Ecosystem goods and services.
Now that we have a foundation of economics, let’s continue on and talk about ecosystem goods and services. The market often assigns natural resources, no quantitative monetary value, no actual costs, or money value. Because of that, we have something called non-market values, and non-market values are going to be values, not included hence why they’re called non-market values not included in the price of a good or service.
Remember how we mentioned. It’s hard to quantify certain things when we were doing a cost-benefit analysis. And here’s why these certain types of non-market values are hard to quantify since there’s no traditional means of measurement for economic worth, you can see all these different examples of non-market value. We have the use-value. It just has worth because we might use it directly. The existence, existence value. The option, the aesthetic, the scientific, the educational, the cultural value, all of these it’s very hard to assign how much they’re worth when we’re looking at the price of a good or services. Natural cycles are vital to our existence, but markets imposed no penalties. A lot of times when we disturb those natural systems that we do rely on. Here, you can see the value of the world economic systems, or I’m sorry, economic services and Earth’s economic value of the 17 ecosystem services each year equals about what we’ve quantified to about 143 trillion in 2014 dollars. That’s more than the gross domestic product of all the nations combined. So if we really quantify how much it would be for all of these things, it’s a lot of money. And the problem is we don’t include all these natural ecosystem services that the environment provides to us like storing water supplies, regulating climate, cycling nutrients, providing habitat, cultural uses, forming soil. There’s so many different aspects that we don’t look at monetarily. Let’s talk about that GDP that we just mentioned. GDP, most of us all know, is gross domestic product, and this is just monetary value of final goods and services provided each year.
Additionally, this has always been used to assess each nation’s economy to see how wealthy they are, to see how progressive they are. Are they growing? Are they seeing a decrease in economic expansion? The problem with gross domestic product is it really fails to account for those non-market values, the use, the aesthetics, the cultural, the existence, all of those aspects. And it also includes both desirable as well as undesirable activity. Meaning gross domestic product can rise as a result of crime, war, pollution, or even natural disasters. So instead of using this gross domestic product, what we can look at is something called genuine progress indicator. And here, this is just showing you what I mentioned with it includes desirable and undesirable activity GDP because spending on cleanup from oil spills can increase GDP, even though this is a negative impact. So a genuine progre… Progress indicators, sorry, can’t talk guys. A Genuine Progress Indicator or GPI it accounts for both desirable and undesirable economic activity. So the conventional economic activity plus positive non-monetary contribution such as volunteering and parenting plus negative impacts such as crime and pollution are also subtracted from this total amount. So this is more accurate in indicating what’s going on economically. And you can see that the change in the US if we’re comparing gross domestic product versus genuine progress indicator,
It includes both, or I shouldn’t say, includes both. It distinguishes between desirable and undesirable economic activity. And you can see this in the graphical illustration.
This term, full cost accounting, also called true cost accounting, accounts for all costs, all benefits. And you can see that difference in that GDP and GPI because we’re looking at external costs, we’re not just looking at internal, we’re looking at negative impacts that we might have on the environment.
Now markets can fail. Obviously, nothing’s perfect, and market failure can occur when markets ignore the environment’s positive impact that it can have on economies, meaning ecosystem services. If we ignore that, a market can fail. And also, if we ignore the negative effects of activities on the environment, or people were talking about external costs, we need to look at those things. We need to understand the importance of ecosystem services and the impacts of external costs, but obviously, government intervention can counter market failure. There could be laws and regulations that are geared towards protecting our ecosystem services or preventing external costs. We can tax harmful activities. We can design our different economic incentives to promote fairness, to promote sustainability, to promote conservation. All right, so that’s it.