Natural capital - AbsoluteAstronomy.com

Natural capital is the extension of the economic notion of capital

Capital (economics)

In economics, capital, capital goods, or real capital refers to already-produced durable goods used in production of goods or services. The capital goods are not significantly consumed, though they may depreciate in the production process...

(manufactured means of production) to goods and services relating to the natural environment

Natural environment

The natural environment encompasses all living and non-living things occurring naturally on Earth or some region thereof. It is an environment that encompasses the interaction of all living species....

. Natural capital is thus the stock of natural ecosystems that yields a flow of valuable ecosystem goods or services into the future. For example, a stock of trees or fish

Fish

Fish are a paraphyletic group of organisms that consist of all gill-bearing aquatic vertebrate animals that lack limbs with digits. Included in this definition are the living hagfish, lampreys, and cartilaginous and bony fish, as well as various extinct related groups...

provides a flow of new trees or fish, a flow which can be indefinitely sustainable

Sustainability

Sustainability is the capacity to endure. For humans, sustainability is the long-term maintenance of well being, which has environmental, economic, and social dimensions, and encompasses the concept of union, an interdependent relationship and mutual responsible position with all living and non...

. Natural capital may also provide services like recycling

Recycling

Recycling is processing used materials into new products to prevent waste of potentially useful materials, reduce the consumption of fresh raw materials, reduce energy usage, reduce air pollution and water pollution by reducing the need for "conventional" waste disposal, and lower greenhouse...

wastes or water catchment and erosion

Erosion

Erosion is when materials are removed from the surface and changed into something else. It only works by hydraulic actions and transport of solids in the natural environment, and leads to the deposition of these materials elsewhere...

control. Since the flow of services from ecosystems requires that they function as whole systems, the structure and diversity of the system are important components of natural capital.

Background

In Natural Capitalism: Creating the Next Industrial Revolution the authors see the world's economy as being within the larger economy of natural resources and ecosystem services that sustain us. This implies that we should attribute value to things such as human intelligence

Human intelligence

Human Intelligence may refer to:* Human intelligence in the species as the property of mind that encompasses many related abilities, such as the capacities to reason, plan, problem solve, think, comprehend ideas, use languages, and learn....

and culture

Culture

Culture is a term that has many different inter-related meanings. For example, in 1952, Alfred Kroeber and Clyde Kluckhohn compiled a list of 164 definitions of "culture" in Culture: A Critical Review of Concepts and Definitions...

s to hydrocarbons, minerals, trees, and microscopic fungi. The authors argue that only through recognizing this essential relationship with the Earth's valuable resources can businesses, and the people they support, continue to exist. The book has many practical suggestions for companies interested in a sustainable future.

According to the authors, the "next industrial revolution" depends on the espousal of four central strategies: "the conservation of resources through more effective manufacturing

Manufacturing

Manufacturing is the use of machines, tools and labor to produce goods for use or sale. The term may refer to a range of human activity, from handicraft to high tech, but is most commonly applied to industrial production, in which raw materials are transformed into finished goods on a large scale...

processes, the reuse of materials as found in natural systems, a change in values from quantity to quality, and investing in natural capital, or restoring and sustaining natural resources

Natural Resources

Natural Resources is a soul album released by Motown girl group Martha Reeves and the Vandellas in 1970 on the Gordy label. The album is significant for the Vietnam War ballad "I Should Be Proud" and the slow jam, "Love Guess Who"...

."

Natural capital is described in the book Natural Capitalism as a metaphor for the mineral, plant

Plant

Plants are living organisms belonging to the kingdom Plantae. Precise definitions of the kingdom vary, but as the term is used here, plants include familiar organisms such as trees, flowers, herbs, bushes, grasses, vines, ferns, mosses, and green algae. The group is also called green plants or...

, and animal

Animal

Animals are a major group of multicellular, eukaryotic organisms of the kingdom Animalia or Metazoa. Their body plan eventually becomes fixed as they develop, although some undergo a process of metamorphosis later on in their life. Most animals are motile, meaning they can move spontaneously and...

formations of the Earth's biosphere

Biosphere

The biosphere is the global sum of all ecosystems. It can also be called the zone of life on Earth, a closed and self-regulating system...

when viewed as a means of production of oxygen

Oxygen

Oxygen is the element with atomic number 8 and represented by the symbol O. Its name derives from the Greek roots ὀξύς and -γενής , because at the time of naming, it was mistakenly thought that all acids required oxygen in their composition...

