ECON 310 Chapter 14 Notes

Biodiversity and Habitat Preservation

 

If Charles Darwin were writing today, his masterwork would probably be known as The Disappearance of Species.

Edmund C. Wolf, The State of the World, p.124

 

 

CHAPTER SUMMARY

 

Extinction is occurring at an unprecedented rate and results in a loss of biodiversity, which can be defined as the total variety of life on earth. A species becomes extinct when the last individual organisms of the species die. There are many natural and anthropogenic sources of extinction, with each anthropogenic source related to market failure.

Natural extinctions occur when the environment changes and existing species find themselves at a competitive disadvantage and are replaced by existing species that are better adapted to the new conditions. Natural extinctions are always occurring, usually at a slow pace. The disappearance of the dinosaurs is an example of a massive and rapid extinction, but it actually took place over a period of about 2 million years. Table 14.1 lists extinctions of mammals over recent history and shows the extremely rapid rate of extinction that has occurred in modern times. These extinctions are primarily due to anthropogenic factors.

There are several important anthropogenic causes of extinction. These include excessive harvesting of the species, loss of habitat, and competition from nonnative species. Table 14.2 lists observed declines in animal species and their anthropogenic causes. Table 14.3 lists the number of species in the United States that are declining to the point of extinction being a possibility.

Many species are found only in a limited range of habitat, and if this habitat is destroyed by conversion into another land use, or contaminated by pollution, the species will become extinct. Loss of habitat may be associated with either open-access or private property resources. Coral reefs tend to be open-access and are destroyed both by pollution that is carried from firms located on a river to the coral lagoons and by fishing activities. Recreational boating also results in destruction of reef when anchors are dropped to catch reef.  The owner of wetlands who is contemplating converting the wetlands to condominiums makes the decision by comparing the private net benefits of conversion with the private net benefits of preservation. Social net benefits are generally excluded.

Competition from nonnative species can also be viewed as an externalities problem. Introduction of an exotic species is often associated with a large ecological and social cost that is not realized by the person who introduced the species. Non-native species may arrive as hitch-hikers with the importation of other species, importation of goods, and in the luggage and on the person of international travelers.  A good example of this is the zebra mussel that has been introduced into the US Great Lakes in the ballast water of tanker ships.  Non-native species impact native species through direct predation, competition of ecological resources, or destruction of habitat. 

The extinction of the American Bison (buffalo) was caused by excessive hunting. Bison had been hunted for thousands of years by Native Americans and yet remained plentiful. With the westward movement of Americans of European and African descent, the herds were decimated. Under Native American control, the bison herds were common property, but not open-access resources.

Common property resources often have restrictions on their use while open-access resources do not. Cultural traditions of the Native Americans dictated the use of bison herds and prevented the destruction of the species. By contrast, when the Native Americans lost control of their hunting grounds to nonnative Americans, the buffalo herds became open-access common property, with no restrictions on their use. No individual hunter had incentive to preserve the resource. A destructive race began, with each buffalo hunter seeking to shoot as many buffalo as possible before they were shot by competing hunters. Buffalo quickly disappeared.

Modern examples of this type of open-access harvesting pressure include many of the large mammals of Africa and Asia such as the elephant, rhinoceros, tiger, bear, and leopard. Although hunting of these animals is usually forbidden by law, it is extremely difficulty to enforce these prohibitions. High profits associated with illegal trade of animals makes enforcement extremely difficult.

Biodiversity promotes ecosystem stability. The more diverse a system the greater its ability to withstand shocks and stresses. Biodiversity promotes all the services derived from ecosystems such as protection of freshwater supplies, production of oxygen, absorption of carbon dioxide, etc. Plants and animal species have a value because they may be used to produce economic goods. Organism genes may be a source of genetic information that may be used in the development of new varieties of plants. Biodiversity may promote new and different plants and species through genetic engineering. People derive greater utility from more diverse ecosystems rather than less diverse. People may also feel that it is society's ethical responsibility to maintain biodiversity.

A habitat provides an environment in which plants and animals can exist. As an example, wetlands play a unique ecological role as a transition zone between aquatic ecosystems and terrestrial ecosystems. Wetlands serve as a vast store of nutrients from terrestrial sources that are gradually released into aquatic systems. Different types of wetlands include forest wetlands, freshwater marshes, saltwater marshes, bogs, bayous, and mangroves.  Most estuarine shellfish and finfish are critically dependent on the productivity of the wetlands. One of the most important roles of wetlands is to serve as a buffer against storms. Wetlands absorb storm water and lessen floods from high levels of rain. Other important roles include serving as a spawning and nursery area and as a source of recreation.

It is important to develop policies which recognize not only the commercial importance of biodiversity in areas of medicine and agriculture, but also the non-commodity benefits associated with biodiversity and ecosystem health. Since the future benefits of biodiversity are unknown, this is an example of the type of environmental problem in which the precautionary principle should be applied.  Under this principle, policy would be created that protected biodiversity as if the benefits were very large, even though we cannot prove that they would be large. 

