The Economics of Rural and Agricultural Ecosystem Services: Purism versus Practicality

Abstract

Ecosystem goods and services (we henceforth refer to these solely as services] have been defined in general terms as outputs of natural systems that benefit society (Daily 1997, Millennium Ecosystem Assessment 2005] or, more precisely, as the flows from an ecosystem that are of relatively immediate benefit to humans and occur naturally (Brown et al. 2 0 0 7, p. 3 3 4]. Economists have long recognized capacity of natural systems to provide market and nonmarket benefits. Models to quantify these benefits have existed for decades (Krutilla 1967], The more recent concept of ecosystem services provides an alternative framework through which these values may be conceptualized and communicated. Among factors that distinguish an ecosystem service framework from traditional economic analysis, at least in principle, is a more fundamental multidisciplinary focus, including an emphasis on both ecological production and economic value (Johnston et al. forthcoming, Wainger and Mazzotta 2011], The ecosystem service perspective also seeks to distinguish benefits provided by natural ecosystems from those provided by human capital, labor, and technology, thereby providing a more direct perspective on benefits provided by natural systems (Bateman et al. 2011, Brown et al. 2007, Johnston and Russell 2011],One advantage of ecosystem service framework is its resonance with noneconomists, including ecologists and others who study biophysical processes through which ecosystems produce outcomes that are valued by society (Brown et al. 2007, Carpenter et al. 2009, Daily 1997], The framework provides a means by which to link changes in ecosystem processes and outputs to effects on social welfare, thereby facilitating cost-benefit analysis of policies and projects affecting natural systems (Wainger and Mazzotta 2011], Research in this area typically seeks to quantify tradeoffs and promote more efficient or socially beneficial policy outcomes. In part due to these attractive features, there has been an exponential rise in number of published papers on ecosystem services and related topics (Fisher etal. 2009] and numerous calls to incorporate ecosystem service information in policy analyses (e.g., Millennium Ecosystem Assessment 2005, President's Council of Advisors on Science and Technology 2011, Environmental Protection Agency 2009],Rural and Agricultural Ecosystem ServicesMuch of recent emphasis on ecosystem services has targeted services linked in some way to rural and agricultural ecosystems. These ecosystems both provide and rely upon a broad array of services (Dale and Polasky 2007, Swinton et al. 2007], Bergstrom and Ready (2009] reviewed two decades of research estimating value of agricultural amenity benefits in United States, many related to ecosystem services. Parallel themes appear in research related to economics and preservation of nonagricultural rural lands (Johnston and Swallow 2006], The multifunctional agriculture movement in United States and Europe similarly recognizes that agriculture provides benefits beyond traditional food, fiber, and fuel, including those related to ecological functions of agro-ecosystems (Batie 2003, Boody et al. 2005, Duke and Johnston 2010], Examples include provision of nutrient cycling, wildlife habitat, carbon sequestration, and recreational opportunities. As a heavily managed land use, agriculture is also source and recipient of numerous ecosystem disservices-effects on or of agriculture that directly or indirectly diminish human welfare.1Because many services and disservices of rural and agricultural ecosystems are realized outside organized markets, value of these services is often unrecognized or underappreciated (Swinton et al. 2007], Lack of recognition of these values in markets and policy is among primary causes of marketfailure in rural and agricultural systems and threats to agricultural sustainability (e. …