, water filter, erosion preventer, or provider of other ecosystem services. It is one approach to ecosystem valuation, an alternative to the traditional view of all non-human life as passive natural resources, and to the idea of ecological

Ecology

Ecology is the scientific study of the relations that living organisms have with respect to each other and their natural environment. Variables of interest to ecologists include the composition, distribution, amount , number, and changing states of organisms within and among ecosystems...

health. However, human knowledge and understanding of the natural environment

Natural environment

is never complete, and therefore the boundaries of natural capital expand or contract as knowledge is gained or lost.

In a traditional economic analysis of the factors of production, natural capital would usually be classified as "land" distinct from "capital" in its original sense. The historical distinction between "land" and "capital" was that land is naturally occurring and its supply is assumed to be fixed, whereas capital as originally defined referred only to man-made goods, (e.g., Georgism

Georgism

Georgism is an economic philosophy and ideology that holds that people own what they create, but that things found in nature, most importantly land, belong equally to all...

). It has been argued that it's useful to view many natural systems as capital because they can be improved or degraded by the actions of man over time (see Tragedy of the commons), so that to view them as if their productive capacity is fixed by nature alone is misleading. Moreover, they yield benefits naturally which are harvested by humans, those being nature's services, 17 of which were closely analyzed by Robert Costanza. These benefits are in some ways similar to those realized by owners of infrastructural capital which yields more goods, e.g. a factory which produces automobiles just as an apple tree produces apples.

The term and metaphor were first used by E.F. Schumacher in his book Small Is Beautiful
Small Is Beautiful
Small Is Beautiful: Economics As If People Mattered is a collection of essays by British economist E. F. Schumacher. The phrase "Small Is Beautiful" came from a phrase by his teacher Leopold Kohr...

and are closely identified with Herman Daly

Herman Daly

Herman Daly is an American ecological economist and professor at the School of Public Policy of University of Maryland, College Park in the United States....

, Robert Costanza

Robert Costanza

Robert Costanza is an American ecological economist is a University Professor of Sustainability at Portland State University in Oregon.- Biography :Robert Costanza was born in Pittsburgh, Pennsylvania....

, the Biosphere 2

Biosphere 2

Biosphere 2 is a structure originally built to be an artificial, materially-closed ecological system in Oracle, Arizona by Space Biosphere Ventures, a joint venture whose principal officers were John P. Allen, inventor and Executive Director, and Margret Augustine, CEO...

project, and the Natural Capitalism

Natural capitalism

Natural Capitalism: Creating the Next Industrial Revolution is a 1999 book co-authored by Paul Hawken, Amory Lovins and Hunter Lovins. It has been translated into a dozen languages and was the subject of a Harvard Business Review summary....

economic model of Paul Hawken

Paul Hawken

Paul Hawken is an environmentalist, entrepreneur, and author.-Life:Paul Hawken had a Swedish grandmother and a Scottish grandfather with a farm. His father worked at UC Berkeley...

, Amory Lovins

Amory Lovins

Amory Bloch Lovins is an American environmental scientist and writer, Chairman and Chief Scientist of the Rocky Mountain Institute. He has worked in the field of energy policy and related areas for four decades...

, and Hunter Lovins

Hunter Lovins

L. Hunter Lovins is an author and a promoter of sustainable development for over 30 years, is president of Natural Capitalism Solutions, a 5013 non-profit in Longmont, Colorado and the Chief Insurgent of the Madrone Project...

until recently, when it began to be used by politicians, notably Ralph Nader

Ralph Nader

Ralph Nader is an American political activist, as well as an author, lecturer, and attorney. Areas of particular concern to Nader include consumer protection, humanitarianism, environmentalism, and democratic government....

