With the exception of bioeconomic fishery models, most economic models do not provide an integrated approach to the issue of ecosystem valuation. Ecosystem services are often modeled as inputs to the economic system, but there is no explicit recognition of the impact of the economic system on ecosystems. This paper presents an integrated model that incorporates flows of services (or disservices) in both directions between an ecosystem and the economic system. The device that is used to accomplish this two-way integration is a set of biodynamic equations, which model the change over time in the stocks of various biotic resources as functions of the intrinsic growth rate of each species, the carrying capacity of the ecosystem for each species, the levels of harvest by humans, and for our purposes, the concentration of tropospheric ozone. Ozone concentrations will be modeled as exogenous variables, and we will be interested in measuring the benefits to ecosystems of a reduction in ozone concentrations. This work is being funded by the U.S. EPA to support its benefits analysis program.

The model assumes that resource stocks enter the individual’s utility function both as a direct argument (in order to reflect nonuse values), and indirectly as inputs into the household production of the commodities that ultimately provide utility. Economic use values have been separated into two categories: consumptive and nonconsumptive. Consumptive uses are those that involve some form of harvesting of the resource, such as logging or hunting. Nonconsumptive uses are those that do not involve any direct harvesting, such as birdwatching. The distinction between consumptive and nonconsumptive uses is drawn to reflect the lack of a direct impact of nonconsumptive use on the biodynamic function (i.e., on the ecosystem). By including terms to reflect harvesting by humans, the biodynamic equations integrate the two systems and act as constraints on both systems. The joint equilibrium solution to the integrated model is derived by simultaneously solving for the efficient harvest and stock levels.

A team of ecologists and economists is currently compiling information on the direct and indirect effects of ozone concentrations on a forest ecosystem. The analysis in this case study will not generate original data, but draws on existing scientific and economic data. The economic valuation techniques employed in the case study will be determined in part by the specific resource stocks that are found to be sensitive to ozone concentrations, and in part by the availability of existing data. We will conclude by discussing potential extensions of the integrated model, including modelling habitat loss and modelling the supply side of the economic system, which would allow the emissions of pollutants that lead to ozone concentrations to be endogenized.