Valuing Nature?

“Nature is like love: one of the most beautiful things on earth,
but if you put a price on it, it becomes prostitution.”
Nele Marien

Every time somebody converts a hectare of forest into a hectare of agricultural land, they have—implicitly or explicitly—compared the value of standing forest to the value of agricultural land, arriving at the conclusion that agricultural land is more valuable to them.

The calculation they have made is probably quite accurate, because millions of years of evolution have made people quite good at evaluating which of two options is best for the survival of their family.

However, what they do not take into account is that the standing forest is also valuable to other people than their immediate family. To people nearby, to people far away, to people living now and to people living in the future, and even to other species. The benefits that other people derive from your forest are called positive externalities, and even millions of years of evolution have not prepared people to take these into account.

Any person should do what he thinks is best for his family (within the limits of the law, of course). If his best option for improving the lives of his loved ones is to convert a bit of his forest into agricultural land, so be it. Nobody can criticize him for not taking into account what the other seven billion people on Earth thinks.

However, the other seven billion people could try to include their preferences into the farmer’s decision by presenting him with an even better option. They, or some global institution representing them, could, for example, present the farmer with the following alternative: “As long as you refrain from deforesting further, we will provide the technical and financial assistance needed to double productivity on the land you have already cleared. We will pay for the education of all your children, so that they don’t have to be farmers for lack of other options and we will guarantee a job for at least one family member on some of the municipality’s development projects, which we also finance.”

Obviously, financing such an option for all interested rural families would be very expensive. However, that is more or less what it would take to ensure that the land remains forested permanently. Just paying the value of the food not produced is insufficient. You also have to make sure the farmer is spending his freed up time either on agricultural intensification or in a non-agricultural job, because otherwise he could just start working for the neighboring cattle rancher, possibly causing even more deforestation than he would have on his own plot. You also have to change the options for the next generation, making sure they are so educated that they would not dream of laboring on a plot of agricultural land under the hot tropical sun. And you have to make sure that other poor families do not arrive to fill the agricultural output gap. Only after doing all this for at least a generation, would the forest be more or less safe.

Would the international community be willing to finance such a mechanism of reduced deforestation for a couple of decades? That depends on how much they value Bolivian forests.

What do you think about financial incentives to curb deforestation? Leave a reply below.

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

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  1. I believe the positive externalities associated with nature’s regulating ecoservices is more of a function of the very high transaction costs associated with the assessment-monitoring-assurance of these less tangible services. And not because people don’t want to pay for them. People would choose to pay for nothing, food or otherwise, unless a system is in place to allow ownership of goods or services in the transaction. Our economic tools and systems in place does not recognize these values, but that does not mean it cannot forever.

    Since 2006, I have applied an ecocommerce model to five “agro-eco-markets” in Minnesota USA. The key to the successes is a transparent and effecient market signal. In these transactions, the ownership is not on the public good of the clean water than leaves the land, or the carbon that is removed from the atmosphere, but on the private good associated with the management of the land that causes these public goods to occur. The demand for these land management strategies are plentiful; corporations, government, NGOs, utilities. These transactions are unique, in that each of these demanders can simultaneously enjoy the ecoservice. The feature can be capitalized by an economic concept called, “Symbiotic Demand” as illustrated in this prezi as the antithesis of the “tragedy of the commons” – which is always caused by the high transaction costs associated with incorporating these values.

  2. Virendra Nath Pandey

    Nature is called the mother.As a child our need is the feed mother nature gives us voluntarily. We shall not make her sick.If she have better feed, thus more milk you can have.As an adult mind and as sons of mother nature we have to make a balance and to be better let us create a situation which improves and make life sustainable.

  3. To conserve the nature, there is a need to balance the population growth. The more population, the more will be the deforestation and hence more polution. Larger number of kids like 8 or 7 should now be cut down to 1 or 2. Incentives should be provided for families having less children and also families should be educated for this. This way nature will not be further compromised.

    • Hi Zia, thanks for your comment. Although I agree with you that large families are not sustainable, the problem is not population per se but the kind of lifestyle that we are trying to get everyone to have.

  4. Andersen’s brief explanation of externalities goes the extra mile of explaining what sort of compensation would be adequate to induce people to make alternative decisions and leave forested land intact (the beginning quote is apt, too).

    I would go an important step farther, however: to really succeed in valuing nature, we must instill an ethos of respect for and coexistence with nature. Otherwise, we will always be a few expedient, hasty decisions away from reversing any progress we achieve. In general, relying on cognitive fixes–people making smart, logical decisions–doesn’t get one very far. Inculcating enduring values, however, yields enduring results.

    Posted by David Engel on LinkedIn

    • Hi David, Thank you very much for your suggestion. I believe you are right, and when I talk about this issue in the future, I will add this education aspect to the list of actions needed to protect nature in a sustainable way.

  5. Principally that is possible and can be done. BUT, reality is: a billion of people have no access of safe drinking water, billions have no basic sanitation, thousands of beloved kids are losing their life due to unsafe water; billions are hunger, particularly in developing countries. There are governments, institutions, bureaucracy, technocrats etc. – they are responsible, transparent, and accountable in their constitution, policy paper …but reality is always opposite …. Everybody knows that!

    Well, we say sustainable development -maintaining equity, responsive development, thinking for the future generation.But we are struggling to meet the need of today. I do agree that there should be some initiatives and agenda setting from international agency however it is impossible without -“stove heats the pan not the handle” to cook. Of course, some of the initiatives like green economy has been evolving- though it is very vague concept -not defined and outlined in a clear framework on what, how where? Valuing the nature is not a sake of protecting only flora and fauna rather than marinating the synergy between development, human life and nature – can be done changing or maintaining ! Thus, I will love to see – if local community is ready !!!!

  6. Good ideas: To get things moving, communities and activiststs need to understand the critical role of the chemical element Phosphorus in those tropical forest ecosystems – both in source and mass balance terms. Perhaps assigning value to these forests for functioning as carbon sinks for CO2, may help people integrate Earth’s Phosphorus cycle to the issue. Identifying soil-plant relations in tropical forest soils, and assigning values to those, might clarify the investment needed to save forests?

  7. I think it’s a very creative idea and not only that; you have studied the hole problem with all its economic and social variables;

    But I also think that the path that leads to the global solution has to bear in mind cheaper and more direct ways to solve the problem. For example: foresting massivly and compulsively millons of square kilometers in countrys like Bolivia, Perú and Argentina were the weather allows not to irrigate; and in a second stage we sould forest in zones were we need to provide the irrigation channles. Perhaps if each conutry would set apart the “0,001%” of its GDP to this kind of massive and compulsive forestation, the problem would be solved sooner.

    All this idea can work with yours.


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