Theoretical Economics Letters, 2013, 3, 39-44 Published Online September 2013 (
A Macroecono mic M odel of Biodiversity Protection*
David Martin
Davidson College, Davidson, NC, USA
Received July 31, 2013; revised August 31, 2013; accepted September 10, 2013
Copyright © 2013 David Martin. This is an open access article distributed under the Creative Commons Attribution License, which
permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Many biodiversity researchers have responded to the financial constraints faced by policy makers to develop models
based upon the “Noah’s Ark” metaphor, implying that society can save only a limited amount of biodiversity. Unfortu-
nately, as Herman Daly (Land Economics , 1991) pointed out, su ch microeconomic rules can allow an ark to sink albeit
in some optimal fashion. So, I step back to look at the macroeconomic question, how big should the ark be? I start with
Norgaard’s (Ecological Economics, 2010) framework, which is based upon the con cept of a production po ssibility fron -
tier combined with a sustainability criterion. I develop a model from that starting point by shifting to an isoquant fra-
mework while maintaining the strong sustainability criterion. I demonstrate how this model allows for identifying and
addressing the key biodiversity protection policy criteria at the macroeconomic level. One key conclusion from this
modeling is that Daly’s analysis remains remarkably prescient.
Keywords: Biodiversity Protection; Natural Capital; Conservation; Macroeconomics; Sustainable Development
1. Introduction
This paper is motivated by the economic issues arising
from the goal of protecting biodiversity given financial
constraints. Because it is likely that the decline in the
stock of biodiversity will continue [1], countries recently
agreed to increase funding for protecting biodiversity
substantially [2]. However, the funding is still far less
than estimates historically [3] and recently [4] the con-
clusion is necessary. Thus, policy makers are financially
constrained when selecting their biodiversity protection
Weitzman [5] introduced the Noah’s Ark metaphor to
this situation. Following the Abrahamic tradition (To-
rah Book of Bereshit, Bible Book of Genesis, and
Quran Surah 11) that God destroyed the world by flood-
ing it with the exception of the people, animals, and
plants Noah saved in the Ark, this metaphor implies that
a constrained society chooses which aspects of biodiver-
sity to save. The literature that followed such as the stu-
dies reviewed by Brooks et al. [6] basically focuses on
the microeconomic question, which species get to board
the ark? These studies treat the size of the ark (the mac-
roeconomic question) as exogenous; after all, God told
Noah how big to build the ark in the same way that poli-
ticians tell policy makers how much th ey get to spend.
Daly’s [7] critique about using microeconomics to
balance a boat optimally while allowing it to sink (be-
cause the macroeconomics fails) resonates with the
Noah’s Ark metaphor. So, in this paper I work to answer
the macroeconomic question, how big should Noah’s
Ark be? I start with Norgaard’s [8] production possibili-
ties-based model as it explicitly includes a sustainability
criterion. I shift the framework to an isoquant-based
frame-work, but retain the strong sustainability criterion
and show how changes in it are important to the analysis.
I conclude by demonstrating how this model allows ana-
lysts to identify and address key biodiversity protection
criteria at the macroeconomic level.
*I wrote the first few versions of this paper as a Fulbright-Nehru Re-
search Scholar affiliated with the Institute of Economic Growth (Uni-
versity of Delhi). This paper has been improved substantially by the
comments of Dr. Julianne (Mills) Busa and Mr. Surit Das as well as
comments from seminar participants at the Madras School of Econom-
ics, the Sálim Ali Centre for Ornithology and Natural History, the
United States India Educational Foundation South and Central Asia
Conference, the Institute of Economic Growth, the Dhaka School o
Economics, the 2013 meeting of the US Society for Ecological Eco-
nomics, and the 2013 International C o n g ress for Conservation Biology.
2. Starting Points
A popular definition of bi o diversity is E. O. Wil so n’s [ 9] :
“all hereditarily based variation at all levels of organiza-
tion, from the genes within a single local population or
species, to the species composing all or part of a local
community, and finally to the communities themselves
opyright © 2013 SciRes. TEL
that compose the living parts of the multifarious ecosys-
tems of the world.” (p. 1). Expanding upon that defini-
tion Naeem, Duffy, and Zavaleta [10] describe seven
different ways that organisms might exhibit such varia-
tion: taxonomic diversity, phylogentic diversity, genetic
diversity, functional diversity, spatial or temporal diver-
sity, interaction diversity, and landscape diversity. This
ecological richness (reasonably) directly serves humans
within agriculture and as the basis for pharmaceuticals as
well as indirectly in ways that we would value if we un-
derstood these processes better (e.g., Cardinale et al.
