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Choices and the value of natural capital

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  • Eli P Fenichel
  • Yukiko Hashida

Abstract

Sustainability requires maintaining opportunities for future generations, so they can meet their needs. Opportunities are passed to future generations through a set of capital assets. Nature provides an important class of these assets, but markets seldom reveal the marginal value of natural capital. Rather, the marginal social worth or asset price must be imputed based on intertemporal exchange. In the context of assessing whether intertemporal allocation rules lead to sustainable development, appropriate asset prices must be based on the actual allocations and trade-offs society makes. Therefore, measuring economic programmes that enable the measurement of asset prices is an important empirical task. We review the theory of measuring natural capital asset prices and discuss the key elements of measuring economic programmes that enable the measurement of natural capital asset prices. We place the measurement of economic programmes and natural capital asset prices in the context of wealth-based sustainability metrics.

Suggested Citation

  • Eli P Fenichel & Yukiko Hashida, 2019. "Choices and the value of natural capital," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 35(1), pages 120-137.
    • Handle: RePEc:oup:oxford:v:35:y:2019:i:1:p:120-137.
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    File URL: http://hdl.handle.net/10.1093/oxrep/gry021
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    4. Barbier , Edward B., 2020. "From Limits to Growth to Planetary Boundaries: The Evolution of Economic Views on Natural Resource Scarcity," 2020 Conference (64th), February 12-14, 2020, Perth, Western Australia 305259, Australian Agricultural and Resource Economics Society.
    5. Manning, Dale T. & Rad, Mani Rouhi & Suter, Jordan F. & Goemans, Christopher & Xiang, Zaichen & Bailey, Ryan, 2020. "Non-market valuation in integrated assessment modeling: The benefits of water right retirement," Journal of Environmental Economics and Management, Elsevier, vol. 103(C).
    6. Ioannis Souliotis & Nikolaos Voulvoulis, 2021. "Natural Capital Accounting Informing Water Management Policies in Europe," Sustainability, MDPI, vol. 13(20), pages 1-24, October.
    7. Matthew K. Agarwala & Diane Coyle & Cristina Peñasco & Dimitri Zenghelis, 2024. "Measuring for the Future, Not the Past," NBER Chapters, in: Measuring and Accounting for Environmental Public Goods: A National Accounts Perspective, National Bureau of Economic Research, Inc.

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