People affect nature, nature affects people. This interaction of humans and nature creates opportunities and risks to both. One major challenge today is how to protect biodiversity. Across the world, scientists tell us the diversity and abundance of life on earth is declining. From coral reefs affected by bleaching and pollution, to lions in Africa, to marine mammals killed by plastic pollution, we hear increasingly bad news from the natural world. Economics can help us understand why these losses are happening and figure out how to reverse these losses.
Consider first the loss of many species in farmland birds, bumblebees and butterflies from parts of the UK where they were previously abundant. One important reason for this loss has been the very big changes over the last 60 years that have taken place in how UK farmland is managed. Farmers have responded to signals from markets about what outputs society values – food – yet receive no reward from markets for protecting biodiversity on their land. Indeed, decisions to protect birds, bees, and butterflies may cost farmers since they have to forego the chance to increase their incomes. Market failure, as economists call it, thus results in a negative pressure on farmland biodiversity. Economics can thus help us understand why biodiversity declines. But it can also help us fix this problem. Since the late 1980s, farmers have been offered financial incentives under the Common Agricultural Policy to change their land management to be more wildlife-friendly. Now protecting wildlife is consistent with protecting family farm incomes. But how exactly we choose to implement these wildlife subsidies turns out to be crucial for how effective such a policy is at reversing the decline in farmland wildlife, and how much this costs the taxpayer.
In Africa, lion populations are declining as their habitats are modified and as lions are illegally killed. However, if we think about the economic incentives for people actually living in lion country, it’s clear that they can be worse off when lions are around, since lions prey on livestock and pose dangers to local people. Economists advise that what needs to happen is that local people need to be able to benefit more from protecting lions. This could happen if developers promote wildlife tourism businesses that benefit local communities. Moreover, we need to think carefully about the net effects of banning global trade in wildlife products. With regard to the conservation of African elephants, banning trade in ivory drives up its price. Higher prices for ivory mean higher rewards for poachers, and more chance of conflict. Banning trade also deprives countries of the chance to gain income from the sustainable management of elephant herds. While many find the killing of wild animals morally repugnant, and while legal trade in wildlife products can enhance opportunities for illegal trade, banning trade in something can generate incentives for people to increase hunting efforts.
Economics also tells us that badly-designed environmental policy can make the plight of wildlife worse. In the United States, the conflict over the Lesser Prairie Chicken protected by the Endangered Species Act is a prime example. The law requires people to protect any endangered irrespective of the cost to protect the species. Protecting the bird means more control over grazing, irrigation, construction, and energy development in five Western states regardless of costs to the landowners in the states. The five governors of these states have all complained about the costs of this law. The federal government has tried to respond by offering up less confrontational conservation approaches, like not prosecuting landowners who accidentally harm the bird, provided that they agreed to restore its habitat. The goal was to encourage collaboration rather than conflict between state governments and private landowners, modify land management, restrict energy leasing on state land, and create incentives for conservation on private land. This plan, however, remains controversial. Congress has attempted to block it, while states, industry, and environmental groups mounted legal challenges.
Finally, invasive species have been recognised by ecologists as posing a serious threat to native wildlife. Economics tells us that markets generate inadequate incentives for the control of invasive species. If a private landowner spends money on controlling an invasive species on his land, this generates spill-over benefits to neighbouring landowners. Each landowner thus has an incentive to free ride on the control efforts of others, so that we can easily see an outcome where no-one chooses to act, even though society would be better off if everyone cooperated to control the spread of invasive species. Economic analysis can reveal good ways to encourage such cooperation, and thus the best ways of countering this global threat to biodiversity.
Featured image credit: “Elephant African Bush” by cocoparisienne. Pixabay License via Pixabay.