Natural capital is the world's stock of natural resources, which includes geology, soils, air, water and all living organisms. Some natural capital assets provide people with free goods and services, often called ecosystem services. All of these underpin our economy and society, and thus make human life possible.
Environmental economics is a sub-field of economics concerned with environmental issues. It has become a widely studied subject due to growing environmental concerns in the twenty-first century. Environmental economics "undertakes theoretical or empirical studies of the economic effects of national or local environmental policies around the world. ... Particular issues include the costs and benefits of alternative environmental policies to deal with air pollution, water quality, toxic substances, solid waste, and global warming."
Ownership is the state or fact of legal possession and control over property, which may be any asset, tangible or intangible. Ownership can involve multiple rights, collectively referred to as title, which may be separated and held by different parties.
Habitat conservation is a management practice that seeks to conserve, protect and restore habitats and prevent species extinction, fragmentation or reduction in range. It is a priority of many groups that cannot be easily characterized in terms of any one ideology.
In law and economics, the Coase theorem describes the economic efficiency of an economic allocation or outcome in the presence of externalities. The theorem is significant because, if true, the conclusion is that it is possible for private individuals to make choices that can solve the problem of market externalities. The theorem states that if the provision of a good or service results in an externality and trade in that good or service is possible, then bargaining will lead to a Pareto efficient outcome regardless of the initial allocation of property. A key condition for this outcome is that there are sufficiently low transaction costs in the bargaining and exchange process. This 'theorem' is commonly attributed to Nobel Prize laureate Ronald Coase.
Cost–benefit analysis (CBA), sometimes also called benefit–cost analysis, is a systematic approach to estimating the strengths and weaknesses of alternatives. It is used to determine options which provide the best approach to achieving benefits while preserving savings in, for example, transactions, activities, and functional business requirements. A CBA may be used to compare completed or potential courses of action, and to estimate or evaluate the value against the cost of a decision, project, or policy. It is commonly used to evaluate business or policy decisions, commercial transactions, and project investments. For example, the U.S. Securities and Exchange Commission must conduct cost-benefit analyses before instituting regulations or deregulations.
Free-market environmentalism argues that the free market, property rights, and tort law provide the best means of preserving the environment, internalizing pollution costs, and conserving resources.
The green gross domestic product is an index of economic growth with the environmental consequences of that growth factored into a country's conventional GDP. Green GDP monetizes the loss of biodiversity, and accounts for costs caused by climate change. Some environmental experts prefer physical indicators, which may be aggregated to indices such as the "Sustainable Development Index".
Contingent valuation is a survey-based economic technique for the valuation of non-market resources, such as environmental preservation or the impact of externalities like pollution. While these resources do give people utility, certain aspects of them do not have a market price as they are not directly sold – for example, people receive benefit from a beautiful view of a mountain, but it would be tough to value using price-based models. Contingent valuation surveys are one technique which is used to measure these aspects. Contingent valuation is often referred to as a stated preference model, in contrast to a price-based revealed preference model. Both models are utility-based. Typically the survey asks how much money people would be willing to pay to maintain the existence of an environmental feature, such as biodiversity.
Ecosystem valuation is an economic process which assigns a value to an ecosystem and/or its ecosystem services. By quantifying, for example, the human welfare benefits of a forest to reduce flooding and erosion while sequestering carbon, providing habitat for endangered species, and absorbing harmful chemicals, such monetization ideally provides a tool for policy-makers and conservationists to evaluate management impacts and compare a cost-benefit analysis of potential policies. However, such valuations are estimates, and involve the inherent quantitative uncertainty and philosophical debate of evaluating a range non-market costs and benefits.
Total economic value (TEV) is a concept in cost–benefit analysis that refers to the value derived by people from a natural resource, a man-made heritage resource or an infrastructure system, compared to not having it. It appears in environmental economics as an aggregation of the values provided by a given ecosystem.
