At the end of the day, all the brave talk about "win-win" situations, which simultaneously produce sustainable development and conserve biodiversity, will not help us to sort out how many children's hospitals should be sacrificed in the name of preserving natural habitats. The core of the problem is conceptual. We have to make up our minds here what it is we are optimizing. This is the essential problem confounding the preservation of biodiversity today.

We start the paper by showing, in a simple constrained optimization problem, exactly where biodiversity appears in a plausible objective function. Then we indicate for this version the basic properties of a solution. The relevant solution concept is cast in the form of a cost-benefit ranking criterion. We then use this ranking criterion, and this theory, as a vehicle for introducing a normative discussion about the economics of biodiversity preservation. Next, we turn to a positive "revealed preference" analysis of the economics of biodiversity preservation, as acted out in U.S. federal and state government decisions about the preservation of species under the Endangered Species Act. We conclude with a discussion of how economic analysis can help to uncover difficulties in the objectives and in the decision-making process about biodiversity.

The Economics of Diversity Preservation

The analytics of the preservation of biodiversity is plagued by the absence of a workable cost-effectiveness framework, within which, at least in principle, basic questions can be posed and answered. Current approaches to endangered species protection seem almost completely lacking in theoretical underpinnings that might...