[11]). It is the complexity of biodiversity (see Vira and
Adams [12]) that makes its preservation so important and
so difficult.
It is clear that biodiversity is part of our stock of natu-
ral capital [13]. Nature creates it (hence “natural”) and
nature and humans use flows from it to produce goods
and services that we value (so it is a form of capital).
Thus, although this analysis is motivated by and framed
within the context of biodiversity protection, it could be
generalized to the wider context of protecting natural
One element of biodiversity’s complexity is the sharp
debate about whether biodiversity restored through man-
made ecosystems are components of natural capital.
Åkerman [14] framed this debate as being between the
David Pearce and the Herman Daly perspectives. The
“Pearce perspective” considers natural capital to be like
any of the other forms of capital, and so allows for sub-
stitution between man-made biodiversity and natural
biodiversity. In contrast, the “Daly perspective” views
natural capital as a distinct entity than man can not create,
so it is not possib le to substitute between man-made bio-
diversity and natural biodiversity. The “Pearce perspec-
tive” is consistent with the con cept of weak sustainability
while the “Daly perspective” is consistent with strong
sustainability. I use the strong sustainability criterion
here as Figge [15] used a portfolio-theory based analysis
to show that the weak sustainability criterion alone is
insufficient to achieve the goal of sustainable develop-
Norgaard [8] integrated a sustainability criterion into
his graphical macroeconomic ecological economics
model of sustainability, which is presented in Figure 1
below. In this model, assume that society is currently
functioning at point A. This point demonstrates that the
current generation is operating inefficiently below the
production possibilities frontier that includes points B
and C. The frontier uses more ecosystem services than
point A does because the social, political, and institu-
tional arrangements include pricing and other distribu-
tional mechanisms that allow society to use ecosystem
services efficiently. To operate more efficiently, the so-
ciety at point A needs to change its social, political, and
Figure 1. Norgaard’s [8] model (Figure 2, p. 1223).
institutional arrangements to permit greater efficiency.
The curved slope of the frontier represents society’s
trade-off between current and future use of the ecosystem
services, and so is based upon the social discount rate
(including equity aspects).
The strong sustainability criterion maps the limits of
ecosystem service use before depletion of biodiversity
begins. So, while Point B is more efficient than Point A
in the sense intra-generational efficiency, it is not so-
cially efficient from an intergenerational sense because it
depletes biodiversity. At Point C society is actually u sing
less biodiversity than it “needs” to use to achieve the
goal of sustainability. That choice might reflect addi-
tional criteria that are not reflected in a traditional eco-
nomic framework, such as equity issues arising from the
distributions of income or resources.
3. A Macroeconomic Model of Biodiversity
A different representation of the same ideas is presented
in Figure 2, with the focus shifted to a traditional iso-
quant framework. Each point from (and including) Curve
A outward represents a combination of ecosystem ser-
vices used by the present (horizontal axis) or the future
(vertical axis) to achieve a certain lifestyle with a given
set of institutional arrangements. A differen t lifestyle or a
different set of institutional arrangements would change
the location of the curve. Investment in physical or hu-
man capital shifts the frontier in, say from Curve A to
Curve B, representing the concept that fewer ecosystem
services are required to achieve the output goal. The
strong sustainability criterion (the ray from the origin
labeled “SC”) represents the same concept as in Nor-
gaard’s [8] model above. One could add a Safe Minimum
Standard [16] by pivoting that ray downwards to repre-
Copyright © 2013 SciRes. TEL
Figure 2. Introduction to the model.
sent the buffer.
Figure 3 demonstrates the depletion of biodiversity.
Given an intra-generationally efficient set of social, po-
litical, and institutional arrangements, we see that Point 1
on Curve A depletes biodiversity to the detriment of the
future. The first of three effects of the depletion is for the
intra-generationally efficient frontier to shift outward to
Curve B as society would have used the best biodiversity
first so the remaining bits are more costly to use. Curve
B is drawn assuming as before that the same lifestyle can
be achieved with the same set of social, political, and
institutional arrang ements while a curve between the two
might represent a more efficient state if society were
willing to make those adjustments. Second, the sustain-
ability criterion pivots upward to represent the same
concept in an intergenerational sense. That is, given the
depletion of the best natural capital first it would be more
costly to achieve sustainability across time. Third, soci-
ety moves from starting at Point 1 to Point 2. The key
points about this shift are that Point 2 is now further
away from the origin in both the horizontal and vertical
directions and further away from the sustainability crite-
rion than Point 1. So, the present generation will have to
use even fewer ecosystem services than previously to try
to move towards sustainability. It is possible for society
to move to a point above the sustainability criterio n (e.g.,
choose a point to meet equity criteria not included in a
traditional economic assessment), and it is also possible
that biological growth could pivot the sustainability cri-
terion downwar ds over time.
