Biological diversity, ecosystem stability and economic development

ECOLOGICAL ECONOMICS ELSEVIER

Ecological Economics 16 (1996) 191-203

Methodological and Ideological Options

Biological diversity, ecosystem stability and economic development Fraser Smith 1 Department of Biological Sciences, StanJbrd University, Stanford, CA 94305-5020, USA Received 16 January 1995; accepted 18 October 1995

Abstract It is clear from the scale of anthropogenic resource use that economic systems should be brought within biophysical limits as soon as possible. One might assume that this task is difficult because it would involve identifying these limits, knowing when and where they are breached, and allocating responsibility. However, an intimate understanding of the natural limits to economic development may not be necessary for achieving a biophysically sustainable economy. Certain measurable features of the natural world are intimately connected with overall biophysical integrity, one such feature being biological diversity. A growing body of ecological research gives compelling evidence that biodiversity confers stability on ecosystems by buffering them against natural and artificial perturbations, and that it increases system productivity. It is well known that the stability and productivity of ecosystems are fundamental components of the earth's biophysical integrity. Therefore, biodiversity should act as a measure of biophysical integrity and biodiversity conservation might provide a viable framework for policies that drive economic activity towards overall biophysical sustainability. Economic instruments to implement a biodiversity constraint would penalise economic activities that directly or indirectly cause biodiversity loss and favour those that conserve it. A biodiversity constraint would, of course, require new legal and institutional underpinnings. What makes a biodiversity constraint doubly attractive is that it would also conserve the potentially large economic use and option values of biodiversity itself, thus removing the need for separate measures for its conservation. Keywords: Biodiversity; Stability; Sustainability; Futures

1. Introduction

As the human population grows, so does its total impact on the world's biophysical systems (Vitousek

Present address: Decision Focus, Inc., 650 Castro Street, Suite 300, Mountain View, CA 94041-2055, USA.

et al., 1986; Holdren, 1991). Public concern about the increasing strain on natural systems is manifested in part in the form of political and other efforts to protect endangered natural populations and species, and to promote biodiversity conservation (World Conservation Monitoring Centre, 1992; World Resources Institute, 1992, 1994; Angier, 1994). This increase in public concern has come about because the consequences of current biophysical changes for

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human welfare are unknown and possibly highly detrimental. Of course, concern about species loss is almost as old as the notion of a species itself. The loss of species has, among other things, led to urgent calls to bring economic activity within biophysical limits (e.g., Ehrlich and Holdren, 1971). A biophysically sustainable economy would at least ensure a less uncertain future for people than an unsustainable one. Among the many difficulties in achieving this aim, two in particular stand out. The first is that defining and establishing biophysical limits, and knowing when particular kinds of human activity breach them, are very difficult tasks; the second is that a necessary conjunct to moving the global economy towards biophysical sustainability is a substantial increase in distributional equity, the political and economic barriers to which are formidable. Although ways are being found to steer local economic development along paths that are more biophysically sustainable than in the past, the intertwining of local and global economic processes requires that sustainable development be co-ordinated to some extent at the global level. Sustainable development is unlikely to be successful if it takes place piecemeal because the global economy must also change from a system where the primary goal is profit maximisation to a system where that goal is subsumed within biophysical limits. This paper outlines a framework that might be used to guide the global economy (and, by extension, local and regional economies) towards biophysical sustainability. This framework is based on the conservation of biodiversity, which, as well as ensuring its own continuing existence as a valuable resource base, serves to stabilise whole ecosystems, thus avoiding the leap into the unknown that would come with global ecological degradation. The paper does not explore individual policies that might be applicable in particular regions, but instead discusses the advantages and disadvantages of using biodiversity conservation as a benchmark for setting economic policy, and provides a sense of the legalities and institutional structures required to build this framework, as well as the long-term economic costs and benefits. It is intended that the consistent application of a "biodiversity constraint" on economic activity - - o r what Perrings (1991) calls an ecological sus-

tainability constraint--would circumvent the problem of dealing with fundamental biophysical limits, and would result in greater distributional equity. There are several stepping-stones to be crossed before assembling the framework of a biodiversity constraint. First, we need to know why biophysical sustainability is necessary for economic development; second, we need to know why biodiversity is a good surrogate measure of fundamental ecological processes; third, we need to understand why biodiversity conservation would be an effective motivator of sustainable development; and fourth, we need to understand the probable short- and long-term economic consequences of conserving biodiversity, in order to know what must be added to biodiversity conservation in order to construct a workable constraint on economic activity. Although the structure and operation of a biodiversity constraint are outlined in this paper, an exhaustive analysis of these areas is held in abeyance for future work. Instead, the present paper concentrates on the rationale for adopting a biodiversity constraint on economic development, and outlines in broad terms how the constraint might work.

