Environmental Engineering Reference
In-Depth Information
of land-use have been made. With the progressive increase in data avail-
ability and a growing understanding of the requirements for making such
studies, it is anticipated that total valuation of dif erent forms of land-use
will become progressively easier.
A method for comparing dif erent ecosystem values: the production function
approach
One of the key shortcomings of many of the current studies has been that
the relative values derived for dif erent forms of land-use have been dif-
i cult, if not impossible, to compare because of the dif erent type of valu-
ations that have been made. However, in cases where a comparison may
be possible, the valuation of each type of resource is made in terms of the
static state of land-use, that is, a forested ecosystem provides a certain
value of resources, whilst a deforested agricultural ecosystem provides
another value. Thus, the value of the ecosystem is dependent on the area of
cover of a particular vegetation type. At i rst sight, the equitable method
of choosing the use of the ecosystem, based on economic value, may be
the one that produces the highest value of resources. However, economic
theory shows that this is not the case, but that the economic value of the
resource may be maximized through a combination of land-uses. Further
detailed information on the theory behind proi t maximization is given in
Common (1996) but a brief outline is given below.
If the value and thus proi t of one use of the ecosystem increases with
an increasing area of that type of land-use, proi t can be expected to be
maximized when the area of that cover of land type is maximized. The
reverse is also true, in that the proi t of another type of land-use will be
maximized when its area is maximized. This can be explained graphically
as is shown in Figure 11.1. The proi t of any enterprise is maximized when
the marginal proi t (the rate in change of proi t with a unit increase in
input) is equal to zero. 1 If we take the example of two types of land cover,
forested or deforested, the graph in Figure 11.1 shows that individual
proi ts for each enterprise will be maximized at C 3 and C 1 respectively,
where marginal proi ts are zero. However, if an area of forest cover
shown at C 2 is chosen, the total value of the area will be greater than at
either at C 3 or C 1 . This theory is known as a Pareto improvement but
will not be discussed in further detail here. In order to identify this level
of forest cover, a relationship between the total value of each ecosystem
use and levels of vegetation cover must be identii ed, that is to say that
a common denominator must be identii ed. The technique behind iden-
tifying a common denominator driving productivity is known as the
production function approach, which has been described in literature on
valuation (see Barbier, 1994).
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