Although valuing ecosystem services does not require knowledge of the function that maps human actions into ecosystem conditions, evaluating whether certain actions are in society’s best interest does require this knowledge. For example, knowing whether to allow housing development in a watershed or timber harvesting in a forest patch requires predictions of how these actions will perturb ecosystems. This perturbation will change the production and value of ecosystem goods and services, and can then be compared to the direct economic value generated by the action (e.g., housing values, value of timber harvest) to see whether or not the action generates positive net benefits.

Where an ecosystem’s goods and services can be identified and measured, it will often be possible to assign values to them by employing existing economic valuation methods. Chapter 4 provides a summary of key existing nonmarket valuation methods for (primarily aquatic) ecosystem services. Some ecosystem goods and services cannot be valued because they are not quantifiable or because available methods are not appropriate or reliable. In other cases, the cost of valuing a particular service may rule out the use of a formal method. Available economic valuation methods are complex and demanding. The results of applying these methods may be subject to judgment and uncertainty and must be interpreted with caution. Still, the general sense of a very large literature on the development and application of various methods is that they are relatively well evolved and capable of providing useful information in support of improved ecosystem valuation. There is little to be gained from a comprehensive National Academies review of these valuation methods. Indeed, the literature contains numerous authoritative reviews and critiques, and some federal agencies have published their own assessments and guidelines, which are cited and discussed briefly in Chapter 4. Thus, an important question for this committee was not how to use any particular valuation method, but how to address ecosystem services for which no existing valuation method has been identified, and how to integrate economic and ecological analysis to obtain economic values of ecosystem conservation. Similarly, while not repeating existing reviews or assessments of valuation methods, this report addresses the decision-making consequences of judgment and uncertainty, including the implications for the selection of methods in specific applications.

Probably the greatest challenge for successful valuation of ecosystem services is to integrate studies of the ecological production function with studies of the economic valuation function. After all, an understanding of the goods and services provided by a particular ecological resource, the interactions among them, and their sustainable levels can come only from ecological research and models. To integrate economic and ecological studies, the definitions of ecosystem goods and services must match across studies. In other words, the quantities of goods and services must be defined in a similar manner for both ecological studies and economic valuation studies. Failure to do so means that the results of ecological studies cannot be carried over into economic valuation studies. Attempts to value ecosystem services without this key link will either fail to have ecological underpinnings or fail to be relevant as valuation studies.

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