2. Terms of reference, disclaimers and caveats The problem of achieving biophysical sustainability is viewed here with an ecological-economic perspective. This perspective views the primary task in economic development as understanding the limits of natural systems to different kinds and combinations of economic activity. Only once these limits are known should allocative efficiency and distributional effects be considered. In this context, a biodiversity constraint would provide a measure of natural limits within which allocative efficiency and equitable distribution of wealth could be pursued. This approach is in sharp contrast with mainstream economics wherein cost-benefit analysis would, in principle, provide a means to assess how many species could be lost to economic activity. The greatest economic efficiency would be achieved when the marginal cost of extinguishing a species equals the marginal benefit. But the mainstream approach is hopelessly inadequate when applied to ecosystems

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because we have virtually no idea how the deletion of particular species, or the sequence of their deletion, would affect particular ecosystems, or how the dynamics of those altered ecosystems would impinge on the economy, now or in the future. Not only is the option value of biodiversity in relation to ecosystem function potentially large, it is literally incalculable, not least because the option values of individual species depend on the presence or absence of other species with which they are ecologically associated. The complex, interrelated nature of the natural systems on which economies depend precludes our knowing with any reasonable degree of accuracy how long people can get away with disrupting them. Advocating the adoption of ecological constraints on economic activity is therefore based on the kind of a priori precautionary stance taken in ecological economics (e.g., Page, 1977; Pearce and Turner, 1990). Regarding option and use values of biodiversity, the distinction is made in the previous paragraph and hereafter between the option value of species and the option value of biodiversity in relation to ecosystem function. In addition to the current use value and the future option value of existing genetic material, 2 biodiversity has option value at the ecosystem level because it provides the option for future economic benefit from the services of stable and productive ecosystems. A biodiversity constraint could not conserve all remaining species on the planet. Many species are already extinct from human activities and, as the human population grows, so will more biodiversity be lost. Even if ecologically disruptive activities could be terminated immediately, the global rate of anthropogenic extinctions would remain high for years or decades because the effects of human activities often take a long time to work their way through ecological systems. In addition, highly restricted or rare species--for example, those with tiny geographical ranges on the order of a tennis court (Mayr, 1963)--could be sent extinct inadvertently by even

2 For example, medicinal plant species whose pharmacological properties are currently known, and those whose properties are currently unknown or for which there is currently no need.

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small-scale activities. While vigilance for inherently vulnerable natural systems will be important in achieving ecologically sustainable development, the conservation of all remaining populations and species on the planet is not a realistic venture; rather, it is an ideal for people to strive towards. In the present paper, all extinctions during this century are assumed to be anthropogenic. The average background rate of extinctions in the geological past is about one per year globally (see Wilson, 1992) and the rate of recorded extinctions since 1900 for which the cause is known is about 2 per year (see Smith et al., 1993a). But only 0.1-1% of all described species have had their status re-assessed since they were discovered. If, in any given region, a species is known to have become extinct through, for example, habitat destruction, then other ecologically similar species are probably also at risk or extinct in that region. Therefore, the true rate of anthropogenic extinctions since 1900 is probably much higher than 2 per year, and the rate of recorded extinctions is expected to climb by about two orders of magnitude in the next century (see Wilson, 1992; Smith et al., 1993b). Certain terms relevant to the discussion are defined in detail in the Appendix. In short, "biodiversity" is taken to mean the total genetic, morphological and functional diversity of all individual organisms that are members of an ecological community or ecosystem; "species richness" is taken to mean the number of species per unit area; "ecosystem" is one or more biological communities plus its abiotic environment; "stability" is the tendency for a system to return to its original state; and "sustainability" is here taken as the "stronger" biophysical definition rather than the " w e a k e r " intergenerational definition (the ability of the present generation to meet its needs without compromising the needs of future generations) because we are considering how to make the full transition to an economy within biophysical limits, for reasons given below. The term "biophysical limits" is used to refer to limits to economic development that are either biological (such as the amount of sunlight fixed by plants) or physical (such as the capacity of the atmosphere to absorb and recycle greenhouse gases), or a combination of both.

