Ralf Döring: Natural Capital - What's the difference?

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Natural Capital - What's the difference?

20 pp.
4.64 EUR
(October 2009)

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In his paper on "Natural capital - what's the difference" Ralf Döring starts with a historic overview on the term Natural Capital and its possible first use by Walras in 1873. In Walras' words Natural Capital is an "incommensable" production input. Before Walras physiocrats and classical economists saw "land" as the most important production factor and feared its scarcity as a cause for a stationary state of the economy. With the "marginal revolution" around 1871 the importance of land as production factor diminished (agriculture turned into a "normal" investment decision) and land was incorporated in the overall man-made capital stock of the society. This implied the necessity of monetary valuation of "nature" (functions, services and resources) because all other parts of the "capital stock" were expressed in monetary terms. As a consequence, as Döring argues, the qualitative differentiation within capital stocks disappears and every entity in it is considered as substitutable with any other. This idea is still held by exponents of weak sustainability today, although Hediger claims in his paper for the necessity of a preservation of critical stocks as part of the weak sustainability concept. Although the monetary valuation of natural capital is problematic some Ecological Economists still use monetary valuation in order to show the importance of ecological services. However, the homogeneity and, therefore, the monetary consideration of natural capital is highly controversial. Döring claims that natural capital must be seen as a heterogeneous bundle of different funds and stocks. According to the theory of funds as it has been developed in the Greifswald approach, funds and stocks can be divided into living, non-living funds and renewable/nonrenewable stocks. By means of this differentiation a more complex definition of Natural Capital is possible, that avoids both a homogenizing view (like in the pure capital concept) and the necessity of thoroughgoing monetary valuation. Moreover, specific goals for the preservation of critical levels of funds can be set. The role of economics would accordingly change from a cost-benefit analysis, which searches for an optimal path/level, to a calculation of the most efficient way to keep the target levels. At the end of his paper Döring refers to two concrete examples in environmental and resource use policy in order to show that the theory of funds is already in some sense part of concepts for concrete actions in climate change policy and fisheries management.

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