New equation puts nature's wealth on par with other assets

 Joshua Abbott

School of Sustainability associate professor Joshua Abbott and his colleague, Eli Fenichel of Yale University, have developed the first interdisciplinary equation to measure the monetary value of natural resources. In assigning a dollar value to natural capital, Abbott and Fenichel’s approach will have widespread implications for policymakers and various stakeholders, putting natural capital on par with other, more easily measured parts of society’s wealth.

In a study titled "Natural Capital: From Metaphor to Measurement," recently published in the Journal of the Association of Environmental and Resource Economists, the researchers demonstrated how their equation can estimate the monetary value of natural resources like fish stocks, groundwater or forests in the United States. Unlike earlier approaches, the method takes into consideration the “opportunity cost” of losing future units of natural capital that could have helped replenish the resource, providing economic benefits in the long run. It is underpinned by the economic principles used to value physical or human capital.