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3. The need for biophysically sustainable economic development 3.1. The scale o f the global economy Most of the time, economists do not think about what the world might be like a century or two from now if current patterns of resource use were to continue. This would be perfectly reasonable in a world where the material or energetic throughput of the global economy were small relative to the overall scale o f the w o r l d ' s biogeochemical cycles. But the global economy is now large relative to these cycles (see Vitousek et al., 1986; Holdren, 1991) and this forces us to consider how current patterns of resource use impinge on future economic welfare. There are two problems. The first is that in a world where the scale of resource use by people is a substantial fraction o f the global scale of resource cycling, the costs of appropriating natural resources should be high. For the most part, these costs are currently too low (see Pearce and Warford, 1993). The second problem is that, even if natural resources were priced appropriately, the cost of their use is discounted into the future at far too high a rate. Because biogeochemical processes, such as the cycling of nutrients through ecosytems, usually operate over many years or decades, the full effects of economic activities on natural processes are unlikely to be seen within a lifetime. It is therefore inappropriate to discount the future at the standard 5% per year. In a world where future human welfare depends so heavily on the future state of natural systems, it is more sensible to discount the future at a rate commensurate with the time for biogeochemical cycles to absorb anthropogenic perturbations, rather than at a rate commensurate with human lifetimes. The interplay between economic systems and natural systems is so complex that it is virtually impossible to know how long a biophysically unsustainable economy could continue to exist, or even how unsustainable the current global economy is, if at all. 3 However, precaution dictates that biophysical

3 The combination of the size of the global economy and its critical dependence on fossil fuels (as opposed to current energy flux) is one of many--albeit weak--indicators of its current biophysical unsustainability.

sustainability should be a long-term goal (i.e., over decades or centuries). It is not enough to achieve intergenerational sustainability, as defined above, because the needs of even the next generation are unclear and, even if they were clear, meeting them with the m a x i m u m possible current resource use would be foolishly risky. Biophysical sustainability is a safer long-term bet, and intergenerational sustainability is an important shorter-term goal towards achieving it. 3.2. The problem o f measuring sustainability H o w do we know whether or when biophysical sustainability is achieved, and what is the best route towards it? There are two layers o f ignorance which must first be peeled away before this question can be addressed. The first is establishing whether natural systems have thresholds beyond which they flip to new states. W h e n perturbation experiments on whole ecosystems are carried out (e.g., Persson et al., 1993), ecologists are often little the wiser about the possible existence of thresholds because either the system has no distinct states or the perturbation was of the wrong type to take the system to a new state. Even if this first layer of ignorance can be overcome, a second presents itself, which is that because ecological-economic interactions are complex, we do not know how to properly establish biophysical limits on economic activities. Although this problem may be soluble, it is necessary also to consider surrogate measures o f biophysical integrity.

4. Biodiversity and ecological processes 4.1. The solution: a surrogate measure Surrogate measures of biophysical integrity should work in a consistent way in all geographical regions and be easily quantifiable. One candidate might be the stability of nutrient or energy flows through ecosystems. These flows are a substantial element of overall biophysical integrity and powerful tools have been developed by ecologists for characterising an e c o s y s t e m ' s energetic condition (Odum, 1983; Jorgensen, 1988; W u l f f et al., 1989; Wagensberg et

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al., 1990), as well as ecosystem stress from nutrient perturbations (Schindler, 1990; Asbury et al., 1991; Carpenter et al., 1992; Persson et al., 1993; Rudstam et al., 1993). However, these flows are not easily quantifiable and, moreover, ecosystems are not always easy to delineate (see Appendix). A more practical measure of biophysical integrity is the amount of biological diversity in an e c o s y s t e m - specifically, species richness because species are distinct biological entities, and because most ecosystems have yet to lose the majority of their species. Other measures of biodiversity (genetic diversity, population diversity) would be equally good indicators of biophysical integrity if they were as easily quantifiable as species richness. 4.2. Biodiversity as a measure of biophysical integrity For biodiversity to be a measure of biophysical integrity it must be demonstrated to show a clear association with ecosystem processes, such as nutrient cycling. The relationship between biodiversity and ecosystem processes has been an area of fertile debate among ecologists for nearly 40 years. While the prevailing wisdom was for a long time that systems with f e w species are the most stable, recent research gives compelling evidence to the contrary. Coming from studies of food web models, the prevailing view in the 1970s and 1980s was that ecosystems with a high degree of internal connectivity (associations among species) tend to be dynamically unstable: an oscillation in the abundance of one species could lead to perturbations in the populations of many others. By contrast, ecosystems with low internal connectivity tend to be dynamically stable. The corollary of this view is that most species in an ecosystem are functionally redundant. Therefore, an ecosystem's stability would not be significantly reduced if most of its component species were removed (see May, 1972, May, 1973, May, 1981; McMurtrie, 1975; Pimm, 1979; Beretta et al., 1987; So16 et al., 1992). However, a mixture of theoretical and experimental work since the 1970s has produced a smaller body evidence to show that the internal complexity of an ecosystem is positively correlated with its stability (DeAngelis, 1975; McNaughton,

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1977; Begon et al., 1986, Table 21.1; Pilette et al., 1990; Wagensberg et al., 1990; Frank and McNaughton, 1991; Moore et al., 1993). Recent alterations to the prevailing view have come from studies on the functional redundancy and productivity of ecosystems.