Engineering economics, previously known as engineering economy, is a subset of economics concerned with the use and "...application of economic principles" in the analysis of engineering decisions. As a discipline, it is focused on the branch of economics known as microeconomics in that it studies the behavior of individuals and firms in making decisions regarding the allocation of limited resources. Thus, it focuses on the decision making process, its context and environment. It is pragmatic by nature, integrating economic theory with engineering practice. But, it is also a simplified application of microeconomic theory in that it assumes elements such as price determination, competition and demand/supply to be fixed inputs from other sources. As a discipline though, it is closely related to others such as statistics, mathematics and cost accounting. It draws upon the logical framework of economics but adds to that the analytical power of mathematics and statistics.
Non-use value is the value that people assign to economic goods even if they never have and never will use it. It is distinguished from use value, which people derive from direct use of the good. The concept is most commonly applied to the value of natural and built resources.
Resource refers to all the materials available in our environment which are technologically accessible, economically feasible and culturally sustainable and help us to satisfy our needs and wants. Resources can broadly be classified according to their availability — they are categorized into renewable and non-renewable resources. They can also be classified as actual and potential based on the level of development and use; based on origin they can be classified as biotic and abiotic, and based on their distribution, as ubiquitous and localised. An item may become a resource with time and development of technology. The benefits of resource utilization may include increased wealth, proper functioning of a system, or enhanced well-being. From a human perspective, a natural resource is anything obtained from the environment to satisfy human needs and wants. From a broader biological or ecological perspective, a resource satisfies the needs of a living organism.
In economics, scarcity "refers to the basic fact of life that there exists only a finite amount of human and nonhuman resources which the best technical knowledge is capable of using to produce only limited maximum amounts of each economic good." If the conditions of scarcity didn't exist and an "infinite amount of every good could be produced or human wants fully satisfied ... there would be no economic goods, i.e. goods that are relatively scarce..." Scarcity is the limited availability of a commodity, which may be in demand in the market or by the commons. Scarcity also includes an individual's lack of resources to buy commodities. The opposite of scarcity is abundance. Scarcity plays a key role in economic theory, and it is essential for a "proper definition of economics itself".
"The best example is perhaps Walras' definition of social wealth, i.e., economic goods. 'By social wealth', says Walras, 'I mean all things, material or immaterial, that are scarce, that is to say, on the one hand, useful to us and, on the other hand, only available to us in limited quantity'."
In financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything that can be used to produce positive economic value. Assets represent value of ownership that can be converted into cash . The balance sheet of a firm records the monetary value of the assets owned by that firm. It covers money and other valuables belonging to an individual or to a business.
In economics, marginal utility describes the change in utility of one unit of a good or service. Marginal utility can be positive, negative, or zero.
In cost–benefit analysis and social welfare economics, the term option value refers to the value that is placed on private willingness to pay for maintaining or preserving a public asset or service even if there is little or no likelihood of the individual actually ever using it. The concept is most commonly used in public policy assessment to justify continuing investment in parks, wildlife refuges and land conservation, as well as rail transportation facilities and services. It is also recognized as an element of the total economic value of environmental resources.
John Vasil Krutilla was an American environmental economist, known for inventing the concept of existence value, the idea that undisturbed wilderness has economic value. According to Kenneth Arrow,
"John Krutilla can fairly be said to have created or stimulated most of the agenda of modern environmental economics.. .. He pioneered in developing the idea later called 'existence value,' the value generated by the mere existence of an amenity, such as an unspoiled wilderness or species of animal or plants."
Rights of nature or Earth rights is a legal and jurisprudential theory that describes inherent rights as associated with ecosystems and species, similar to the concept of fundamental human rights. The rights of nature concept challenges twentieth-century laws as generally grounded in a flawed frame of nature as "resource" to be owned, used, and degraded. Proponents argue that laws grounded in rights of nature direct humanity to act appropriately and in a way consistent with modern, system-based science, which demonstrates that humans and the natural world are fundamentally interconnected.
