Allocation: The process of distributing resources, goods and services. The market is one of many possible allocation mechanisms.
Avoided cost: Valuing services based on the costs or harm that would be expected in the absence of those services. For example, healthy wetlands often reduce the likelihood or extent of flood damage.
Benefit transfer: Estimating the economic contribution of ecosystem services by applying the value identified in one primary research study to another location. Also known as value transfer, benefit transfer follows one of three methods: unit value transfer, function transfer, or meta-analysis.
Built capital: Includes equipment, buildings, plants, and inventories created from production factors and used to produce goods, now and in the future. Also known as human-made capital.
Carrying capacity: The number of people that can be supported within an ecosystem, based on the average level of consumption and the environmental impacts of the prevailing technology.
Compensatory damages: Payment for damages to ecosystems, intended to repay stakeholders for loss, injury, or harm suffered as a result of oversight or inaction by another.
Competitive market: A system of exchange in which there are enough buyers and sellers of similar products that no single buyer or seller is able to affect the market price for that product.
Complementarity: When goods or production factors can be used together to produce another good. For example, fish and fishing boats are complements.
Comprehensive efficiency: The services provided by built capital, in relation to the services lost as natural capital is converted into built capital.
Conjoint analysis: Choosing or ranking alternative service scenarios or ecological conditions (e.g. ranking wetland management plans that result in different levels of flood protection and fishery yields).
Contingent valuation: Determining willingness-to-pay (or accept compensation) for a change in the level of ecological service provision (e.g. willingness-to-pay for cleaner air).
Correspondence: The degree to which the ecological, social, or economic characteristics of a primary research study site are similar to those of the transfer site.
Demand: The relationship between the price of a good or service and the quantity of that good or service consumers would purchase at that price.
Development: Improvement in the quality of goods and services, as indicated by their ability to increase human well-being, in the present and indefinite future (related to the scale of resource consumption relative to replenishment rates).
Distribution: The allocation of income, wealth, or resources, whether from natural variation (e.g., mineral resources) or social institutions (e.g., socioeconomic systems).
Ecological economics: An attempt to unify economics with an understanding and appreciation of the importance of biophysical systems, especially ecosystem services. Within this framework, value can be derived from marketed and non-marketed goods and services (e.g., lumber, trees, forests, watersheds, hydrological cycles), with greater emphasis placed on carrying capacity, buffer capacity, and non-market benefits.
Ecological footprint: A spatial measure of the ecosystems (terrestrial, aquatic) necessary to support one person based on the average level of consumption and prevailing technologies of a given socioeconomic context.
Ecological scale: The size of a subsystem relative to the ecosystem that contains and sustains it.
Ecosystem health: A description of ecosystem quality, often characterized in terms of productivity (e.g., plant and animal biomass), ecological function (e.g., soil stabilization, nutrient fixation, habitat), and resilience to disturbance (e.g., resource exploitation, pollution, climatic variation), among other factors.
Ecosystem goods and services: The natural resources and ecological functions of direct or indirect value to humans. Goods are tangible, and often traded in markets (e.g., potable water, fish, timber). Services provide less tangible, often non-market benefits (e.g., flood protection, water quality, climate stability). Though more difficult to value, ecosystem services are understood to provide immense value.
Ecosystem structure: The individual organisms and communities of plants and animals, their age and spatial distribution, and any non-living natural resources that comprise an ecosystem. Interactions between these components are what produce ecosystem functions.
Efficient allocation: A pattern of production that satisfies consumer preferences, or in which the cost of supplying a good or service is equal to the benefit that good or service provides (including non-market costs and benefits).
Entropy: The randomness or disorder within a given system, often measured as the energy available to do work. The second law of thermodynamics predicts that the entropy of semi-closed systems (e.g., Earth) constantly increases, limited only by the transfer of energy from external sources (e.g., the sun).
Environmental economics: The branch of neoclassical economics that studies environmental externalities and the valuation of non-market environmental services. Environmental economists generally characterize the environment as an economic production factor, rather than as the macro-level system within which all economies function.
Environmental sink: Ecological processes capable of converting waste flows (e.g., sewage, runoff) into benign or usable resources; such processes typically have limited capacity, beyond which their ability to convert waste can be degraded or overwhelmed.
Externality: An unintended and uncompensated loss (e.g., degradation of ecosystem function) or gain (e.g., aesthetic benefits following restoration efforts) resulting from the actions of another party.
Function transfer: Applying a model of ecosystem function (or valuation) from primary research sites to transfer sites (also known as policy sites), based on measurement of the model variables at the transfer sites.
Fallacy of composition: The argument that what is true for the part must necessarily be true for the whole. The inverse – arguing that what is true for the whole is true for its parts – is the fallacy of division (or “ecological fallacy” in statistics).
Fallacy of misplaced concreteness: To reify – to consider an abstraction a concrete, tangible event or thing (e.g., “treating the map as the territory”).
Growth: An increase in quantity, dimension, mass, volume, or magnitude.
Hedonic valuation: Estimating the value of a service based on the observed willingness-to-pay for that service through purchases of correlated goods (e.g., the effect of open space on nearby housing prices).
Human Needs Assessment: An approach to evaluating human welfare that extends beyond economic indicators (e.g., income, wealth) to include the capacity to satisfy existential human needs (e.g., good health, psychological wellbeing, food and shelter, social belonging).
