THE INSURANCE VALUE OF BIODIVERSITY IN THE PROVISION OF ECOSYSTEM SERVICES
From the text: In the face of uncertainty, diversity provides insurance for risk-averse economic agents. For example, investors in financial markets diversify their asset portfolio in order to hedge their risk; firms diversify their activities, products or services when facing an uncertain market environment; farmers traditionally grow a variety of crops in order to decrease the adverse impact of uncertain environmental and market conditions. In this paper, I argue that biological diversity plays a similar role: it can be interpreted as an insurance against the uncertain provision of ecosystem services, such as biomass production, control of water run-off, pollination, control of pests and diseases, nitrogen fixation, soil regeneration, etc. Such ecosystem services are generated by ecosystems and are used by utility- maximizing and risk-averse economic agents (Daily [1997], Millennium Ecosystem Assessment [2005]).
Credits: NATURAL RESOURCE MODELING Volume 20, Number 1, Spring 2007
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