Another reason to invoke the precautionary principle in biodiversity has to do with the idea of a minimum viable population of species.  A population level lower than this minimum viable level would move the species toward extinction.  A prudent policy would set the level of population well above the minimum viable level. 

The assignment of well defined property rights in the use of an open-access resource is one policy alternative. Assigning a village property rights to manage an elephant herd will result in actions which promote long term existence of the herd. However, it is necessary to design a management area that is large enough to encompass the entire range of the herd.

Loss of habitat is the inevitable result of economic and population growth. Excessive loss of habitat occurs when people confront choices about how to utilize habitat but do not have an incentive to incorporate preservation values into their decision making. Consequently, marginal private cost of converting habitat is less than marginal social cost. Closing the disparity between private and social costs or alternatively, the disparity between private and social benefits of preservation is an extremely difficult task. One reason is that the benefits of habitat preservation have public good characteristics of nonrivalry and nonexcludability.

An approach suggested by Sedjo for addressing the disparity between private and social benefits from pre- serving rain forests would allow the country where the plant, from which the new medicine is derived, grows to receive a royalty payment from its use. In this way, the country shares in the benefits from preservation. The implementation of marketable carbon permits would allow countries to receive positive benefits, in the form of payments from wealthier countries, from preservation of forests. This would address the issue of preserving carbon sequestration.

Other issues would require command and control regulations. Examples include: prohibition of wetland destruction and creation of national parks and wildlife sanctuaries to protect critical habitat.  The first question that must be answered in the development of policies to protect habitat is how much should be protected and at what level of protection.  A prioritization scheme should be developed.  Criteria which should be considered include: uniqueness of habitat, biodiversity contained in the habitat, importance of habitat for the provision of ecological services, existence values associated with the habitat and the cost of protecting the habitat.

The Endangered Species Act of 1973 is a particularly important and controversial piece of legislation directed at the protection of habitat of endangered species. Under this act, it is illegal to use any federal funds in a fashion that might further threaten endangered species. Since federal funds are used in many infrastructure projects (roads, sewers, etc.) this legislation applies to a surprisingly large proportion of development projects. A major criticism of this act is that it is oriented toward species in trouble but does nothing directly to protect other species from becoming endangered or threatened. This act came up for reauthorization in 1993, but was not changed.

There are two basic types of policies that are available for protecting and preserving habitat in general. One involves the creation of protected areas such as national parks. The other involves the restriction of use of privately owned lands. For example, federal and state laws that restrict the destruction of wetlands. In 1991, a controversy developed over the Bush administration proposal to change the definition of a wetland from a definition based on soil type and vegetation to one based on inundation by water for specified times during the growing season. The new definition was not enacted but did serve to point out the importance of a clear, consistent definition and the potential for dramatic changes in wetland area designations should the definition change.

The development of wildlife refuges and nature preserves is normally thought of as a government activity, but is becoming increasingly private. Nongovernmental organizations (NGOs), such as the Nature Conservancy, can act as agents for individuals. These NGOs collect money from individual citizens and then use the funds to buy critical habitat from private landowners. The private provision of a public good can take place because of the role of nongovernmental organizations.

These groups serve to reduce free rider problems by providing an organization through which individual citizens can commit to protect habitat. These organizations also serve to reduce the transactions costs to citizen action. NGOs are very important, without them much private preservation would not take place.

            Policies for prevention of introduction of non-native species are difficult to develop.  The US has a policy of prohibiting importation of plants and animals believed to be a risk to native species (black-listing).  An alternative policy would be to develop a “white list” where people would have to prove that an imported species is safe before it could be imported.  Direct controls can be used to make it illegal to have undeclared plants and animals in possession when crossing borders.  The most promising economic incentive for addressing non-native species is a liability system, which would make importers liable for future damages associated with imported plants and animals.

            The logical solution to open-access exploitation would be to better define property rights.  Assignment of private property rights to wild game and fish would be politically unfeasible. It is possible to design policies which limit access such as season limits, limits on the number harvested, and restrictions on how and where animals may be harvested. However, certain endangered or threatened animals are not allowed to be harvested at all.  Both assignment of property rights and restriction of access are ineffectual when profits from illegal harvesting are high relative to opportunity wage of the hunter, where the opportunity wage is the highest alternative wage for the hunter in a different occupation. Policies directed at both supply and demand can address this issue. A combination of prohibitions on all sales of animal products and publicity campaigns making it socially unacceptable to use animal products can eliminate the profitability of the illegal trade.

 

KEY CONCEPTS AND DEFINITIONS

 

Extinction – species become extinct when the last individual organisms of the species die.

 

Natural Extinction – occurs when the environment changes and existing species find themselves at a competitive disadvantage and are replaced by existing species that are better adapted to new conditions.