, Paul Martin Jr., and agencies of the UK government including the London Health Observatory. Some economists and politicians, including Martin, believe natural capital measures play a key role in money supply and inflation measurements in a modern economy. They point to uneconomic growth

Uneconomic growth

Uneconomic growth, in human development theory, welfare economics , and some forms of ecological economics, is economic growth that reflects or creates a decline in the quality of life. The concept is attributed to the economist Herman Daly, though other theorists can also be credited for the...

and a lack of any direct connection between measuring well-being and such indicators as GDP.

Indicators adopted by United Nations Environment Programme's World Conservation Monitoring Centre and the Organisation for Economic Co-operation and Development (OECD) to measure natural biodiversity use the term in a slightly more specific way. However, all users of the term differentiate natural from man-made manufactured capital or infrastructural capital in some way. It does not appear that the basic principle is controversial, although there is much controversy on ecological health indicators, value of nature's services and Earth itself, consistent methods of ecosystem valuation, biodiversity metrics and methods of audit that might apply to these services, systems and biomes.

Full cost accounting

Full cost accounting

Full cost accounting generally refers to the process of collecting and presenting information - about environmental, social, and economic costs and benefits/advantages - for each proposed alternative when a decision is necessary. It is a conventional method of cost accounting that traces direct...

, triple bottom line, measuring well-being and other proposals for accounting reform

Accounting reform

Accounting reform is an expansion of accounting rules that goes beyond the realm of financial measures for both individual economic entities and national economies...

often include proposals to measure an "ecological deficit" or "natural deficit" alongside a social deficit and financial deficit. It is difficult to measure such a deficit without some agreement on methods of valuating and auditing at least the global forms of natural capital (e.g. value of air, water, soil).

The concept of natural capital implies that the savings rate of an economy

Economics

Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...

is an imperfect measure of what the country is actually saving, because it measures only investment in man-made capital. The World Bank now calculates the genuine savings rate of a country, taking into account the extraction of natural resources and the ecological damage caused by CO₂ emissions.

Ecologists are teaming up with economists to measure the wealth of ecosystems and to express their value as a way of finding solutions to the biodiversity crisis. Some researchers have attempted to place a dollar figure on ecosystem services, such as the value that the Canadian boreal forest

Boreal forest of Canada

Canada's boreal forest comprises about one third of the circumpolar boreal forest that rings the northern hemisphere, mostly north of the 50th parallel. Other countries with boreal forest include Russia, which contains the majority, and the Scandinavian and Nordic countries . The boreal region in...

is contributing to global ecosystem services. If ecologically intact, the boreal forest has an estimated value of US$3.7 trillion. The boreal forest ecosystem is one of the planet's great atmospheric regulators and it stores more carbon than any other biome on the planet. The annual value for ecological services of the Boreal Forest is estimated at US$93.2 billion, or 2.5 greater than the annual value of resource extraction. The economic value of 17 ecosystem services for the entire biosphere (calculated in 1997) has an estimated average value of US$33 trillion per year. These ecological economic values are not currently included in calculations of national income accounts, the GDP and they have no price attributes because they exist mostly outside of the global markets. The loss of natural capital continues to accelerate and goes undetected by mainstream monetary analysis.

External links

Costanza, Robert (Lead Author); Cutler J. Cleveland (Topic Editor). 2008. "Natural capital." In: Encyclopedia of Earth. Eds. Cutler J. Cleveland (Washington, D.C.: Environmental Information Coalition, National Council for Science and the Environment). First published in the Encyclopedia of Earth February 26, 2007; Last revised July 31, 2008; Retrieved September 5, 2008.
Natural Capital Project. A joint venture among The Woods Institute for the Environment at Stanford University, The Nature Conservancy, World Wildlife Fund.
NOAA Economics US Economic Benefits of Natural Systems to Business and Society.
Lacombe Morgane and Aronson James, 2009. Restoring Natural Capital in Arid and Semiarid Regions Combining Ecosystem Health with Human Wellbeing. Les dossiers thématiques du CSFD. N° 7.
Earth Economics http://www.eartheconomics.org

The source of this article is wikipedia, the free encyclopedia. The text of this article is licensed under the GFDL.

Background

See also

Further reading

External links