Economic value is defined as the value a person attaches to something, could be a commodity, a service, etc., based on the benefits they derive from it. This value is often demonstrated by the person’s willingness to pay a certain amount of money (because it is economic) to have such goods or services.
The more a person is willing to pay for a commodity or service, the more value they attach to it. Now that we understand the meaning of economic value, let’s narrow down its scope to biological economic value, which is often related to the ecosystem. But before that, let’s learn what an ecosystem means.
Economic Value in an Ecosystem
An ecosystem is a community or an environment of both living and nonliving things that work together as a unit. As such, in working together, the concept of economic value comes up.
Economic value in an ecosystem refers to the value attached to ecosystems. It comprises both—the income generated by the goods and services and the benefit they make to human life and welfare.
For instance, the economic value of a forest would be not only the things it produces—wood, fruits, other commodities that one can sell in a market for money—but also the benefits it makes to human life—producing oxygen, for example.
Take another example, this time of an aquatic ecosystem. On the one hand, this ecosystem supports commercial fishing and provides for the livelihood of the local communities. On the other hand, it also helps control pollution, aids water transport and the recreational and tourism sectors.
Healthy ecosystems provide us with fertile soil, clean water, timber, and food. They reduce the spread of diseases. They protect against flooding. Worldwide, they regulate atmospheric concentrations of oxygen and carbon dioxide.
The Cycle of Economic Value in an Ecosystem
The term ‘economic value’ is used to describe the importance placed on ecosystems by individuals, which includes not only income generated from using ecosystem goods and services, but also other benefits they provide for human welfare that could alternatively be called social and ecological values.
Just like humans derive value from an ecosystem, other things in the ecosystem also derive value from humans. Plants, for example, use the carbon dioxide that humans exhale in photosynthesis. Plants also derive nutrients from the soil.
Agriculture, forestry and fisheries products, stable natural hydrological cycles, fertile soils, a balanced climate and numerous other vital ecosystem services depend upon the conservation of biological diversity.
Environmental and economic benefits of biodiversity
Biodiversity is essential for the sustainable functioning of the agricultural, forest, and natural ecosystems on which humans depend, but human activities, especially the development of natural lands, are causing a species extinction rate of 1,000 to 10,000 times the natural rate.
Maintaining biodiversity is essential for organic waste disposal, soil formation, biological nitrogen fixation, crop and livestock genetics, biological pest control, plant pollination, and pharmaceuticals. Plants and microbes help to degrade chemical pollutants and organic wastes and cycle nutrients through the ecosystem.
Now economics can recognize the value of ecosystem services. Human activities are sustained by natural ecosystems and all the living things. Natural processes can be thought of as a concrete service by economics based on the old industrial profile. For example, conversion of sunlight to energy through photosynthetic carbon dioxide fixation; retention of nutrients ratio carried out by carbon, oxygen, nitrogen, sulphur and phosphorus cycles; climate regulation, moisture control and recharging of groundwater through the water cycle; recycling of organic waste through biodegradation or moderation of flood damage; control of erosion through soil formation and its interaction with plant root system are all example of ecosystem services.
Conclusion
Economic value is defined as the value a person attaches to something—could be a commodity, a service, etc.—based on the benefits they derive from it.
An ecosystem is a community or an environment of both biotic, or living, organisms and abiotic, or nonliving, things functioning as a unit.
Economic value in an ecosystem doesn’t only refer to the positive impact of one element on another but also the adverse effect of their existence on other elements.
Economists measure the value of ecosystem services to people by estimating the amount people are willing to pay to preserve or enhance the services.