6 - Biodiversity loss and the economics of discontinuous change in semiarid rangelands  pp. 190-210

Biodiversity loss and the economics of discontinuous change in semiarid rangelands

By Charles Perrings and Brian W. Walker

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One of the main biological challenges to the economics of natural resource utilisation relates to the fact that almost all dynamic resource models are now being shown to ignore those properties of natural systems which most affect their evolution over time. The economic utilisation of natural resources involves the exploitation of ecological systems that turn out to be highly nonlinear, and characterised by discontinuous and sometimes irreversible change around a range of “thresholds.” Yet most resource models either implicitly or explicitly assume the continuity, differentiability and reversibility of the underlying ecological functions. It has long been recognised that negative environmental externalities compromise the concavity–convexity conditions for social optima (cf Baumol and Bradford 1972; Starrett 1972), but the problem raised by the complexity of ecological systems goes well beyond the nonconvexity of the social possibility set. Discontinuities in the evolution of economically exploited ecological systems imply discontinuities in the economic system. That is, if economic pressure on any ecosystem causes it to “crash” – to undergo some fundamental and irreversible internal reorganisation – then the economic activities concerned will be similarly disrupted. Since many of the sources of discontinuous change in economically important ecological systems lie in the alteration of species diversity, this challenge is raised in a particularly acute way in the biodiversity problem.