4.2.1. Functional redundancy An alternative hypothesis from the prevailing view runs as follows. Although an ecosystem's stability against small perturbations might be unaffected by species deletion, the same cannot be said about its stability against large perturbations. In a system from which many species have been deleted, the remaining species would be critical to the system's integrity, and a full complement of species gives an ecosystem a kind of "buffering capacity" (Jorgensen, 1990) against large perturbations (see also Walker, 1992). Tilman and Downing's (1994) work on grasslands supports this hypothesis. The primary productivity (amount of sunlight converted to plant tissue) of grassland communities with a full complement of species shows a greater resistance to drought, and a greater resilience in recovering from it, than communities with less than the full complement of species. They derive a curvilinear relationship between species richness and stability such that each species lost has a progressively greater negative impact on drought resistance. In grassland plots with a bare minimum of species, a stressful perturbation that eliminates one or more species risks destabilising the system within a plot because no surviving species of a similar functional type will be present to take the place of the lost species. In cases like this, recovery is limited by the rate at which the lost species can recolonise from elsewhere. In economic language, this buffering capacity is a kind of substitutability among species within functional groups. But just as goods of a similar functional type have differential utility, so species have differential importance. So-called " k e y s t o n e " species provide critical support to wide arrays of other species with which they interact. If they are removed from an ecosystem, many others will follow (see Gilbert, 1980). The sequential removal of species from an ecosystem would therefore not necessarily produce a smooth reduction in stability.

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4.2.2. P r o d u c t i v i t y

Tilman and Downing's (1994) work on grasslands shows not only that a full complement of species buffers ecosystems against large perturbations, but also that it enhances productivity. Experimental grassland plots with a full species complement recover faster from perturbations than those with a minimal or near-minimal complement. Tilman and Downing (1994) hypothesise that the "fully loaded" plots are more efficient at processing water and nutrients. This hypothesis is confirmed by Naeem et al. (1994) using the so-called Ecotron, a macrocosmic, climate-controlled, laboratory ecosystem (see Lawton et al., 1993). Ecotron units containing relatively more species in each functional group (producers, consumers, decomposers) are relatively more productive, processing nutrients and waste relatively faster and more efficiently. Based on the supposition that these macrocosmic patterns reflect the dynamics of whole ecosystems, the view now emerging about biodiversity (species richness) in relation to ecosystem stability is that there are two evolutionary forces at work. As Robert May puts it, " O n e [force] is to pump up species diversity to allow an ecosystem to make the most of its resources. The other is to reduce species diversity to avoid generating fragility. History ... may have selected a subset of complex ecosystems that balance these two pressures" (see Cherfas, 1994). 4

5. T h e efficacy o f biodiversity conservation as a m o t i v a t o r for sustainable d e v e l o p m e n t

With strong evidence that species richness stabilises ecosystem processes, it is logical to propose biodiversity as a measure of biophysical integrity. Ecosystems that are "fully loaded" in terms of biodiversity will be at their most resilient and productive, playing their full part in the global biogeo-

4 One possible test of this hypothesis would be a comparison of the deciduous forests of Europe, North America and Asia. The European forests have reduced species richness compared with the others, and Schulze and Mooney (1993) hypothesise that the European forests might be more susceptible to the effects of acid rain and stratospheric ozone depletion.

chemical processes on which the global economy is based. More particularly, they will be able to provide the widest possible array of resources to regional and local economies. The conservation of ecoystem processes would in principle ensure the conservation of biogeochemical cycles because the former is a very significant part of the latter. However, without specific measures to conserve biodiversity, a wellstocked larder of species that protects ecological processes would not be guaranteed. Biodiversity conservation not only ensures the "option value" of continued ecological stability, but also guarantees the current use, plus options for future use, on the widest possible variety of genetic resources. As a motivator for sustainable development, biodiversity conservation would therefore be highly effective. This is not to say that the economic costs would be low, but that biodiversity conservation would have a high degree of leverage over the transition to biophysical sustainability, and over the maintenance of sustainability once achieved.

