Endangering the economics of extinction

he core of the broad field of economics considers how to allocate society’s scarce resources among unlimited desires. In systems where choices are impersonal, have an impact isolated to a point in time, and require little to no ethical dilemma, traditional economics and market prices are well suited to inform the best (or optimal) choices. Many choices made in well-defined goods and services markets qualify. Examples are many, including the market for basic consumer necessities such as food, shelter, and clothing. On the production (or supply) side, economics describes the choice to produce another good or service as a balancing act between the cost and benefit of producing the next unit. The choice to produce or consume the next unit of a good or service is what economists refer to as a marginal choice and is argued as the basis for efficient decision making. In competitive markets, the cost of producing the next unit (marginal costs) are typically increasing over the relevant range of production, and the marginal benefits to the firm are synonymous with the fixed price received per unit of output. Competitive firms are price takers and will produce until the marginal cost of the next unit of production equals its market price. On the consumer (or demand) side, traditional economics similarly frames the choice of how much to consume as a balancing act between marginal cost (which is price on the consumer side) and marginal benefits from consumption. Marginal benefits from consumption are much more difficult to measure and are often based on the economist’s concept of consumer utility, an abstraction intended to capture the pleasures of consumption. More utility is always preferred. As consumption increases, the amount of utility received in consuming the next (marginal) unit is assumed to be diminishing to capture a notion of increasing satisfaction at a decreasing rate. How much to consume is determined by equating marginal utility with market price. This traditional economic view of optimal production, optimal consumption, and market exchange has been expanded to include goods without a well-defined market price. A typical example is the case of an all-you-can-eat pizza bar. After the one-time payment is made, an individual can eat as much pizza as she would like at no additional cost. However, individuals don’t consume pizza as if there were zero marginal costs. Marginal cost Species and ecosystems have been assigned dollar values through methods developed by economists. Their value is then measured in financial terms and becomes comparable to any good or service traded in markets. This assignment of economic value to biodiversity and species will not guarantee their protection. In fact, pricing these nonmarket values allows for their direct comparison with market goods on a common metric, allowing for the possibility of optimal economic extinction of a species. In contrast to a market model of choice, I propose a decision framework that incorporates complexity, uncertainty, and limits to substitution between biodiversity and monetized goods and allows for critical valuation decisions outside the market model.. Abstract