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Natural Capital: From Metaphor to Measurement

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  • Eli P. Fenichel
  • Joshua K. Abbott

Abstract

Current efforts to value ecosystem services have contributed little to the valuation of natural capital, suggesting that in practice "nature is capital" primarily serves as a metaphor. We provide a theoretically motivated approach for recovering natural capital prices that expands beyond idealized management to encompass current, likely inefficient, management institutions. Theoretically consistent capital valuation requires adjusting for the net marginal productivity of the natural capital asset and price appreciation. We develop a numerical approach for approximating the value of capital that integrates estimates from ecology and economics. We employ the method to recover credible accounting prices for a pound of Gulf of Mexico reef fish as a capital asset under real-world management conditions. Our approach reveals the interdisciplinarity of natural capital valuation and the importance of understanding the feedbacks between the state of natural capital stocks, human behavior affecting these stocks, and the role of institutions in shaping that feedback.

Suggested Citation

  • Eli P. Fenichel & Joshua K. Abbott, 2014. "Natural Capital: From Metaphor to Measurement," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 1(1), pages 1-27.
  • Handle: RePEc:ucp:jaerec:doi:10.1086/676034
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    1. repec:pal:easeco:v:43:y:2017:i:3:d:10.1057_s41302-016-0013-x is not listed on IDEAS
    2. repec:wsi:wepxxx:v:03:y:2017:i:02:n:s2382624x16500089 is not listed on IDEAS
    3. repec:wsi:wepxxx:v:03:y:2017:i:02:n:s2382624x17020027 is not listed on IDEAS
    4. Mubashir Qasim & Les Oxley & Eoin McLaughlin, 2018. "Genuine Savings as a Test of New Zealand Weak Sustainability," Discussion Papers in Environment and Development Economics 2018-01, University of St. Andrews, School of Geography and Sustainable Development.
    5. Gollier, Christian, 2017. "Valuation of natural capital under uncertain substitutability," TSE Working Papers 17-813, Toulouse School of Economics (TSE).
    6. Fenichel, Eli P. & Horan, Richard D., 2016. "Tinbergen and tipping points: Could some thresholds be policy-induced?," Journal of Economic Behavior & Organization, Elsevier, vol. 132(PB), pages 137-152.
    7. Johnson Kakeu, 2016. "Exhaustibility and Risk as Asset Class Dimensions: A Social Investor Approach to Capital-Resource Economies," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 65(4), pages 677-695, December.
    8. Sato, Masayuki & Phim, Runsinarith & Managi, Shunsuke, 2015. "Sustainability indicators and the shadow price of natural capital," MPRA Paper 62612, University Library of Munich, Germany.
    9. Yun, Seong Do & Hutniczak, Barbara & Fenichel, Eli P. & Abbott, Joshua K., 2016. "The Wealth of Ecosystems:Valuing Natural Capital in the Context of Ecosystem Based Management," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 235737, Agricultural and Applied Economics Association.
    10. repec:kap:enreec:v:70:y:2018:i:3:d:10.1007_s10640-017-0161-4 is not listed on IDEAS

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