6. E c o n o m i c c o n s e q u e n c e s o f c o n s e r v i n g biodiversity: the distribution o f resource use

Biodiversity conservation by itself could not act as a biodiversity constraint. The problem is that economies would respond differentially to the conservation of biodiversity. Consider, for example, Papua New Guinea and California. 5 Papua New Guinea has a few large extractive industries (e.g., gold, copper, timber), but no heavy manufacturing industry to speak of, relatively basic financial industries, and a growing service sector based largely around tourism. The vast majority of Papuans are rural and derive most of their living from the natural resources around them by farming and hunting. The population growth rate is 2.3% per year (Population Reference Bureau, 1993). The supposition is that a constraint on economic activity that prevents species loss in Papua New Guinea would probably steer the country's economic development not very far away from its current path. Growth industries might in-

5 These examples are chosen only to illuminate an argument and are not based on empirical research.

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clude (i) timber extraction, with an emphasis on minimal disturbance (loggers in many parts of the country already use portable sawmills); (ii) the licensing of the country's genetic resources internationally, leading towards a domestic biomedical industry; and (iii) tourism. It is possible that the growth in GDP per capita in Papua New Guinea might not suffer significantly in the transition to sustainability, and might actually increase if distributional equity among nations improves at the same time (see below). By contrast, California already has a biodiversity constraint of sorts, in the form of the Federal Endangered Species Act, one of the first enactments of which was to restrict housing developments on San Bruno Mountain near San Francisco to protect an endangered population of the Mission Blue butterfly ( lcaricia icarioides missionensis). However, the Endangered Species Act has had arguably no effect on restructuring the Californian economy towards sustainability because the Californian economy simply has too many economic links with the rest of the world for that to be possible, and because most of the state's industries do not directly affect its domestic biodiversity. The California example shows that domestic moratoria on species loss would by themselves probably fail to restructure the economies that contribute most to global environmental change. A global moratorium would be equally useless because, except in rare cases, it would be impossible to apportion blame for the extinction of a particular species to economic players far removed from the species' home. Therefore, a workable biodiversity constraint would need more than just the conservation of biodiversity. 7. The biodiversity constraint: a framework for policies towards sustainable development The logic of the biodiversity constraint runs as follows. Because economic activities that deplete biodiversity are likely to destabilise natural systems, and because instability in natural systems is economically risky given the current scale of economic activity, biodiversity depletion should carry financial penalties and its conservation should carry financial incentives. In this way, economic activities that do not destabilise natural systems will be favoured and

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biophysically sustainable economies will gradually develop. The evolution towards biophysical sustainability in regions that are economically poor and ecologically rich will take place only if the w o r d ' s economically wealthy regions also develop in the same direction. Wealthy regions would probably not make the transition to sustainability on biodiversity conservation alone but, crucially, they are linked to poorer regions by international trade. The hypothesis is that the transition to sustainability in economically poor countries would be driven largely by biodiversity constraints that guide the design of economic instruments to favour the most efficient long-term extraction of biological resources 6. In contrast, the transition to sustainability in wealthy countries would be driven largely by a global biodiversity constraint based on international trade. However, a biodiversity constraint would not be a policy mechanism. It would be a set of organising principles--a framew o r k - - t o tailor policies to regional economic and ecological conditions. 7.1. Economic structure o f a biodiversity constraint

The two main elements of the global constraint are, first, that trade in ecologically sustainable goods (those whose production and delivery do not deplete biodiversity) would be free of import and export tariffs, and second, that trade in ecologically unsustainable goods would be penalised to gradually eliminate these goods from the economy over a period of decades. It is the second component that would directly link to economic policies formulated under domestic biodiversity constraints. These policies may regulate activity based on a mixture of commandand-control and market mechanisms. In principle, formulating a policy mechanism to conserve biodiversity would be comparatively straightforward. Consider a market-based policy. The task is to make the extraction of a given species, population or genetic resource increasingly uneconomic as that resource becomes depleted. Roughgar-

6 The impetus for biodiversity conservation in poor countries might come from the global biodiversityconstraint itself or from internal efforts, or from a combination of the two.

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den and Smith (1996) show that, for fisheries, a tax on the market price of landings that increases as the size of the fish stock decreases will protect the stock from overharvest. 7 All that is required is to know the size of the stock at any time, the size of the harvest at that time, and the tax rate that makes harvesting uneconomic at low (unstable) stock sizes, plus a buffer against natural fluctuations. This kind of policy is equally applicable to the harvesting of other natural resources, like timber or medicinal plants. It would apply even to the conversion of land from its natural state to human use. If such a conversion were to diminish the population of a species to a point where it became significantly more vulnerable to other perturbations, then the tax on the earnings from that land should be so high as to make the conversion uneconomic 8. Although the exact values of these population thresholds may be known only with hindsight, enough is known about the population dynamics of species in various ecological groups to build realistic simulation models. Estimates of fundamental parameter values as well as the effects of other species can be easily derived from sample population data (see Roughgarden and Smith, 1996). It would not matter that the estimates were not perfectly accurate, only that the instruments to which they are linked protect the population from overexploitation. However, for every species with economic value, the same calcula-