Figure 3 is drawn as if the depletion of biodiversity
resulted from an intra-generationally rational decision in
the traditional neoclassical economic sense such that
sustainability is not a criterion. On the other hand, the
biodiversity depletion might also result from economi-
cally inefficient decisions such as habitat destruction
associated with inefficient market prices [17] and/or in-
adequate social-political institutions [18]. In that case,
each point would be outside of the relevant isoquant. In
Figure 3. Depleting biodiversity.
such a case, society would have to adopt intra-genera-
tionally efficient policies [17,18] as well as inter-genera-
tionally efficient policies to achieve sustainable devel-
Returning to the issue of Noah’s ark, Figure 3 allows
us to answer an implied preliminary question: is Noah’s
ark necessary? Yes, as it is impossible for Point 2 to be
or to the left of sustainability criterion SC 2. Even begin-
ning with the (wildly unrealistic?) assumption that soci-
ety is beginning from an intra-generationally efficient
starting point and shifting to an intra-generationally effi-
cient point, it moves further away from sustainability
than it began. As in the Abrahamic tradition, so ciety suf-
fers because it does not consider the intergenerational
implications of the actions it considers to be in its best
interests. So, what are the implications of Noah building
an ark, of biodiversity protection policy?
4. Modeling Biodiversity Protection Policy
Figure 4 below demonstrates how this model represents
the impacts of policies designed to protect biodiversity
from depletion. For a bit of context, consider the example
of a wetland ecosystem downstream of a dam and its
command area. Society might protect biodiversity in that
ecosystem by allowing the river to flow naturally, there-
by redirecting water from the farmers in the dam’s com-
mand area to the wetland to stab ilize the existin g wetlan d
system from potential water shortages. Or, society might
encourage farmers near the existing wetland to allow
their fields (created by draining wetlands) to return to
being wetlands thereby providing insurance for biodi-
versity in the form of increased habitat. As before as-
sume that we’re starting from Point 1 on isoquant Curve
A so we would typically move (as in Figure 3) to Point 2
on Curve B.
The first aspect is that the policy imposes opportunity
costs on society today so it becomes even more costly in
terms of ecosystem services to maintain the current life-
Copyright © 2013 SciRes. TEL
Figure 4. Impacts of biodiversity protection policy.
style. In the two examples at hand, these opportunity
costs would be the costs of compensating the command
area farmers for the use of the irrigation water they sacri-
fice and the costs of compensating the local farmers for
the agricultural profit lost by converting their fields to
wetlands. These costs are represented by the shift from
Curve B to Curve C.
Second, because less natural capital is used as a result
of protecting biodiversity, the sustainability criterion
pivot downwards from SC 2 to SC 3. For the two exam-
ples here, the pivot from SC 2 to SC 3 would represent
either the benefits from stabilizing the wetlands with the
river’s natural flow or expanding the footprint of the
wetlands. Notice that both the extent of the initial pivot
from SC 1 to SC 2 and the extent second rotation from
SC 2 to SC 3 depend upon the valuation of ecological
factors in economic terms. How important are the spe-
cific lost biodiversity components today and how impor-
tant will they be in the future (SC 1 to SC 2) as well as
how important are the protected biodiversity components
today and how impor tant will they be in the future (SC 2
to SC 3)? This possibility of a tradeoff between the lost
biodiversity and th e protected biodiv ersity is discussed in
Section 5 belo w.
It is at this point that the debate about strong versus
weak sustainability becomes relevant. As used here, the
strong sustainability criterion pivots only to the extent
that such stabilization can be considered a return to a
previously existing natural state (in comparison to the
water being directed to the wetland with man-made en-
gineering structures) or the flooded agricultural fields
used to be part of the original wetland ecosystem (in con-
trast to being man-made wetland mitigation elements).
The more “man-made” these elements are, the less the
sustainability criterion pivots.
Finally, society would shift from Point 2 to Point 3
because the policy would be both costly to the present
(require more ecosystem services to maintain the current
lifestyle) and save more ecosystem services for the future.
