Methodolgical foundations and explanatory potential of economic valuations

In terms of method, economic valuations build upon the monetarisa-tion of individual preferences. For the world of politics, but also for the people affected, the „trick“ of economic valuation methods lies in that they express in monetary terms the alternative actions desired by the public and implemented by politicians. This is how the quanti-tative foundations for political decisions are laid. Even if monetari-32 Economic valuation of biosphere services

sation does not always succeed, it still remains the desirable goal.

Economic valuations are often exposed to strong criticism because they determine monetary values for the natural environment. Howe-ver, an economic valuation can often consist of much more than of the process of pure monetarisation; thus, the critique of this approach should always take into account what the valuation method is sup-posed to explain.

It is monetarisation that creates the preconditions for economic valuation methods to be applied to the environment – in this case to the valuation of biosphere services. Building on the perspective of moderate anthropocentrism, economics regards people as the cen-tral body for the derivation of monetary values. In contrast, the phy-siocentric view ascribes to nature an intrinsic value that exists inde-pendently of individual preferences, and it consequently rejects transferring the economic calculation to the environment. In order to somewhat tone down this conflict between anthropocentrists and physiocentrists, the methodological foundations of the economic valuation should be presented first. Besides, in this context, it is espe-cially important to explain in more detail, which explanatory poten-tial is seen as underlying economic valuation.

Individual preferences are the starting point of economic valuati-ons. They are the reference points for the valuation approaches based on neo-classical welfare economics. In addition to the focus on the individual, the desire for additional utility maximisation is the second assumption underlying the economic valuation approach, i.e.

individuals aim at realising those alternatives that provide them with the greatest benefits.

Based on these fundamental assumptions, the task of economic valuation is also seen in recording and valuating the benefits to be gained by various alternative political actions and reproducing them in a comparable utility equivalent – usually in monetary terms. In an expanded form this can be found in formalised cost-benefit analyses.

They are conducted in the political sphere in order to increase the rationality of political decisions and contribute to objectivisation (Cansier, 1996).

When assessing economic valuations it is essential not only to have a critical look at the methodological foundations but also to consider the explanatory potential of the economic valuation approach. In this way, economics by no means pretends to assign a value to all

Methodological foundations 33

things. Rather, an attempt is made to make the usually implicit valua-tions in a society transparent and thus relevant to decisions (Burtraw and Portney, 1991; Kosz, 1997).

This explanatory potential of economic valuations can also be applied to the valuation of the biosphere. Decisions on protection of the biosphere are unavoidable. For example, the whole of biological diversity cannot be conserved in its current state. It will be essential to consider carefully the extent to which man wants to conserve bio-logical diversity. On the one hand, such decisions occur explicitly if, for example, the areas and their associated species inventories to be designated as protected areas are at stake. On the other hand, impli-cit considerations are made if a road is built through a semi-natural ecosystem for the purposes of the economic development of a region, for example. If corresponding ecological considerations have not been included in the plans for the road-building, an implicit valuation and prioritisation should be included in the decision for construction along the lines that the economic benefit should or should not be given higher priority than the loss of biological diver-sity that may be associated with the construction of the road.

No one can escape from the need to act and to make a decision.

Implicitly or explicitly, valuations are conducted constantly (Perrings et al., 1995; Goulder and Kennedy, 1997; Weikard, 1998).Because of this inevitability of decisions, especially when protecting the bios-phere, the issue of valuation should be viewed pragmatically. Empha-sising that nature has intrinsic values is of no help with most decision problems that have to be taken in political reality (Pearce and Moran, 1998). The anthropocentric approach thus has higher opera-tionality because it does not set intrinsic values of nature as absolu-tely. Instead, the anthropocentric approach aims at weighing up dif-ferent values of human societies (Heister, 1997). Another strength of anthropocentric justifications for the conservation of biological diversity lies in the fact that anthropocentric approaches can be deri-ved directly from central (liberal-democratic) principles.

With the stance of moderate anthropocentrism advocated by the Council it is at the same time possible and intended to link ecologi-cal aspects to the individual cost-benefit rationale. Because of its integrating function, moderate anthropocentric nature ethics appears to be the only perspective that can acquire social and thus legal binding force. Only this approach builds almost entirely upon 34 Economic valuation of biosphere services

the rules that already exist in and justify a civilised society (Geisen-dorf et al., 1998).

Along these lines, the attempt by economics to render such deci-sion-making situations more transparent by means of monetarisa-tion should be viewed as an approach that contributes to demon-strate the economic relevance of biosphere services. In this connec-tion, the exact calculation of the benefits granted by the biosphere is less important. The demonstration function of economic valuations is decisive (Fromm, 1997). That way, valuation studies indicate the eco-nomic relevance of environmental problems (Repetto, 1993;

Costanza et al., 1997) and thus greatly help to increase public awa-reness of environmental issues (Hampicke, 1991). The conversion, or more modestly, the attempt at conversion of biosphere services into monetary values also makes sense because the value is expressed in a „currency“ that can be understood and further processed in the political decision-making process (Daily, 1997). The results of econo-mic valuations can, thus, not only be used as arguments for anthro-pocentric conservation. Instead, they can also be helpful for physio-centric viewpoints, especially because monetary values are more con-vincing than variously perceived intrinsic values (Hampicke, 1991).

4.3 Overview of the procedure for economic valuation of the