Roots of Ecosystem Services from Economics

Abstract

The consequence of human action on environmental resources was noticed by ancient thinkers like Plato. Modern concern for natural resources started with the publication of Marsh’s book Man and Nature in 1864 where he pointed out that natural resources are not infinite. Nature always remained at a core position in economic analysis. During pre-classical period, physiocrats believed that nature was the primary source of value. Classical economists like Ricardo, Malthus, Mill, put nature as an important determinant in their theories. But classical economists concentrated only to the use values, neglecting their exchange values. The writings of Marx are also rich in ecological hints. Rise of neoclassical economists brought about a change in economic analysis. Emphasis was shifted from use value to exchange value. By 1930s scope of economic analysis was restricted to the factors that command price. Gradually, natural resources completely disappeared from economic production function. Economists started to believe that natural resources can substituted for manufactured capital. During that period, non-marketed ecosystem services were kept outside the scope of economic analysis. The advent of environmentalists during the second half of 20th century opened the door for non-marketed services to be incorporated in economic analysis. For this purpose, they devised various tools like market value approaches, revealed preference approaches and stated preference approaches. Present paper will give an account of the trend of environmental concern in economic analysis.