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Market Failures, the Environment, and Human Health  

Karyn Morrissey

Knowledge of the important role that the environment plays in determining human health predates the modern public health era. However, the tendency to see health, disease, and their determinants as attributes of individuals rather than characteristics of communities meant that the role of the environment in human health was seldom accorded sufficient importance during much of the 20th century. Instead, research began to focus on specific risk factors that correlated with diseases of greatest concern, i.e., the non-communicable diseases such as cardiovascular disease, asthma, and diabetes. Many of these risk factors (e.g., smoking, alcohol consumption, and diet) were aspects of individual lifestyle and behaviors, freely chosen by the individual. Within this individual-centric framework of human health, the standard economic model for human health became primarily the Grossman model of health and health care demand. In this model, an individual’s health stock may be increased by investing in health (by consuming health services, for example) or decreased by endogenous (age) or exogenous (smoking) individual factors. Within this model, individuals used their available resources, their budget, to purchase goods and services that either increased or decreased their health stock. Grossman’s model provides a consumption-based approach to human health, where individuals purchase goods and services required to improve their individual health in the marketplace. Grossman’s model of health assumes that the goods and services required to optimize good health can be purchased through market-based interactions and that these goods and services are optimally priced—that the value of the goods and services are reflected in their price. In reality, many types of goods and services that are good for human health are not available to purchase, or if they are available they are undervalued in the free market. Across the environmental and health literature, these goods and services are, today, broadly referred to as “ecosystem services for human health.” However, the quasi-public good nature of ecosystem services for human health means that the private market will generate a suboptimal environment for both individual and public health outcomes. In the face of continued austerity and scarce public resources, understanding the role of the environment in human health may help to alleviate future health care demand by decreasing (or increasing) environmental risk (or benefits) associated with health outcomes. However, to take advantage of the role that the environment plays in human health requires a fundamental reorientation of public health policy and spending to include environmental considerations.

Article

Economics of the Biodiversity Convention  

Joanne C. Burgess

Biological diversity refers to the variety of life on Earth, in all its forms and interactions. Biological diversity, or biodiversity for short, is being lost at an unprecedented rate. The International Union for Conservation of Nature (IUCN) Red List of Threatened Species estimates that 25% of mammals, 41% of amphibians, 33% of reef building corals, and 13% of birds are threatened with extinction. These biodiversity benefits are being lost due to conversion of natural habitat, overharvesting, pollution, invasive species, and climate change. The loss of biodiversity is important because it provides many critical resources, services, and ecosystem functions, such as foods, medicines, clean air, and storm protection. Biodiversity loss and ecosystem collapse pose a major risk to human societies and economic welfare. The CBD was established in 1992 at the United Nations Conference on Environment and Development (the Rio “Earth Summit”) and enacted in 1993. The international treaty aims to conserve biodiversity and ensure the sustainable use of the components of biodiversity and the equitable sharing of the benefits derived from the use of genetic resources. The CBD has near universal global participation with 196 parties signatory to the treaty. The non-legally binding commitments established in 2010 by the CBD are known as the Aichi Targets. They include the goal of conserving at least 17% of terrestrial and inland water habitats and 10% of coastal and marine areas by 2020. Biodiversity continues to decline at an unprecedented rate and the world faces “biological annihilation” and a sixth mass extinction event. There are several underlying causes of the continuing loss of biodiversity that need to be addressed. First, the CBD Aichi Targets are not ambitious enough and should be extended to protect as much as 50% of the terrestrial realm for biodiversity. Second, it is difficult to place an economic value on the range of direct, indirect, and nonuse values of biodiversity. The failure to take into account the full economic value of biodiversity in prices, projects, and policy decisions means that biodiversity is often misused and overused. Third, biodiversity is a global public good and displays nonrival and nonexcludable characteristics. Because of this, it is difficult to raise sufficient funds for conservation and to channel these funds to cover local conservation costs. In particular, much of the world’s biodiversity is located in (mainly tropical) developing countries, and they do not have the incentive or the funds to spend the money to “save” enough biodiversity on behalf of the rest of the world. The funding for global biodiversity conservation is $4–$10 billion annually, whereas around $100 billion a year is needed to protect the Earth’s broad range of animal and plant species. This funding gap undermines CBD’s conservation efforts. Governments and international organizations have been unable to raise the investments needed to reverse the decline in biological populations and habitats on land and in oceans. There is an important role for private-sector involvement in the CBD to endorse efforts for more sustainable use of biodiversity and to contribute funds to finance conservation and habitat protection efforts.