Valuation of Ecosystem Goods and Services Part 2: Implications of Unpredictable Novel Change

Abstract

This is the second part of a two-part paper which offers a new approach to the valuation of ecosystem goods and services. In the first part a simple pre-industrial model was introduced to show how the interdependencies between the three subsystems, society, economy and nature, influence values, and how values change over time.

In this second part the assumption of perfect foresight is dropped. I argue that due to novelty and complexity ex ante unpredictable change occurs within the three subsystems society, economy and nature. Again the simple pre-industrial model, which was introduced in part 1, serves as a simple paradigm to show how unpredictable novel change limits the possibility to derive accurate estimates of values.

Keywords: Complexity, Dynamic optimization, Ecosystem goods and services, Environmental valuation, Ignorance, Novel change

JEL Classification: Q57, D81, C61