7 This is like a severance tax on natural resources of the specific rather than ad valorem type (see Page, 1977). Of course, market mechanisms of this type are not restricted to taxes. If a market exists for a natural product, then in principle that product could be conserved by applying a wide range of financial instruments. Solow (1971) considers environmental bonds as fees levied on the use of environmental resources at a rate equal to the "social cost to the environment if the material were returned to the earth in the most harmful way possible." An instrument easier to implement might be an option to harvest a species or other resource on or after specified dates where the value of the option depends on the size of the stock at the maturity date. 8 For any sustainable harvest rate, there are two equilibrium population sizes at which that harvest may be made (see Begon et al., 1986, Fig. 10.14). The lower equilibrium is dynamically unstable whereas the upper one is stable to perturbations. The object is then to set the tax rate on earnings from harvesting such that the tax increases the further the population drops below the upper equilibrium and approaches the lower one (Roughgarden and Smith, 1996).

tions would be necessary for those species with which it is associated (cf. Perrings, 1991). 9 This qualification raises the issue of the economic costs of a biodiversity constraint, until now left aside. The example of the Newfoundland cod fishery is instructive. The Canadian government used stock and harvest data in the 1980s to successfully configure the fishery at or near the economically optimal equilibrium (Roughgarden and Smith, 1996). However, the ecological instability of this point spoke doom for the fishery: relatively constant harvest rates through several years of adverse environmental conditions (pushing the stock below its optimal size) caused the stock to collapse through overfishing. About 9 years will be required for the stock to rebuild, at an enormous social cost (C$4 billion in unemployment programmes alone). On balance, 10 years of fishing followed by 9 years of idleness will leave the fishery in the red by millions of dollars. The cost of maintaining the stock at a relatively high,

9 Perrings (1991) defines an ecological sustainability constraint as an m-dimensional vector

h[x(t),u(t),t]<_O;

O<_t
where x(t) is the "state of nature" and u(t) is a control function containing control parameters and prices. The role of the constraint is to restrict economic activities to "maintain ecological populations within stable and .therefore sustainable bounds". Further, an ecological sustainability constraint would be based on the critical depensatory point of a biological population. In this sense, Perrings' constraint and the biodiversity constraint outlined here are the same. However, they depart on two points: first, the placement of the ecological sustainability constraint would "depend on the perceived significance of the future welfare effects of the collapse of the population" (Perrings, 1991, p. 291) whereas the biodiversity constraint is more stringent. It views the collapse of a population as inherently bad and so economic instruments would be designed to prevent it. Second, Perrings believes that the ecological sustainability constraint would have limited use through pricing mechanisms because the global system is mostly uncontrollable, and cites fishing quotas, game licences and other direct controls as evidence of this. By contrast, under a biodiversity constraint, these things would be among the levers to make natural systems accessible to prices. Although phased in over many decades, the constraint outlined here or by Perrings would appear in an eyeblink on the timescale of biological evolution. On sub-evolutionary timescales, the natural fluctuation of populations decreases the control of economic instruments to protect them, but if the economic system were ecologically sustainable (that is, not significantly lowering ecological stability in the course of exploitation), then population collapses by def'mition would not be the fault of economic activity.

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stable level through a stock-dependent tax or other mechanism is the foregoing of a certain volume of fish harvested plus the support costs of estimating stock size and harvests accurately enough for the mechanism to work. The benefit is a stable, almostguaranteed revenue stream into perpetuity (Roughgarden and Smith, 1996). What applies to one species in isolation extends naturally--although with greater difficulty--to many species together. The important feature of policies to implement a biodiversity constraint is that the policy mechanisms relate the costs of using ecological resources to the state of those resources. As Daly and Goodland (1994) correctly point out, the potential increases in environmental damage caused by deregulated international trade stem from a lack of environmental accountability at the global level. By contrast, a biodiversity constraint would build global environmental accountability through international trade. In the international arena, two side-effects of such policy mechanisms might be to bring incomes in poor countries up towards those in wealthy countries and to increase incentives for poor countries to export products whose demand is relatively inelastic to price. Suppose, for example, that the demand in California for ebony from Papua New Guinea were price-inelastic. If Papua New Guinea's exports of ebony to California were depleting stocks of ebony - - o r even of species that live on ebony trees--then the price per cubic metre of ebony would be taxed heavily, and Papuan ebony exporters would raise prices to compensate. But if demand for ebony in California were price-elastic, then substitutes for ebony would be sought in Papua New Guinea. The greater the biodiversity in the exporting country, the greater the substitutability among natural products. Either way, Californians would be paying Papuans amounts much closer to the full environmental costs for their products. Of course, the economic disruption caused by the full and immediate implementation of policy mechanisms like these could potentially be very large. In the international arena, a gradual adjustment of import and export quotas might be needed in order to phase-in policy mechanisms for a biodiversity constraint. In the example, Papua New Guinea and the United States would agree to gradually reduce trade in ebony produced unsustainably.