 

Anthropogenic – related to human activity.

 

Common-Property Resource – resource whose location prevents excluding individuals from its use. An open-access resource will tend to have common property attributes, but a common-property resource does not have to have open-access.

 

Biodiversity – refers to differing aspects of an ecological system. Biodiversity promotes ecosystem stability. The more diverse a system, the greater its ability to withstand shocks and stresses.

 

Habitat – the environment within which different plant and animal species coexist. An example would be the wet- lands, which playa unique ecological role as a transitional zone between aquatic and terrestrial ecosystems.

 

Wetland – bogs which serve as transition zones between aquatic ecosystems and terrestrial ecosystems. Wetlands serve as a vast store of nutrients from terrestrial sources that are gradually released into aquatic systems. Most estuarine shellfish and finfish are critically dependent upon productivity of the wetlands.

 

The Endangered Species Act – under this act it is illegal to use any federal funds in a fashion that further threatens an endangered species. This is a particularly important and controversial piece of legislation directed at the protection of habitat of endangered species.

 

Nongovernmental Organizations (NGOs) – private organizations involved in organizing individuals, raising funds and promoting environmental agenda. An example is the Nature Conservancy. These NGOs can act as agents for individuals.

 

Chapter 14 Short-answer questions

 

1.         Discuss the different sources of extinction. How has the rate of species extinction rate changed through time?

·        Natural extinction-occurs very slowly (0.01 extinctions per century).

·        Anthropogenic sources of extinction-includes open-access harvesting, loss of habitat, competition from nonnative species (145 extinctions per century).

 

2.         Your text argues that the American bison population could be considered a common-property resource prior to the arrival of the Europeans and nonnative Americans but the bison then became an open-access resource. Explain the difference and the resulting impact upon the bison population.

·        Common-property-culture and traditions dictated the method and magnitude of harvest. The buffalo were an important part of the culture and therefore, their continued existence was important.

·        Open-access-individuals without traditions of cultural ownership maximize their own personal goals. The inability to prevent others from doing so as well meant there was no incentive to preserve the resource.

 

3.         What types of policies have been implemented to protect the elephant herds in Africa? Do you believe that banning trade of ivory will be a successful policy? Why or why not?

·        Ban hunting and ban trade in ivory internationally.

·        Give property rights to herd to neighboring village. Allow the village to earn revenue through the elephant herd. There will be an incentive to maintain the herd numbers-

·        Banning sales of ivory would lessen the economic incentives for the village.

 

4.         What are the various costs associated with losses in biodiversity? Can these costs be quantified?

·        A loss of diversity could mean greater susceptibility to disease and drought.

·        Loss of animals and plants could have economic impact.

·        Loss of potential cures and potentially valuable resources.

·        Some of the potential values can be quantified, others would not be known.

 

5.         What are the different approaches that have been used to identify a wetland area? Why was there concern over the method suggested by the Bush administration?

·        The designation of wetlands had been determined by soil type and vegetation.

·        Bush administration sought to define wetlands by number of consecutive days of inundation during certain parts of the year.

·        Bush legislation would create problems because wetland designation would vary by time of assessment. Also, some previously designated wetlands would no longer be wetlands.

 

6.         What kind of policy has been developed to deal with the loss of species due to competition from nonnative species? Do you think that this should include the introduction of genetically altered species into the natural environment?

·        These rely on command and control. One type requires a permit before a nonnative species can be brought into an area. The other prohibits the introduction of nonnative species.

·        It has been argued that open-access exploitation problems can be eliminated with the establishment of private property rights. Is this a viable solution? Is it possible to depend on communal ownership as an alternative to private ownership?

·        Elephant protection through allocation of rights to a nearby village. It would work if it were possible for the village to earn income from these rights.

·        The same would be true for genetic diversity in tropical forests if the rights were allocated to the local community and the locals could earn a royalty from any medicines developed from their II genetic pool."

·        Paying for carbon sequestering would be another example.

 

8.         Your text argues that there are two policies which can be designed to promote preservation of biodiversity (such as the rainforest). One of these focuses on a system of marketable carbon permits, where countries receive benefits for preserving their forests. The other would require forested countries to purchase carbon permits for every unit of forest converted to non-forest. Compare and contrast these alternative approaches.

·        The marketable carbon permit system that requires forested countries to purchase carbon permits for every unit of forest converted to non-forest use would place the "cost" of preservation on the backs of the developing countries. The other alternative allows the developed countries to bear the cost of preservation.

 

9.         What are the two basic types of policies that are available for protecting and preserving habitat in general? How do these two types of policies differ?

·        Create protected areas, for example national parks.

·        Restrict use of private lands. Much more resistance to this type.

 

10.       What role have nongovernmental organizations such as the Nature Conservancy played in the preservation of biodiversity?

·        NGOs act as an agent for multitude of individuals. They collect money and use this money to buy critical habitat from landowners. Reduce transaction costs.