Defining an Economics Research 

Program to Describe and Evaluate 

Ecosystem Services

Jeffrey D. Kline

United States 

Department of 

Agriculture

Forest Service

Pacific Northwest 

Research Station

General Technical

Report

PNW-GTR-700

December 2006
The Forest Service of the U.S. Department of Agriculture is dedicated to the principle of

multiple use management of the Nation’s forest resources for sustained yields of wood,

water, forage, wildlife, and recreation. Through forestry research, cooperation with the

States and private forest owners, and management of the National Forests and National

Grasslands, it strives—as directed by Congress—to provide increasingly greater service to a

growing Nation.

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large print, audiotape, etc.) should contact USDA’s TARGET Center at (202) 720-2600 (voice

and TDD). To file a complaint of discrimination, write USDA, Director, Office of Civil Rights,

1400 Independence Avenue, SW, Washington, DC 20250-9410 or call (800) 795-3272 (voice)

or (202) 720-6382 (TDD). USDA is an equal opportunity provider and employer.

Authors

Jeffrey D. Kline is a research forester, Forestry Sciences Laboratory, 3200 SW 

Jefferson Way, Corvallis, OR 97331.

Cover Photos by Jeffrey Kline and Frank Vanni.
Abstract

Kline, Jeffrey D. 2007. Defining an economics research program to describe and 

evaluate ecosystem services. Gen. Tech. Rep. PNW-GTR-700. Portland, OR: 

U.S. Department of Agriculture, Forest Service, Pacific Northwest Research 

Station. 46 p.

Balancing society’s multiple and sometimes competing objectives regarding forests 

calls for information describing the direct and indirect benefits resulting from 

forest policy and management, whether to address wildfire, loss of open space, 

unmanaged recreation, ecosystem restoration, or other objectives. The USDA Forest 

Service recently has proposed the concept of ecosystem services as a framework for 

(1) describing the many benefits provided by public and private forests, (2), evaluating the effects of policy and management decisions involving public and private 

forest lands, and (3) advocating the use of economic and market-based incentives 

to protect private forest lands from development. The concept extends traditional 

economic theory regarding multiple forest benefits and the use of economic incentives to enhance their provision, by emphasizing ecosystems as an organizing 

structure for benefits. Although the emphasis on ecosystems is new, challenges in 

evaluating ecosystem services are similar to those long faced by economists tasked 

with evaluating forest benefits: (1) defining a typology of ecosystem services, 

(2) describing and measuring ecosystem services units or outputs, and (3) describing and measuring ecosystem services per unit of values or social weights. Progress 

within the Forest Service in applying the ecosystem services concept to forest 

policy and management will depend on knowing what information will suffice, 

working across disciplines, deciding on appropriate analytical frameworks, defining the appropriate role of economic and market-based incentives, and adequately 

funding economics research. 

Keywords: Public goods, nonmarket values, economic analysis, forests and society.
Defining an Economics Research Program to Describe and Evaluate Ecosystem Services



Introduction

Natural resource policy and management in the United States often are characterized by limited budgets and multiple, and sometimes competing, societal objectives. 

Our use and management of forest lands involve tradeoffs between the current 

and potential benefits public and private lands provide to society and the effects 

our policy and management actions have on the resiliency of natural systems (for 

example, Arrow and others 2000: 1401). However, translating society’s multiple 

forestry objectives into policies and management actions has become more difficult 

as society’s objectives have become more complex (Wear 2003). Public policies 

both guide the management of public forest lands and influence the management 

decisions of private forest landowners who control 57 percent of the total forest land 

base (Smith and others 2004). With limited budgets and demands for fiscal accountability, policymakers and managers often must describe economic rationales for 

their decisions to justify public expenditures and programs, weigh public preferences and support, and compare the benefits of different policy and management 

alternatives (King and Mazzotta 2005). Debates about natural resource management—what should be produced, how much, when, where, through what means, 

and at what cost—are fundamentally social in nature (Clark 2005: 42). Social 

acceptability of forest conditions and management practices depends in part on 

economic efficiency and equity (Shindler and others 2002:1). All of these demands 

have led to increasing interest among forest policymakers and managers for ways 

to describe, evaluate, and enhance both the direct and indirect benefits arising from 

public and private forest lands. Those interests increasingly center on the concept of 

ecosystem services. 

