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MANAGING ECOSYSTEM RESOURCES

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1MANAGING ECOSYSTEM RESOURCESKenneth Arrow1, Gretchen Daily2, Partha Dasgupta3, Simon Levin4*, Karl-Gšran MŠler5, EricMaskin6, David Starrett1, Thomas Sterner7 and Thomas Tietenberg8October 26, 19991. Department of Economics, Stanford University, Stanford, CA 943052. Department of Biological Sciences, Stanford University, Stanford, CA 943053. Faculty of Economics and Politics, Cambridge University, Cambridge CB3 9DD UK*4. Department of Ecology and Evolutionary Biology, Princeton University, Princeton, NJ 08544-1002; Tel 609-258-6880; Fax 609-258-6819; Email [email protected]. The Beijer Institute, The Royal Swedish Academy of Science, Box 50005, S-104 05 StockholmSweden6. Department of Economics, Littauer 308, Harvard University, Cambridge, MA 021387. Resources for the Future, 1616 P Street, Washington, DC 200368. Department of Economics, Colby College, Waterville, ME 049012AbstractWe explore some of the special problems faced in the management of environmental resources,paying particular attention to valuation of ecosystem services, externalities, uncertainty and thenonlinearities characteristic of complex adaptive, highly interconnected systems. Throughconsideration of case studies drawn from the management of lake and mangrove ecosystems, wedevelop a theoretical perspective in which we analyze the challenges, suggest approaches to theirresolution, and endeavor to derive principles that may guide management more generally.IntroductionHumans are part of Nature, and must utilize the bounty it provides in order to survive. However,the choices we make regarding how to utilize natural systems have fundamental implications fortheir maintenance, and ultimately therefore for the sustainability of the services they providehumans. We rely on natural systems directly for food, water, oxygen, fiber, fuel andpharmaceuticals, and indirectly for pollination, for the stabilization of climates and coasts, andfor an uncountable list of other essential aspects of our quality of life (1). We deliberately modifysome systems (as in agriculture), and extract resources from others, in all cases affecting a rangeof services these systems do and might provide.The exploitation of natural systems, including efforts to modify and manage them, forces us to3confront the tradeoffs between real and potential services, and effects upon their resiliency.Though it is appropriate and relatively straightforward to construct lists of the most importantof such services, their valuationÑan essential step for making management decisionsÑposesdaunting challenges. Despite some efforts in that direction (2), it makes no sense to speak of thetotal value of ecosystem services on the planet. What does make sense, however, is to attempt toestimate the marginal costs that would be associated with having to replace the services currentlyprovided by a piece of Nature. The challenge, nonetheless, is far from easy. Conflicting valuesystems, intergenerational and intragenerational equity, and the basic principle of maintaining theintegrity and resiliency of ecosystem functions pose daunting tasks. Our goal in this paper willbe to identify some of the problems, and to illustrate them with particular examples that exhibitthe essential complexities. Our approach represents a theoretical perspective, illuminated by casestudies, rather than an effort to deal with all the practicalities of those case studies. In principle, efficient management of ecosystems involves the same economic principles as doesefficient management of fossil fuels and other capital assets. In practice, however, ecosystemspossess several features that make good management particularly problematic. They are, first ofall, highly nonlinear complex adaptive systems (3, 4), with extensive interconnections amongcomponents. Such features lead to the existence of multiple domains of attraction, to elaboratepotential path dependency in development, and to the possibility of qualitative shifts in4dynamics due to a combination of endogenous and exogenous factors. Periods of drought ingrasslands, for example, can lead to patterns of erosion, loss of tree species, and eventualdesertification if extended across long enough periods of space and time. Similar major transitionscan also occur in aquatic and marine systems due to positive feedbacks, and we will return tosome of these examples later. Our conclusions will be that, given the challenge of sustainingservices and managing ecosystems in the face of exogenous and endogenous uncertainty, suchnonlinearites and unpredictable aspects argue for adaptive management and precautionaryprinciples.A related feature is that ecosystem development is an idiosyncratic, historically constrainedprocess, making generalization difficult and uncertainty high. Finally, as regards humanexploitation, ecological assets to ultimately in large part represent public goods, and theconsequent externalities associated with their use are not usually well accounted for in marketmechanisms. In this paper, we will attempt to elucidate these difficulties and suggest ways ofmitigating their effects. In so doing, we will draw on two specific examples: mangrove swamps inthe tropics and shallow lakes in North America.Managing a mangrove ecosystemIntelligent management of any system requires quantification of costs and benefits, and5evaluation of the tradeoffs involved in different courses of action. The most powerful way to dothis bookkeeping and projection is through some sort of model, which requires as a first step theconstruction of a systematic, quantitative catalogue of the sources and consumers of ecosystemservices. For a given location, one must know which services are used locally (e.g., pollination;pest control; renewal of soil fertility; serenity); which are used globally (e.g., preservation of thegenetic library; climate stabilization), and which are exported to other regions (e.g., seafood;timber; flood control; water purification). For the case of a mangrove swamp, some of these areobvious, but some are hidden. In the category of directly consumed goods, the mangroves harborand sustain fisheries containing not only species that are endemic to the swamp, but also othersthat migrate and are only occasional users. The mangrove trees themselves are used as wood forfuel and for construction. Salt can also be produced in some circumstances.The mangroves also provide many indirect services. By providing buffers to the coastline,


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