Environ. Sci. Technol. 2000, 34, 1401-1406 ² value of ecosystem services on the planet. What does make Managing Ecosystem Resources sense, however, is to attempt to estimate the marginal costs KENNETH ARROW,³ GRETCHEN DAILY,§ that would be associated with having to replace the services PARTHA DASGUPTA,| SIMON LEVIN,*, ⊥ currently provided by a piece of nature. The challenge, KARL-GOÈ RAN MAÈLER,# ERIC MASKIN,+ nonetheless, is far from easy. Conflicting value systems, DAVID STARRETT,³ intergenerational and intragenerational equity, and the basic THOMAS STERNER,¶ AND principle of maintaining the integrity and resiliency of THOMAS TIETENBERG£ ecosystem functions pose daunting tasks. Our goal in this Department of Economics and Department of Biological paper will be to identify some of the problems and to illustrate Sciences, Stanford University, Stanford, California 94305, them with particular examples that exhibit the essential Faculty of Economics and Politics, Cambridge University, complexities. Our approach represents a theoretical per- Cambridge CB3 9DD U.K., Department of Ecology and spective, illuminated by case studies, rather than an effort Evolutionary Biology, Princeton University, Princeton, New to deal with all the practicalities of those case studies. Jersey 08544-1002, The Beijer Institute, The Royal Swedish In principle, efficient management of ecosystems involves Academy of Science, Box 50005, S-104 05 Stockholm, Sweden, the same economic principles as does efficient management Department of Economics, Littauer 308, Harvard University, of fossil fuels and other capital assets. In practice, however, Cambridge, Massachusetts 02138, Resources for the Future, ecosystems possess several features that make good man- 1616 P Street, Washington, D.C. 20036, and Department of agement particularly problematic. They are, first of all, highly Economics, Colby College, Waterville, Maine 04901 nonlinear complex adaptive systems (3, 4), with extensive interconnections among components. Such features lead to the existence of multiple domains of attraction, to elaborate We explore some of the special problems faced in the potential path dependency in development, and to the management of environmental resources, paying particular possibility of qualitative shifts in dynamics due to a com- bination of endogenous and exogenous factors. Periods of attention to valuation of ecosystem services, externalities, drought in grasslands, for example, can lead to patterns of uncertainty, and nonlinearities characteristic of complex erosion, loss of tree species, and eventual desertification if adaptive, highly interconnected systems. Through extended across long enough periods of space and time. consideration of case studies drawn from the management Similar major transitions can also occur in aquatic and marine of lake and mangrove ecosystems, we develop a theoretical systems due to positive feedbacks, and we will return to some perspective in which we analyze the challenges, suggest of these examples later. Our conclusions will be that, given approaches to their resolution, and endeavor to derive the challenge of sustaining services and managing ecosystems principles that may guide management more generally. in the face of exogenous and endogenous uncertainty, such nonlinearites and unpredictable aspects argue for adaptive Introduction management and precautionary principles. Humans are part of nature and must utilize the bounty it A related feature is that ecosystem development is an provides in order to survive. However, the choices we make idiosyncratic, historically constrained process, making gen- regarding how to utilize natural systems have fundamental eralization difficult and uncertainty high. Finally, regarding implications for their maintenance and ultimately for the human exploitation, ecological assets in large part represent sustainability of the services they provide humans. We rely public goods, and the consequent externalities associated on natural systems directly for food, water, oxygen, fiber, with their use are not usually well accounted for in market fuel, and pharmaceuticals and indirectly for pollination, for mechanisms. In this paper, we will attempt to elucidate these the stabilization of climates and coasts, and for an uncount- difficulties and suggest ways of mitigating their effects. In so able list of other essential aspects of our quality of life (1). doing, we will draw on two specific examples: mangrove We deliberately modify some systems (as in agriculture) and swamps in the tropics and shallow lakes in North America. extract resources from others, in all cases affecting a range of services these systems do and might provide. Managing a Mangrove Ecosystem The exploitation of natural systems, including efforts to Intelligent management of any system requires quantification modify and manage them, forces us to confront the tradeoffs of costs and benefits and evaluation of the tradeoffs involved between real and potential services and the effects upon in different courses of action. The most powerful way to do their resiliency. this bookkeeping and projection is through some sort of Although it is appropriate and relatively straightforward model, which requires as a first step the construction of a to construct lists of the most important of such services, systematic, quantitative catalog of the sources and consumers their valuationsan essential step for making management of ecosystem services. For a given location, one must know decisionssposes daunting challenges. Despite some efforts which services are used locally (e.g., pollination, pest control, in that direction (2), it makes no sense to speak of the total renewal of soil fertility, serenity); which are used globally (e.g., preservation of the genetic library, climate stabilization), ² Part of the special issue on Economic Valuation. * Corresponding author telephone: (609)258-6880; fax: (609)258- and which are exported to other regions (e.g., seafood, timber, 6819; e-mail: [email protected]. flood control, water purification). For the case of a mangrove ³ Department of Economics, Stanford University. swamp, some of these are obvious, but some are hidden. In § Department of Biological Sciences, Stanford University. the category of directly consumed goods, the mangroves | Cambridge University. ⊥ harbor and sustain fisheries containing not only species that Princeton University. are endemic to the swamp but also others that migrate and # The Royal Swedish Academy of Science. + Harvard University. are only occasional users. The mangrove trees themselves ¶ Resources for the Future. are used as wood for fuel and for construction. Salt can also £ Colby College. be produced in some circumstances. 10.1021/es990672t CCC: $19.00 2000 American Chemical Society VOL. 34, NO. 8, 2000 / ENVIRONMENTAL SCIENCE & TECHNOLOGY 9 1401 Published on Web 03/04/2000 The mangroves also provide many indirect services. By mangroves. With this in mind, let us now return to the providing buffers to the coastline, they offer storm control. comparison with the multiproduct firm. By anchoring the soil, they reduce erosion. They recycle There are several reasons why the problem of managing nutrients, help in the purification of sewage, and provide an ecosystem is different in character from that of managing habitat for a variety of birds; partly as a consequence, they a multiproduct firm. For one thing, the producers in the firm also can serve as an attraction for tourism. Mangroves also generally have good knowledge of the products that they can sequester carbon as well as toxic materials. Although this is (potentially) produce and of the production technology for only a partial list, one can see that the dimension of the doing so. By contrast, we are relatively ignorant concerning output space in such systems can be quite large. In and of relationships in ecosystems and are likely to underestimate itself, that fact is not impossible to overcomesafter all, the the list of services they provide. This represents a particular output space of a typical firm contains a large number of form of uncertaintyswhat unknown benefits, such as products. However, when it comes to measuring and potential pharmaceuticals yet to be identified, lie concealed comparing all these effects, the problems are more serious. from our view, awaiting discovery? The firm knows how to measure its products, and the profit A second difficulty with attempting to manage an motive provides a natural way of comparing the importance ecosystem like a multiproduct firm is that, for the firm, the of various items; such ready measures, however, are not easily future utilities are given by the forecasted market prices for available for ecosystems. the goods it is producing; in contrast, for the mangrove, Despite these remarks, we can formulate a general model system many of the outputs have a ªpublicº or ªcommon for analyzing the impact on well-being from different man- propertyº feature that makes it difficult to determine the agement strategies. We posit the existence of a social planner relative value the service conveys or to appropriate that value who represents society in its preferences for services supplied to the entity doing the managing. by the mangrove swamp. The Nobel Prize winning economist For example, storm protection has this public character. Tjalling Koopmans showed in a number of articles that these If it is provided, everyone inland automatically gets the preferences can be represented as the