Ecosystem services are the products of functioning ecosystems that often are 

available without direct costs to people who benefit from them. They can include 

clean air and water, protection of water recharge areas and watersheds, detention of 

floodwaters, reduction of erosion and sedimentation, biotransformation of nutrients, 

production of topsoil, habitat for pollinators, and preservation of genetic diversity, 

among others (Science and Policy Working Group 2004). Early economic analyses 

of multiple-use forestry on public lands tended to focus on select beneficial forest 

outputs, such as timber, forage, water, recreation, and habitat for species of commercial or recreational interest (for example, Gregory 1955). The public increasingly expects these same benefits from private forest lands, although they sometimes 

are produced by private landowners only as byproducts of commercial activities 

such as timber production. Describing these multiple forest benefits on public 

lands and using economic or market-based incentives to enhance their provision on 

private lands has long been the interest of economists working in forestry. However, 

Describing multiple 

forest benefits on 

public lands and using 

economic or marketbased incentives to 

enhance their provision 

on private lands has 

long been the interest 

of economists working 

in forestry. 
General TEchnical REport PNW-GTR-700



the shift toward ecosystem management in recent decades has increased interest 

among noneconomists in describing these benefits to advocate ecosystem protection 

(for example, Collins 2005). Ecosystem services provide a framework for outlining 

all of the attributes of ecosystems that benefit humans. The only real difference 

between the ecosystem services concept and economists’ traditional conceptualization of multiple forest benefits is the emphasis on ecosystems as an organizing 

structure of benefits. This emerging interest among policymakers and managers 

adds to recent trends favoring complex landscape-level research that evaluates the 

combined policy and management effects on numerous ecosystem conditions and 

processes simultaneously. 

The concept of ecosystem services initially was proposed as a way to describe 

the contributions of intact ecosystems to human well-being to advocate ecosystem 

protection (for example, Daily 1997). Recently, the USDA Forest Service has adopted the concept to serve three primary objectives: (1) better describing to Congress, 

Office of Management and Budget, and the public what the public receives from 

federally owned forests, (2) providing a comprehensive “forest benefits” framework 

for evaluating the effects of forest policy and management actions, and (3) providing forest benefits measures to aid in advocating and implementing economic and 

market-based incentives to protect private forest lands from development. Additionally, the ecosystem services concept can form the basis of empirical performance 

measures to meet national and global environmental objectives, such as the Kyoto 

Protocol outlining international commitments to reduce greenhouse gases.

The desire to describe and evaluate the benefits arising from federal forests, 

policies, and management actions is not new (for example, Bowes and Krutilla 

1989, Peterson and Randall 1984, Peterson and others 1988), but unqualified success 

has remained elusive. Most forest benefits research in the past has tended to focus 

more on identifying and conceptualizing forest values rather than operationalizing 

and measuring them (Brown and Reed 2000). Measuring and evaluating multiple 

forest benefits has always been difficult owing to a general lack of information 

describing forest benefits outputs and their values. This continues to be true with 

the adoption of ecosystem services concept as a forest benefits framework. Two 

lessons learned in recent years about ecosystem valuation in particular are (1) it 

is easy to spend large amounts of money on valuation studies, and (2) it is easy 

for benefits information to be misused in ways that undermine public support for 

natural resource decisions (King and Mazzotta 2005). Still, policy and management 

decisions must be made, and the case for continued public ownership and manage-
Defining an Economics Research Program to Describe and Evaluate Ecosystem Services

ment of land must be made as well. A charge of social and economics research is 

to produce methods and information for making sound policy and management 

decisions that appeal to the public’s desires regarding the Nation’s forests (Haynes 

2005). Given the needs of policymakers and managers, this charge now must 

include devising ways to account for benefits associated with ecosystem services on 

public and private forest lands.

Public policy and management regarding public forest lands first and foremost 

must be fashioned in response to the desires and preferences of the Nation’s 

citizenry regarding their perceptions of the multiple benefits that public forest 

lands provide. The management of private forest lands generally is influenced 

through state-level policies that regulate the forest management activities of private 

landowners. Meeting our strategic goals calls for comprehensive consideration 

of all socially valued ecosystem services on both public and private lands—what 

services are produced and where, how much they are valued by society, in what 

ways their production might be compatible or incompatible with one another or 

with other policy and management objectives, and how best to align private forest 

landowner behavior to augment the provision of services on public lands. This task 

does not necessarily mean that we will always have perfect and complete information regarding ecosystem services outputs, values, and how they change over time. 

Rather, it implies that we should be able to at least identify what information might 

be missing and try to understand its implications for pressing policy and management needs.