In these cases, Point 3 is further out the horizontal axis
because the crops lost from either the command area far-
mers or the farmers near the wetlands are likely cheaper
for society to produce than the alternative crop sources
(assuming an efficient agricultural market) so more eco-
system services than previously used will h ave to be em-
ployed to produce those altern ative crops. But, Point 3 is
further up the vertical axis because the biodiversity pro-
tected by these policies would be available to provide
services for future generations.
If society would make lifestyle or institu tional changes
the locations of Curve C and/or Point 3 could improve. If
pricing irrigation water is not a feasible policy in this
region at this time, one set of such institutional changes
might be to use the existing agricultu ral extension agents
and general education programs more effectively to assist
the command area farmers to adapt to the loss of irriga-
tion water by changing their cropping patterns and to
in-crease their families’ potentials to earn off-farm in-
comes. In the case of paying farmers to return their fields
to wetlands, rather than depleting existing governmental
revenues to pay the farmers the government could create
fee-based wildlife viewing opportunities that would fund
both those opportunities and a compensation poo l for the
5. Concluding Comments
Now we can see how the answer to the macroeconomic
question: how big of an ark should Noah build? The goal
is to move society to (or beyond) the sustainability crite-
rion by protecting biodiversity, so in Figure 4 Point 3
would be lying on or be to the left of the sustainability
criterion SC 3. First of all, is that outcome possible? Yes,
one could easily visualize that the outcomes in Figure 4
through some combinations of the three policy aspects
were discussed in the preceding section.
First of all, to raise Point 3 high enough to reach or
breach SC 3, society would hav e to impose large enough
opportunity costs upon itself so that Curve C would rise
to meet the sustainability criterion. Because these oppor-
tunity costs fundamentally take the form of not depleting
biodiversity, there are benefits in the other two policy
Second, by depleting less biodiversity the sustainabi-
lity criterion SC 3 will pivot closer to the starting point of
SC 1. As noted in Section 4, it might be possible for so-
ciety to pick and choose which components of biodiver-
sity to save and not to save thereby affecting how far SC
3 pivots down from SC 2. Weitzman [5] provided the
foundation for those choices by providing Noah with a
model for boarding the species with the largest benefit
per dollar spent. That microeconomic model (and the
subsequent elaboration of it by many others) links to this
Copyright © 2013 SciRes. TEL
model within the context of providing the means for so-
ciety to select the policies that shift Curve C up the least
for a given pivot down of SC 3 (or a maximum pivot
down of SC 3 for a given shift up of Curve C).
The third aspect of biodiversity pr otection policy is th e
shift of Point 3 to be to the righ t of Point 2 (the opportu-
nity cost to the p r esen t) and to b e high er than Po in t 3 (the
benefits to the future). So, in this macroeconomic context
Noah would want to choose the species so that the net
outcome would be as nearly a vertical rise from Point 2
to Point 3 as possible. Weitzman’s [5] microeconomic
framework would facilitate that analysis as it included
genetic distinctiveness as one way to measure each spe-
cies’ option value for the future.
So, Daly’s [7] Plimsoll line-based critique about mi-
croeconomists ignoring macroeconomics not only reso-
nates metaphorically with the Noah’s Ark problem, it
also resonates with the directions this model provides to
Noah in building his ark. This macroeconomic model is
incapable in and of itself in answering the question, how
big should Noah’s ark be? As demonstrated in the pre-
ceding two paragraphs, Noah needs complementary mi-
croeconomic analyses to select the optimal policies. At
the same time, as Noah chooses his policies (boards a
species) efficiently he can ascertain if he needs more (if
the ark should be larger). Rather than stopping biodiver-
sity protection when an insufficient [4] budget constraint
is reached, Noah should continue to protect species until
Point 3 on Curve C reaches or breaches the sustainability
criterion SC 3. The macroeconomic analysis and the mi-
croeconomic analysis must go hand-in-glove.
Of course, this model leaves open the possibility that
society could adjust its lifestyle and institutions, which
could shift the frontier inwards and, also, move society to
a point closer to the sustainability criterion. As noted in
the last paragraph of Section 4, such changes might allow
society to move even closer to sustain ability than merely
preserving biodiversity alone. Again, microeconomic ana-
lysis can suggest efficient social changes and the macro-
economic analysis would allow Noah to see the implica-
tions for whether he needs to continue building a larger
ark. The macroeconomics points to the value of the mi-
croeconomics and the microeconomics requires the ma-
croeconomics. Daly’s prescient analysis is crucial to
Noah whether he starts from Weitzman’s [5] microeco-
nomic model or from the macroeconomic model devel-
oped here.
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