Environmental Engineering Reference
In-Depth Information
be benign are typically discussed under two headings referring to their
absence in practice. These are (1) market failure and (2) policy failure.
Causes of biodiversity loss: market and policy failure
Market failure occurs when private decisions based on a set of prices, or
lack of them, do not generate an ei cient allocation of resources (Hanley
et al., 1997). With respect to biodiversity the concern is that market prices
are not reliable indicators of social cost. Social cost refers to the opportu-
nities forgone by society in committing resources in some way (Coase,
1960) and social cost in this study is taken to mean the true value that
society as a whole places on natural resources. Private cost, on the other
hand, refers simply to the i nancial cost faced by the private individual
or i rm undertaking the land use change, at current and expected market
prices.
This divergence between private and social cost occurs because managed
biodiverse landscapes generate benei ts to society in addition to those that
are transacted in the market system: external benei ts. An absence of such
external ef ects is one of the necessary conditions for market ei ciency
referred to in the previous section. Typically, the reason these benei ts
remain external to the market system is that they have the characteristics
Table 4.1
Characteristics of public and private goods
Pure Private
Goods
Quasi- private
Goods
Quasi- public
Goods
Pure Public Goods
Rivalness in
consumption;
excludability;
property rights,
market prices
Regular payments
in form of taxes or
changes are made
to i nance supply
Up to some
capability constraint
(carrying capability),
non- rivalness in
consumption
Non- rivalness in
consumption; non-
excludability; or
excessive costs of
excludability
use values
(market revealed)
non- use values
(non- market
revealed)
VALUATION DIFFICULTIES
Degree of 'familiarity' declining
Problems of 'perception' increasing
New information requirements increasing
Problems of reliability/validity increasing
Reliance of interdisciplinary research ef ort and i ndings increasing
Source:
Turner (1993).