This paper provides an overview of public policy and management needs for 

information describing the benefits of public and private forest lands, highlighting 

the particular challenges involved in providing information using the ecosystem 

services concept to support public forest policy and management. The report is 

not a thorough review of forest benefits or ecosystem services research literature, 

which is something that may be wanting, nor is it a comprehensive review of 

valuation methods and issues, which can be found in other sources (for example, 

Champ and others 2003, Freeman 2003). Rather, this paper is a discussion of why 

ecosystem services information is needed, why it has not been rapidly forthcoming despite steady advances in benefits estimation methods in recent decades, and 

what researchers might do to address growing demand for it among policymakers 

and managers. The paper concludes by suggesting several potential areas for future 

ecosystem services research to support public forest policy and management in the 

Pacific Northwest region and the Nation.
General TEchnical REport PNW-GTR-700



The Federal Context of Forest Policy and Management 

A direct federal role in ensuring adequate provision of forest benefits exists because 

many forest benefits are public goods—there generally is no way of excluding 

nonpaying beneficiaries (for example, Nicholson 1985: 706-709). This is true as well 

for an ecosystem services framework for describing forest benefits—that is, many 

ecosystem services also are public goods. Examples of ecosystem services that are 

typically thought of as public goods include scenery, wildlife, clean air, and water, 

among others. The goal of ensuring sufficient national supplies of timber can also 

be a public good if considered in a national security context. Because beneficiaries 

of public goods generally cannot be excluded from receiving benefits, beneficiaries 

have little or no incentive to pay for their enjoyment of ecosystem services. Private 

forest landowners receive no compensation for providing them. These circumstances can lead to situations where fewer ecosystem services might be produced than 

are desired by society. To avoid their underproduction, governments generally take 

on the responsibility for producing public goods on behalf of society with public 

financing through taxation. In the case of ecosystem services, this government role 

justifiably is manifested through our system of public-owned national, state, and 

community forests. A secondary government role could include encouraging the 

provision of ecosystem services on private lands through policies and programs that 

provide appropriate incentives to private landowners to provide them. The Forest 

Service’s Forest Legacy Program is an example of such an effort. 

As an organizing principle for Forest Service work, the ecosystem services 

concept is quite consistent with the agency’s mission as it has evolved over time. 

Gifford Pinchot—first Chief of the Forest Service—described that mission as 

providing the greatest amount of good for the greatest amount of people in the 

long run (Pinchot and others 1998: 261). Although that original mission focused 

on protecting timber and water resources, the Forest Service emerged from World 

War II as a primary supplier of natural resource commodities, including timber as 

well as rangeland for grazing livestock (USDA FS 2005). Socioeconomic changes, 

coupled with new legislation passed during the 1960s, 1970s, and 1980s, eventually 

broadened the range of agency activities and objectives to consider other benefits, 

including recreation and ecological health among others (Apple 2000). Because 

many forest benefits are produced at landscape-level scales, effective government 

provision often must include considering ways in which private forest lands augment public lands in providing benefits. If necessary, this may include inducing 

private owners to pursue management activities that complement those conducted 

on public-owned lands through economic and other incentives. For this reason, the 

Forest Service now advocates strategies for managing forest lands cooperatively 

The ecosystem 

services concept is 

quite consistent with 

the Forest Service 

mission as it has 

evolved over time.
Defining an Economics Research Program to Describe and Evaluate Ecosystem Services

across public and private ownerships (for example, Haynes and others 1996, USDA 

FS 2006a). 

As a Forest Service mission, providing multiple benefits to people receives 

broad public support (Shields and others 2002). As an organizing principle for 

agency work, the ecosystem services concept provides a convenient link between 

acknowledging the multiple benefits provided by forests and managing ecosystems. 

Indeed, within its stated current mission—sustaining the health, diversity, and 

productivity of the Nation’s forests and grasslands for present and future generations—the Forest Service’s strategic plan identifies several specific goals, including 

reducing wildfire risk, reducing invasive species, providing outdoor recreation, 

providing energy, and improving watersheds (USDA FS 2004). Although the way 

the mission is described evolves, the overarching goal of providing a “greatest 

good” remains. However, it implies a particular challenge: How to provide the 

public with their preferred range of forest uses and benefits in a sustainable manner 

and at a reasonable cost. 

