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Biodiversity is the diversity within a species, between different species, and the total diversity present in an ecosystem. Extinction of species lessens the biodiversity of the ecosystem in addition to having an impact beyond the local environ.

How do species become extinct?

It is generally accepted by scientists that biodiversity is being lost (Handbook, 21). While there is some debate how much of the present extinction is caused by mankind (anthropogenic sources), there are many biologists who strongly contend that man is driving extinction way beyond its natural rate. There are many ways humans impact their environment, including land development; overexploitation or hunting; species translocation and introduction of foreign, invasive species; and pollution along with climate change. Of these, the destruction or degradation of habitats that occurs with the development of land is one of the key causes, if not the primary cause of biodiversity loss (Lande, 2). A lot of land, particularly tropical rainforest, has been developed for agricultural or other use. This clearing of lands destroys the habitat of many species. Especially at risk are the biologically rich coral reefs, grasslands, rainforests, and old-growth forests. These sources account for over 50% of all known species (Hanley, 295).

Why value biodiversity and its loss?

There are many ways in which biodiversity is valued, which also provide reasons for preserving biological richness. (As this section deals with valuing environmental goods, it's appropriate to know about Valuation).

  1. Aesthetic Value
  2. Direct Value
  3. Ecosystem Value

What Can We do about it?

It is an admirable but ultimately Quixotic goal to try and save all of the species on the planet from extinction. The costs of such an undertaking are uncertain, but definitely exorbitantly high. The benefits calculated using the above methods would also be uncertain, but most likely not enough to offset the high costs of such a grand campaign. Unfortunately, mankind's impact on its environment has been such that a certain degree of species loss seems inevitable. But mankind can also limit its impact and set up a kind of triage system for threatened or endangered species by prioritizing them based on their worth. Though valuing one form of life over another is repugnant to many, it is what is necessary to effectively and efficiently protect biodiversity and the ecosystem it supports. Whenever regulation of human behavior is concerned, it is often a call for government intervention. The area of species protection is no different, with many laws being enacted in the past 35 years concerning the preservation of biodiversity. Though the track records of the below policies have be less than stellar, they comprise a base from which to work.

  1. Local Policies
  2. National Policies
  3. International Policies

Policy Obstacles

All of these forms of policies run into the some of the problems associated with externalities and public goods that commonly surround such natural resources. The biodiversity in an unprotected landscape can be conceived as a Common-Property Good, which is an impure form of a public good. This means that the resource is exhaustible- forests can be cut to the point of depletion and species are gone when extinct. Yet people aren't able to be excluded from consuming the good- clear cutting down the forests or trapping and selling exotic species.

The issue of externalities arises when the local slash-and-burn farmer doesn't take into account the external cost he is placing on others through his practices: the costs on those who have existence values for the flora and fauna or the cost to those infirm people who could be cured by a drug discovered in the  ecosystem they're cutting down. All the farmer is considering is how he is going to raise enough crops to make a living and feed his family.

Correspondingly, rich first world countries could impose most of the costs of a biodiversity preservation program upon those poor countries that host the habitat. So the more advanced countries- those where people are likely to have an existence value for rainforests and the like- get to free-ride off of the efforts of the poorer nation to provide the public good of global biodiversity. Or, the tables could be turned and the costs of preserving biodiversity could be shifted over to the richer nations. Then the less advanced nations would be free-riding off of the efforts of the 1st World. What's clear is that hardly anyone that wants to pay for a good like biodiversity that is considered part of the national property and which is provided freely by nature.

A policymaker or economist most be mindful of such obstacles, or they can grossly misjudge the situation and what the remedy for it should be. They should know about these serious considerations, because market failures like the underprovision of a public good like biodiversity serve as justification for the government to intervene with some sort of policy.


Tropical forests such as does like the Amazon or the Congo are typically known for their wildly diverse biological resources. That's why rainforest preservation is considered one and the same with the preservation of biodiversity. Other reasons concerning the value of preserving the rainforest include incorporating its role in moderating the global climate. In this case study all the values of rainforests are explored, along with the policy solutions addressing the issue of tropical deforestation.



Handbook of Market Creation for Biodiversity: Issues in Implementation. 2004. OECD.

Hanley, Nick, Jason F. Shogren, and Ben White. Introduction to Environmental Economics. 2001. Oxford University Press, NYC.

Lande, Russell. 1999. "Extinction Risks from Anthropogenic, Ecological, and Genetic Factors." In Genetics and the Extinction of Species: DNA and the Conservation of Biodiversity. ed. Laura Landweber and Andrew P. Dobson. Princeton, NJ: Princeton Press Publishers.

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