Development Roast

Aesop, Golden Eggs and Ecosystem Services

Everybody knows Aesop's fable about the farmer with the goose laying golden eggs: Day after day, the lucky farmer awoke to rush to the nest and find another golden egg, growing richer by the day. But with his increasing wealth came increasing greed and impatience, and unable to wait, the farmer decided to kill the goose and get all the eggs at once. But when he opened the goose, he found it empty, with no eggs and no way to get any more. He killed the very asset that produced his wealth, while he should have nurtured and nourished it.

In this article we will apply the fable to the concept of ecosystem services. The natural capital we have (forests, streams, lakes, soil, atmosphere, etc.) is the goose, and as long as we take good care of it, it will provide us with a continuous stream of ecosystem services (wood, fish, fruits, wildlife, fuel, nutrient recycling, water filtering, air cleansing, waste decomposition, climate regulation, spiritual and aesthetic pleasures, etc.) which are the golden eggs.

The problem in Bolivia is that we have an abundance of geese (natural capital) laying golden eggs (ecosystem services), whereas we are a bit short on ordinary chickens (physical and human capital) laying edible eggs (income). Since we can't live on golden eggs alone, and since there is no well-functioning market where we can trade our golden eggs for edible eggs, we naturally try to convert some of our geese (natural capital) into chickens (agricultural land) or even directly into edible eggs (income).

There is nothing wrong with converting geese into chickens. Even turning geese into edible eggs would be OK, if we refrained from eating the eggs, and let them grow into a chickens. The important thing is to at least maintain, and preferably increase, our total stock of productive capital (physical, human and natural capital), and not be tempted to make a big feast out of all our geese, chickens and eggs.

Is Bolivia feasting too much? Nobody knows, because nobody is keeping track of anything but the edible eggs.

While the number of edible eggs (income) clearly has increased during the last few years, it is impossible to know whether this is a healthy, sustainable increase, unless we also know what has happened to the number of geese and chickens. If the number of geese and chickens has increased, we should be allowed to eat more eggs, but if the number of geese and chickens has decreased, we are on an unsustainable path that will eventually reduce future incomes, as we have been eating our productive capital.

The point I want to make is that the System of National Accounts needs to be expanded to keep track not only of edible eggs, but also of golden eggs, chickens and geese. That is, we need a System of Integrated Economic and Environmental Accounts, if we are going to be able to know whether we are on the right track or not.

A secondary point to be made is that much goose killing could be avoided if there was a well-functioning market for golden eggs (Payment for Ecosystem Services). The REDD mechanism was trying to accomplish that, since it would pay us directly for the golden eggs, thus avoiding the need to kill the goose. I hope we didn't kill that too.

Do you think Bolivia is feasting too much? How do we measure and tackle the problem? Leave your thoughts below.

Lykke E. Andersen is the Director of the Center for Economic and Environmental Modeling and Analysis (CEEMA) at the Institute of Advanced Development Studies (INESAD), La Paz, Bolivia.