December 16, 2008

Critical natural capital

Joshua Farley explains the concept of critical natural capital with this figure:

This is a demand curve that illustrates how the value of an additional unit of a good declines as we have more units of that good. Unlike typical demand curves, however, this one goes up to infinite as the quantity of the good goes to zero. The idea is that a certain minimum amount of natural resources is absolutely essential to human life and once we deplete or destroy natural resources down to that amount it becomes infinitely valuable.

Farley says that such irreplaceable resources include "the world's major rainforests, biodiversity, freshwater supply, and climate regulation" and that we are very near or have already crossed the threshold where we simply cannot afford further "losses." Many have argued the same thing in the past and they all turned out to be wrong.

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