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7.2. Legal and institutional underpinnings of a biodiversity constraint Although the difficuly of instituting a biodiversity constraint may seem great, the groundwork for phasing it in has already been laid with the signing of the Biodiversity Convention at Rio de Janeiro in 1992. The Convention is, however, non-binding and constructing binding agreements would clearly be a high priority for building a biodiversity constraint. These treaties might be formulated under an umbrella organisation--for example, a General Agreement on Trade and the Environment (GATE), proposed by DeBellevue et al. (1994) as a reform to the General Agreement on Tariffs and Trade (GA'Iq'). Although the DeBellevue et al. (1994) vision of a GATE would bring environmental experts to the discussion table on international trade, a bolder version of the GATE might be necessary to institute a biodiversity constraint, by defining a series of steps to bring the economies of participating nations within biophysical limits. Leapfrogged by a GATE, the GATT's activities would then be limited to cases external to a biodiversity constraint, such as import duties on high value added goods. Once a treaty for a biodiversity constraint is in place, participating countries would then be under obligation to develop and implement policies to encourage economic activities that conserve biodiversity (e.g., by subsidies) and to penalise those that do not. The monitoring and enforcement of the treaty would be carried out by an independent international body, and frameworks might be included in the treaty to assist nations struggling to meet targets.

7.3. Challenges and limitations to the operation of a biodiversity constraint Many considerations have been ignored in this discussion, particularly further requirements for a biodiversity constraint to work, and limitations to its scope. In particular: 1. A biodiversity constraint would require that institutions regulating the use of natural resources be effective. This is largely true in wealthy countries, but not yet in most poorer ones. However, given adequate property rights, the effective regulation and enforcement of resource use by the people who

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directly use the resources is already taking place (see, for example, The Economist, September 30th, 1995, p. 98) and so a biodiversity constraint would become a feasible long-term objective as regulatory institutions evolve. 2. Biodiversity loss is often caused by the "downstream" effects of human activities. For example, the silting of rivers from logging can cause coral reefs to die. Therefore, policy mechanisms that link economic development with the state of natural stocks, such as a stock-dependent tax on market prices, must take account of these downstream effects, and may require international co-operation. 3. The biodiversity of some groups, especially micro-organisms, is not easy to measure, yet these groups may be very diverse (Barns et al., 1994; DeLong et al., 1994) and vital to maintaining basic ecosystem processes. Although recent improvements have been dramatic (Barns et ai., 1994), techniques for assessing microbial diversity are still in their early days. 4. The role of the World Bank might be re-cast to support a biodiversity constraint. Development loans to be used as investment pools for ecologically sustainable businesses could be made available to needy countries. 5. Biodiversity loss might be caused directly by such global processes as climate change, for which responsibility cannot easily be apportioned. For example, the abundances of many amphibian species around the world have dropped sharply in the last 10 years, possibly in response to atmospheric changes (Wake, 1991). In addition, climate change may cause so-called community dislocation where species migrate at different rates in response to changes in mean atmospheric temperature, and their geographical ranges cease to overlap (Root and Schneider, 1993). Hence, biophysical sustainability may require economic measures beyond a biodiversity constraint, such as taxes on resource throughputs in preference to taxes on labour and income (Daly, 1994).

8. Summary Because the global regulation of human economic activity is becoming a necessity, a means of regulation must be sought. A biodiversity constraint is a

strong candidate because (i) the balance of ecological evidence indicates that the conservation of biodiversity conserves ecosystem stability and productivity; (ii) biodiversity (at least species richness) is a comparatively straightforward ecosystem characteristic to measure and monitor; (iii) biodiversity has value in its own right. A biodiversity constraint would, over many decades, re-mould the economy to avoid breaching biophysical limits. Command-andcontrol policies may be feasible for this purpose in some instances, but the overwhelming majority of policies probably would utilise market forces by systems of incentives and penalties. The employment of a biodiversity constraint would not only help to secure humanity's long-term future, but also spawn whole new industies; indeed, human technical ingenuity may yet bring us such wonders as a biophysically sustainable automobile.

Acknowledgements Valuable comments on an earlier version of the manuscript were received from Tim Swanson, Rob Jackson, Bob Rowthorn, Bengt-Owe Jansson and three anonymous reviewers. Thanks also to members of Stanford University's Center for Conservation Biology for helping to sharpen some of the ideas in the early stages of this project. This paper is adapted from Working Paper GEC 9 4 / 1 0 of the Centre for Social and Economic Research on the Global Environment, University of East Anglia, UK.

