An Introduction to the Economics of Natural Capital

Stephen Polasky and Gretchen Daily

Review of Environmental Economics and Policy, 2021, vol. 15, issue 1, 87 - 94

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.

Date: 2021
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