Economics of Non-Convex Ecosystems

Economists all too often assume that ecosystem and population dynamics are subject to convex (even linear) processes. However, research by ecosystem and population ecologists has shown that the processes in question are very often non-convex. This has important implications for environmental and resource economics. Typically, a system under study or being managed would contain multiple basins of attraction. So the system would flip from one basin to another if a "threshold" (mathematically, a bifurcation) were crossed. Furthermore, the flip could be irreversible. But even if it were reversible, the system could well display hysteresis. The latter eventuality means that in order to entice the system to return to its original basin of attraction, a different and possibly costly path has to be traced. A mistake in management may then be a lot more costly than envisaged. An example would be a possible flip of the Gulf Stream owing to fresh water intrusion from melting glaciers during global warming. These conclusions offer a sharper interpretation of the so-called precautionary principle. Moreover, the structure of optimum taxes and subsidies that Nature calls for is likely to be far more complicated than has been envisaged so far in environmental and resource economics. All this implies that environmental and resource economists would be wise to work closely with ecosystem and population ecologists. There is a great deal more to learn in the economics of non-convex ecosystems.Dasgupta, Partha is the author of 'Economics of Non-Convex Ecosystems', published 2004 under ISBN 9781402018640 and ISBN 1402018649.