Choices of ecosystem capital without discounting and prices.
In the last decade, neo-classical economists have used the Consumption-Growth Based Utility (CGBU) framework to suggest an appropriate discount rate for eco-system capital. The CGBU framework, being based on the simplicity and single-valued nature of man-made capital, is subject to many limitations. Three general limitations of the framework, irrespective of its use for man-made capital or ecosystem capital, paradox of consumption growth, expectations' insensitive utility specification, and insensitivity to the nature of returns, are discussed. With respect to its use for ecosystem capital, the framework has two limitations: ecosystems cannot be commoditized and ecosystem capital satisfies differentiated needs, and, hence, gross substitution between different components of ecosystem capital or between ecosystem capital and man-made capital is not possible. Therefore, the rate of discount for ecosystem capital suggested on the basis of the framework is arbitrary. In the context of international security, choices of ecosystem capital are similar to the choices of military decisions. Similar to military decisions, ecosystem choices should be made without discounting and prices. The neo-classical framework does not have appropriate tools for such decision analyses, and other streams of economics, specifically post-Keynesian economics, may assist decision-makers in analysing ecosystem choices without prices and discounting.
Kant
Shashi
S
Faculty of Forestry, University of Toronto, Toronto, Ontario, Canada. shashi.kant@utoronto.ca
D003247:Conservation of Natural Resources / Q000191:economics*; D003661:Decision Support Techniques; D017753:Ecosystem; D004777:Environment; D006801:Humans; D008889:Military Personnel; D018803:Models, Economic; D011050:Policy Making; D012637:Security Measures