Ecosystem Goods and Services: Definition, Valuation and Provision

Ecosystem goods and services emanate from a functioning ecosystem and are of direct value to humans. They enter the utility function either directly (without any other inputs); or along with labor, capital, and other produced goods as inputs in a production process resulting in consumable goods. Most ecosystem goods and services have produced–although usually imperfect–substitutes. For example, mushrooms may be cultivated, trees may be grown in plantations, and the waste assimilation properties of natural watersheds can be replaced with a waste treatment plant. It is the nature of economic and population growth that some ecosystem goods and services become depleted and that humans use inputs including more plentiful ecosystem goods and services to produce new capital and goods that compensate for such depletion. An economic question is whether the substitutes for ecosystem services cost society more to produce than the opportunity cost of protecting the original ecosystem services. Many ecosystem services and some ecosystem goods are commonly received for free. The marketing of ecosystem goods and services is basically an effort to turn such recipients–those who benefit without ownership–into buyers, thereby providing market signals that serve to help protect valuable services. Some formal arrangement is needed to make this happen. We review the various mechanisms for marketing ecosystem goods and services.