Index of Sustainable Economic Welfare (ISEW): An alternative to the GNP, calculated by adjusting personal consumption for various factors known to impact human welfare or sustainability (e.g., environmental degradation, income inequality).
Instrument design: Formulating the specific rules, roles, and processes by which policies are to be implemented (e.g., taxes, permitting).
Market-based valuation: Value estimates based on observed willingness-to-pay for a given good or service (i.e., market pricing).
Matrix of human needs: A framework of existential human needs and values that yields a more nuanced description of welfare than conventional economic measures.
Meta-analysis: Using data from multiple primary studies to systematically explore variation in those data, as associated with the significant contextual factors of each study.
Monopoly: A market condition in which there is a single seller of a given good or service.
Monopsony: A market condition in which there is a single purchaser of a given good or service.
Natural capital: The naturally occurring assets and systems that sustain life on Earth, including: minerals, soils, and nutrient cycles, water and hydrological cycles, cellular life (e.g., plants, animals, bacteria), energy resources, and atmospheric and climatic processes.
Non-market value: Value which is acknowledged, but not traded in markets; such value is not commonly expressed in prices, and as such, is often ignored by conventional economic decision making.
Opportunity cost: The value of alternatives which are forgone when another option is chosen.
Optimal scale of the macroeconomy: The point where the marginal social and environmental costs of expanding the overall economy equal the marginal benefits of additional production. Beyond this point, growth becomes uneconomic, despite conventional characterizations of economic expansion as "economic growth."
Primary research/study: Methods in which on-site data is collected first-hand by the researcher and analyzed in an original study.
Policy appraisal: Assessing policy outcomes according to predetermined dimensions (e.g., benefit-cost analysis, effectiveness, equity).
Production valuation approaches: Valuing ecosystem services based on the impacts those services have on economic outputs (e.g., increased shrimp yields resulting from increases in wetland area).
Region: A spatial area (terrestrial or aquatic) with definable characteristics, but not necessarily fixed boundaries (e.g., forested lands, watersheds, subtropics).
Replacement cost: Valuing ecosystem services in terms of the cost of replacing that service (e.g. the cost of building water treatment facilities as a measure of the nutrient capture function of wetlands).
Resiliency: The ability of a system to withstand and recover from disturbance (e.g., droughts or floods).
Revealed preferences: Preferences can be estimated based on observed behavior (e.g., people will pay a premium for homes adjacent to open space).
Risk: The probability of occurrence of an event expected to cause damage and/or disruption.
Secondary research/study: An interpretation of primary research data, often with a broader focus; secondary research commonly cites multiple primary research studies.
Social capital: Social capital is a metaphor for the contribution of a sense of civic identity, belonging, collective safety and security, and mutual trust associated with healthy and resilient societies.
Stated preferences: Preferences as explicitly stated (e.g., polling, public statements).
Steady-state economy: An economy that is in dynamic equilibrium with the ecosystem which sustains it; increased resource consumption is replaced by improving the quality of life with available resources.
Study site: The location where data was collected for a primary research project.
Substitutability: The ability of one good, service, or factor of production to serve as the functional equivalent of another (e.g., energy sources), often enabled by technological innovation.
Supply: The total amount of a good, service, or factor of production available to consumers or producers. Supply often grows in response to demand through increased resource use, exploration and discovery of new resource reserves, or the development of functional substitutes.
Thermodynamics: The physical science that studies energy (heat, mechanical, electrical, chemical), including conversion from one form to another. The First Law of Thermodynamics states that the quantity of energy and matter in a closed system remains constant. The Second Law of Thermodynamics states that the distribution of energy within a closed system moves constantly towards equilibrium (i.e., entropy). Combined, they establish physical limits on the scale of the economy based on the stored energy within Earth's biophysical systems and the ongoing contribution of solar energy to those systems.
Throughput: The flow of raw materials and energy from low-entropy sources (e.g., mines, fisheries, croplands) through the economy, and back to environmental sinks (e.g., oceans, atmosphere, local ecosystems) for higher-entropy wastes (e.g., heat, nutrient runoff, sewage effluent).
Transaction cost: The total cost of an exchange, including information gathering, identifying interested parties, bargaining, legal fees, etc.
Transfer site: The site being studied in the current analysis.
Travel cost: The value of site-based amenities, as inferred from the costs people incur to enjoy them (e.g. total trip costs of all visitors to the Grand Canyon).
Uncertainty: A situation in which we may know a range of possible outcomes, but do not know the probability of those outcomes. Uncertainty is unmeasurable.
Uneconomic growth: Economic activity that generates negative net benefits, often understood in terms of the scale of the macroeconomy relative to supporting ecosystems.
Unit value transfer: A benefit transfer method that takes unit values (e.g. US$ per person, US$ per hectare) from a study site and scales them to the number of relevant units at the transfer site.
Waste absorption capacity: The capacity of an ecosystem to absorb and transform waste into usable forms through biogeochemical processes. Waste absorption capacity is a renewable service that may be overwhelmed, degraded, destroyed, or used within sustainable limits.
Welfare: The state of satisfying wants or enjoying life – an experience, not a thing. Creation of welfare is the basic purpose of economic activity.