On Natural Capital

This paper provides a brief on the economics of biodiversity. The human economy is seen here as being embedded in the biosphere, which is an all-embracing planetary capital asset. Ecosystems are components of the biosphere; hence, they are considered forms of ‘natural capital’. The economics of biodiversity thus constitutes the study of a specific class of asset management problems. Theoretical reasoning and empirical findings tell us that human activities have given rise to ecological overreach, breaching the safe operating space of our planetary boundaries. In effect, we have been overdrawing the global stock of natural capital. The underlying reason for the increasing overdraft is the under-pricing of natural capital. The implications of this for our economic prospects are the subject of this paper.