Natural Capital: From Metaphor to Measurement

Current efforts to value ecosystem services have contributed little to the valuation of natural capital, suggesting that in practice "nature is capital" primarily serves as a metaphor. We provide a theoretically motivated approach for recovering natural capital prices that expands beyond idealized management to encompass current, likely inefficient, management institutions. Theoretically consistent capital valuation requires adjusting for the net marginal productivity of the natural capital asset and price appreciation. We develop a numerical approach for approximating the value of capital that integrates estimates from ecology and economics. We employ the method to recover credible accounting prices for a pound of Gulf of Mexico reef fish as a capital asset under real-world management conditions. Our approach reveals the interdisciplinarity of natural capital valuation and the importance of understanding the feedbacks between the state of natural capital stocks, human behavior affecting these stocks, and the role of institutions in shaping that feedback.