By Pete Geddes
Foundation for Research on Economics and the Environment
Bozeman, Mont

I live in the Sourdough Creek watershed, just south of Bozeman. This mix of federal, state, and private lands is highly valued -- as a recreation spot for city residents, for its wildlife habitat, and as one of Bozeman's primary sources of drinking water.

The watershed's forests and soils are a natural filter for the melting winter snowpack. This work is performed for free. It's an example of one of the many services nature provides us, at no monetary cost. Can we put a price on ecosystem services like those provided by the Sourdough Creek watershed? Should we?

Some argue that such a valuation is either impossible or unwise. We shouldn't place a monetary value on such "intangibles" as a human life or forested views. Those who do are accused of knowing the price of everything and the value of nothing.

I have some sympathy for this argument. But we do, in fact, make such judgments every day. For example, construction standards for buildings imply how much we value human life: We don't, for example, require four fire escapes on every floor of every building and those in dangerous professions receive higher "hazard pay" for risking their lives.

Wouldn't knowing the value of the Sourdough Creek watershed services better help us appreciate their worth? Since ecosystem services don't compare well with other economic services, they are often given little weight in policy decisions.

This is because ecosystem services are a public good. Public goods are not traded in commercial markets and no one can be excluded from using them. National defense is the classic example. It's clearly impossible for a private supplier to make it available only to those who have paid their Defense Subscription Fee.

Since we all enjoy the benefits of the Sourdough Creek watershed for free and no one can be denied these benefits, there is no incentive to pay for them. But just because this is a difficult problem doesn't mean the situation is hopeless. Consider this example from New York State.

The Sterling Forest is the largest privately owned, undeveloped parcel of land within commuting distance of New York City. Like the Sourdough watershed, it was highly valued for wildlife habitat, recreation, and for protecting drinking water for nearby residents of New York City and northern New Jersey.

Plans for developing the forest led environmental entrepreneurs to mobilize and purchase the land and preserve it as open space. In 1998, 90 percent of its land had been protected. New York City contributed $1.5 billion to avoid spending $6 billion to $8 billion for the construction of new water treatment plants.

In the American West, conservation efforts have focused on protecting large areas of federal public lands, such as Yellowstone. In recent years, attention has focused on identifying and protecting the connective tissue between these "islands." This is because the theory of island biogeography tells us that protected areas like Yellowstone are simply too small to support viable populations of wide-ranging species, including grizzly bears.

Here's a quick lesson. Take a map of the West and a pen. Circle all the protected lands -- wilderness areas, national parks and wildlife refuges. Pretend the space between them is water. The result is a series of islands, often surrounded by intense resource use and development. When animals like wolves are confined to small habitat islands they meet a predictable fate: extinction.

However, market forces place a higher value on open land for real estate development. Since the ecosystem services produced by these lands are unpriced, land-use change follows. This comes at the expense of open space and wildlife habitat.

Speaking of liberty, Thomas Paine said, "What we obtain too cheap, we esteem too lightly." Settling on values for nature's services offers the possibility of creating incentives for landowners to advance conservation and ecological protection.

Developing markets for ecosystem services has the potential to compensate landowners -- private, NGO, or governmental -- for the environmental benefits they provide. This would promote conservation and stewardship, perhaps making us more aware of our interrelationship and dependence on the natural world.

Pete Geddes is program director of the Foundation for Research on Economics and the Environment (FREE) and Gallatin Writers. Both are based in Bozeman, Montana.

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