Introducing natural capital in macroeconomic modeling

Abstract

Biodiversity loss is now widely perceived as a potential source of significant economic and financial instabilities. This is intuitive since biodiversity loss is not only a risk for the environment and a direct threat to nonhuman species but also a menace to human civilization, which relies on Nature to produce goods and services essential to its livelihood. More impactfully, “ecosystem services” are what makes human life possible. Among the most obvious services are food, water, plant materials that generate fuel, infrastructure materials, and drugs. Less visible but certainly not less essential, ecosystem services include climate regulation and natural defenses from natural forces provided by forests, carbon sequestration, or the pollination of crops by insects. Less directly apparent services also include culture, inspiration, and the sense of purpose that living in a healthy and thriving natural world gives humans every day.