Appendix A. Definitions of terms (i) Biodiversity. This term is widely used to describe the total diversity of living organisms. Hammer et al. (1993) identify four independent divisions of "biodiversity": species diversity, genetic diversity, functional diversity (the range of functions of species in an ecosystem), and spatiotemporal diversity (topography, climate, etc.). Odum (1983, Table 18. l) lists a wide array of diversity indices. Ehrlich and Daily (1993) identify population diversity as an alternative to species diversity in the measurement and conservation of biodiversity. Although the essence of the argument presented in this paper

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would be the same for all the above definitions of biodiversity, the policy prescriptions depend to some extent on the definition and therefore biodiversity is taken to mean species diversity because it is usually the easiest to measure in the field. It is important to distinguish between diversity within an ecosystem and the amount of diversity in different ecosystems. If diversity is linked to stability, then by the latter meaning one would expect boreal ecosystems--such as arctic tundras--to be less stable than tropical rainforests. If there are stability differences among types of ecosystems, then it is valuable from the point of view of sustainable development to know why, but the reason may not necessarily have anything to do with their component diversity, however measured. The results presented in this paper relate to the relationship between diversity within an ecosystem and its stability. (ii) Ecosystem. An ecosystem is a biological community or set of communities plus its abiotic environment. These are the two necessary conditions for defining an ecosystem. They are supplemented by the following sufficient conditions. Like the individual organisms that form ecological communities, ecosystems are self-maintaining and self-regulating. These properties arise because of feedback flows of energy and nutrients within, and between, systems. These feedback flows maintain ecosystems far from thermodynamic equilibrium, and buffer them against perturbations. In a thermodynamic sense, ecosystems are orderly. In addition, ecosystems are thermodynamically open, receiving free energy from the sun or from geothermal activity. But this external orderliness belies their internal complexity, because the feedback flows that operate within ecosystems give rise to non-linear dynamics--bounded c h a o s - - i n the interactions of their components, such as among populations (e.g., Hanski et al., 1993). Ascribing geographical boundaries to ecosystems is difficult and, in many cases, inappropriate. Ecosystems may be nested within each other, for example, freshwater ponds within a prairie. Some regions of the world, such as the open ocean, contain communities of organisms and exchange energy and matter with the abiotic environment, and are therefore ecosystems, but they have no clear boundaries. Thus, what constitutes a given ecosystem is often definitional.

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Ecosystem processes emerge from the interaction of the biological and physical entities comprising an ecosystem. These processes include nutrient and energy flows, succession, species turnover by immigration and emigration (/3-diversity), speciation and species extinction. There are also certain static characteristics of ecosystems that can be measured: these include numbers of entities per unit area (richness) and richness weighted by entity abundance (a-diversity). The enormous internal complexity of ecosystems has led to attempts to describe their organisation in intelligible ways, perhaps most successfully as nested hierarchies in time and space (e.g., Odum, 1983; Urban et al., 1987; O'Neill, 1989; Holling, 1992). (iii) Stability. Stability is the tendency for a system to return to its original state. Local stability (or Lyapunov stability) is the tendency for all system components to return to their steady state equilibrium values following small perturbations (DeAngelis et al., 1989). A large perturbation may therefore push a system into the domain of attraction of another steady state, if such a state exists (Lewontin, 1969; Holling, 1973). This kind of stability is--perhaps misleadingly--referred to as "global stability." The parameters used to describe stability vary from study to study: they may be population sizes, nutrient flows, connectivity of mathematical networks, but in all cases stability is taken to mean low variance in parameter values and instability is characterised by high variance. Stability is commonly viewed as comprising two parts: resistance and resilience. Resistance is the tendency for the parameter values describing a system to remain within the same bounds under a perturbation, and resilience is the speed with which a system returns to its original state following a perturbation. Much of the empirical work on ecosystem stability has focused on observing the resilience of a system following a measurable perturbation. Finally, the hierarchical view of ecosystems accentuates the role of spatial and temporal scale in considering stability. For example, a "stable" ecosystem might contain numerous unstable populations over a given time-frame. Nutrient flows in one part of an ecosystem may be unstable on a given timescale, but those through the whole system may nevertheless be stable. Therefore, it is usually infor-

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mative to define the spatiotemporal context when discussing ecosystem stability. (iv) Sustainability. Like biodiversity, this term takes many meanings. Here, biophysical sustainability is used and this is, in essence, defined by the biodiversity constraint itself. An economic activity is biophysically sustainable if it does not damage ecosystems by disrupting nutrient flows and/or depleting biodiversity.

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