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An Introduction to the Economics of Natural Capital

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  • Stephen Polasky
  • Gretchen Daily

Abstract

Nature can be thought of as a form of capital (natural capital) that provides essential contributions to human health, prosperity, and well-being. However, economic activity that leads to climate change, loss of biodiversity, and other ecosystem degradation has resulted in risky and costly losses of natural capital. Economics has a central role to play in analyzing the value of natural capital and in designing incentives to conserve and restore it. This symposium features perspectives on key research frontiers and advances in the economics of natural capital. The articles in the symposium focus on three crucial issues. Fisher, de Wit, and Ricketts explore the relationship between land quality—notably, its forest cover and biodiversity—and human health, highlighting the current lack of economic tools and approaches to evaluate alternative interventions to achieve public health outcomes. Barbier and Di Falco examine the relationship between land as a productive asset—its quality and ongoing degradation—and living standards in developing countries. Brandon et al. review efforts to bring natural capital into the system of national accounts and national economic policy making. Together, these articles highlight recent advances as well as the challenges that remain to reversing the decline of natural capital and achieving sustainable development.

Suggested Citation

  • Stephen Polasky & Gretchen Daily, 2021. "An Introduction to the Economics of Natural Capital," Review of Environmental Economics and Policy, University of Chicago Press, vol. 15(1), pages 87-94.
  • Handle: RePEc:ucp:renvpo:doi:10.1086/713010
    DOI: 10.1086/713010
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    Cited by:

    1. Madhu Khanna, 2022. "Breakthroughs at the disciplinary nexus: Rewards and challenges for applied economists," American Journal of Agricultural Economics, John Wiley & Sons, vol. 104(2), pages 475-492, March.
    2. Shahbaz, Muhammad & Siddiqui, Aaliyah & Ahmad, Shabbir & Jiao, Zhilun, 2023. "Financial development as a new determinant of energy diversification: The role of natural capital and structural changes in Australia," Energy Economics, Elsevier, vol. 126(C).
    3. Krishna Raj Bhandari & Mikko Ranta & Jari Salo, 2022. "The resource‐based view, stakeholder capitalism, ESG, and sustainable competitive advantage: The firm's embeddedness into ecology, society, and governance," Business Strategy and the Environment, Wiley Blackwell, vol. 31(4), pages 1525-1537, May.
    4. Rodríguez, Rosa M. & Labella, Álvaro & Nuñez-Cacho, Pedro & Molina-Moreno, Valentin & Martínez, Luis, 2022. "A comprehensive minimum cost consensus model for large scale group decision making for circular economy measurement," Technological Forecasting and Social Change, Elsevier, vol. 175(C).
    5. Zhang, Yunhui & Zhao, Wei, 2024. "Social capital's role in mitigating economic vulnerability: Understanding the impact of income disparities on farmers' livelihoods," World Development, Elsevier, vol. 177(C).

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