3 Total Economic Value
In environmental economics, the Total Economic Value of Nature (TEV) approach
was proposed (see Randall 1987, Pearce and Moran 1994, Plottu and Plottu 2007,
see also contributions in Kumar 2010). It is based on a preference-based axiology
and embedded in micro-economic theory of rational choice. The intensity of the
preferences is reflected in the willingness to pay (WTP) for nature conservation or in
the willingness to accept (WTA) compensation for a loss of preferred nature.
Interestingly, the concept of intensity forms an interface between economics, phenomenology and even morality (Ott 2013). Nature can be a source of both worth or
values and the opposite of worth or disvalues like earthquakes, pests, infectious
diseases, etc. Nature is not just good for humans. For the rest of the article, we keep
the dimension of disvalues and disservices closely in mind but focus the benign and
beneficial dimension of nature. Nature is conceived being a broad source of utility
for humans and “utility” is a generic term for all kinds of benefits, welfare and
pleasures that result from it. One can also use natural systems as source of resources
and as sinks for pollutants. The “source-and-sink”-perspective is common in environmental economics.
This anthropocentric and preference-based TEV approach also distinguishes
between use values and non-use values. Use values include, among others, yields
(direct use) and tourist areas (indirect use), which can be measured in monetary
terms by travel cost analysis.
Option value, bequest value and existence value are categories of non-use values
within the TEV and refer to preferences in favour of nature conservation and
protection. Option values refer to a preference to make decisions from a number of
actual future options whose details are uncertain or unknown in the present. If
tropical forests and the deep sea are regarded as natural “laboratories” in which
many types of biochemical compounds are “tested” by the forces of evolution,
humanity has reasonable grounds to preserve such environments for future food
production, medical, pharmaceutical, or chemical research. Algae, for example, can
have many options that are still unknown. Since humans are omnivores, option
values are important for future food security. Perhaps an ecological civilization will
shift cultural barriers against certain edible plants and insects. Whatever that may be,
we should keep promising options open. Nature destruction can exclude options
before they are identified. Option values of nature are dispositional ones. As such,
they are hard to monetize. Ironically, there might be economic analogies between
option values of nature and the speculative future value of a start-up company at the
stock markets. Perhaps, licences for exploring some areas may indicate option
values. There are many ways by which nature can be “optional” to humans.
Genes, species, and even landscapes are full of options many yet unrealized.
Restoring nature should also count as an option. Grounding option values oscillates
between generic and specific options. The option value of the sea floor is highly
generic, while the option value of some algae species can be specified in terms of
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K. Ott and K. C. Reinmuth
In environmental economics, the Total Economic Value of Nature (TEV) approach
was proposed (see Randall 1987, Pearce and Moran 1994, Plottu and Plottu 2007,
see also contributions in Kumar 2010). It is based on a preference-based axiology
and embedded in micro-economic theory of rational choice. The intensity of the
preferences is reflected in the willingness to pay (WTP) for nature conservation or in
the willingness to accept (WTA) compensation for a loss of preferred nature.
Interestingly, the concept of intensity forms an interface between economics, phenomenology and even morality (Ott 2013). Nature can be a source of both worth or
values and the opposite of worth or disvalues like earthquakes, pests, infectious
diseases, etc. Nature is not just good for humans. For the rest of the article, we keep
the dimension of disvalues and disservices closely in mind but focus the benign and
beneficial dimension of nature. Nature is conceived being a broad source of utility
for humans and “utility” is a generic term for all kinds of benefits, welfare and
pleasures that result from it. One can also use natural systems as source of resources
and as sinks for pollutants. The “source-and-sink”-perspective is common in environmental economics.
This anthropocentric and preference-based TEV approach also distinguishes
between use values and non-use values. Use values include, among others, yields
(direct use) and tourist areas (indirect use), which can be measured in monetary
terms by travel cost analysis.
Option value, bequest value and existence value are categories of non-use values
within the TEV and refer to preferences in favour of nature conservation and
protection. Option values refer to a preference to make decisions from a number of
actual future options whose details are uncertain or unknown in the present. If
tropical forests and the deep sea are regarded as natural “laboratories” in which
many types of biochemical compounds are “tested” by the forces of evolution,
humanity has reasonable grounds to preserve such environments for future food
production, medical, pharmaceutical, or chemical research. Algae, for example, can
have many options that are still unknown. Since humans are omnivores, option
values are important for future food security. Perhaps an ecological civilization will
shift cultural barriers against certain edible plants and insects. Whatever that may be,
we should keep promising options open. Nature destruction can exclude options
before they are identified. Option values of nature are dispositional ones. As such,
they are hard to monetize. Ironically, there might be economic analogies between
option values of nature and the speculative future value of a start-up company at the
stock markets. Perhaps, licences for exploring some areas may indicate option
values. There are many ways by which nature can be “optional” to humans.
Genes, species, and even landscapes are full of options many yet unrealized.
Restoring nature should also count as an option. Grounding option values oscillates
between generic and specific options. The option value of the sea floor is highly
generic, while the option value of some algae species can be specified in terms of
138
K. Ott and K. C. Reinmuth