Optimal Ecosystem Management When Species Compete for Limiting Resources

Abstract

Resource-based models of species competition have been introduced recently as an alternative to the classical theory based on the Lotca-Volterra methodological approach to species competition. We consider economic management of an ecosystem for a Tilman model of mechanistic resource-based species competition where the growth of species is limited by resource availability. We analyse the equilibrium ecosystem state resulting from Nature's equilibrium, and two basic management problems: the privately optimal management problem and the socially optimal management problem. Under private optimization agents do not take into account externalities associated with the effects of their management practices on ecosystem service flows, while these effects are accounted for at the socially optimal management. We show that in general three different equilibrium species specialization patterns emerge, we completely characterize these patterns for the ecological/economic model with linear structure, and we provide policy rules so that the privately optimal state could be driven towards the socially optimal or the natural equilibrium. We also develop an approach for unifying equilibrium price theory with Tilman ecological modelling and we prove the existence and analyse the stability of a price equilibrium for a stochastic discrete choice model of species specialization. Finally we discuss equilibrium specialization and policy issues for a generalized model where species and resources interact among themselves, as a conceptual basis for incorporating detailed ecological modelling into economic management.

JEL Classification: Q0, Q2