Given a fixed resource base, limited funding, and shifting demands for 

ecosystem services, the Forest Service mission implies a need to make tradeoffs 

among multiple and sometimes competing objectives. This process typically occurs 

through national forest planning, but it also occurs through court cases involving 

legal challenges to specific policy and management decisions. Translating multiple 

objectives into policies and management activities is complicated by several factors: (1) many public forest uses can be incompatible with each other (for example, 

intensive timber production and retaining large trees or uneven-aged stands), (2) 

policy and management decisions can have significant local socioeconomic effects, 

especially in Western States, (3) natural resource tradeoffs often must be made with 

imperfect information regarding resource benefits and values, (4) forest production 

responses to management often are uncertain or unknown, and (5) forest system 

complexity creates numerous possible alternatives (Wear 2003: 206). Policymakers and managers also must consider private forest lands as complements to public 

lands in providing many ecosystem services, and how particular policies designed 

to influence private forest owner behavior mesh with public lands management. 

These factors highlight the importance of defining sets of benefits that are appropriate and feasible to produce from the Nation’s forests based on society’s preferences 

and values, and existing landscape endowments.

Socioeconomic factors complicate fulfilling the Forest Service mission (for 

example, USDA FS 2002). United States population growth coupled with rising 

incomes conceivably increases demands for many ecosystem services—forest and 
General TEchnical REport PNW-GTR-700

other natural resource commodities, fresh water, and outdoor recreation opportunities, for example—while reducing the land area on which services are produced. 

Population growth increases demands for housing and other infrastructure, resulting in loss of forest land to development. Rising economic status and a quest for 

environmental amenities prompts migration of people to rural areas (Cordell and 

others 2004). Nationally, developed lands increased by 34 percent from 1992 to 

1997 and may double by 2025 (Alig and others 2004). Increasing fragmentation 

of forest land can result in declines in habitat and uncertain changes in the way 

remaining forest lands are managed (Kline and others 2004b). Population growth 

and resulting declines in open space also mean that remaining forest lands and the 

ecosystem services they produce are shared among more and more people. From 

1982 to 1997, undeveloped land per capita declined by 15 percent from 8.1 acres to 

6.9 acres per person, with greater reductions in the fastest growing regions (USDA 

NRCS 2001, USDC Bureau of the Census 2000). United States residents are placing 

ever greater demands on an ever-declining forest land base, for water, recreation, 

and environmental amenities (Kline and others 2004a). 

At the same time, federal forest policymakers and managers must answer 

calls for fiscal accountability (for example, Office of Management and Budget 

1996). Two persistent challenges faced by the Forest Service recently have been 

describing and defending the expected economic benefits resulting from ecosystem 

restoration and wildfire management activities. Many of the values represented in 

current wildfire policy and management decisionmaking processes—the Wildland 

Fire Situation Analysis decision-support tool, for example—are highly subjective 

(MacGregor and Haynes 2005). Research is needed to develop decision frameworks 

that provide a stronger and more consistent basis for justifying policy and management activities based on the benefits and costs expected to result from them. Any 

forest policy or management path we choose defines a particular ecological trajectory characterized by a flow of goods and services accruing from the natural capital 

inherent in healthy ecosystems (for example, Science and Policy Working Group 

2002, 2004). Ecosystem management decisions ultimately are economic decisions, 

whereby society evaluates the utility of different management alternatives, including inaction (Weigand and Haynes 1996). Deciding on one policy or management 

path necessarily carries costs associated with foregone opportunities. 

Evaluating the multiple benefits provided by public and private forest lands 

enables policymakers and managers to better pursue forest policy and management 

that is socially and politically acceptable, broaden public interest and representation 

in decisionmaking, and reduce potential conflict and resistance to management 

decisions by responding to diverse and changing public views and opinions (Tarrant 
Defining an Economics Research Program to Describe and Evaluate Ecosystem Services

and others 2003). Forest stakeholders increasingly are presenting their own analyses 

of forest benefits produced on the Nation’s forests (for example, Niemi and FiField 

2000). Forest Service economics research regarding ecosystem services can build 

upon and augment past and present forest benefits research by agency researchers and others (for example, Bowes and Krutilla 1989, Champ and others 2003, 

Peterson and Randall 1984, Peterson and others 1988) to help foster trust among the 

public that the agency also is acting on its strategic goals in an earnest and methodical manner.

Ecosystem Services Typologies, Outputs, and Values

From an economic perspective, intelligent ecosystem policy and management 

requires quantifying the costs and benefits of and evaluating tradeoffs associated 

with different policy and management alternatives (for example, Arrow and others 2000: 1401). Although the financial costs of proposed policy and management 

actions—the costs of labor, equipment, and other resources expended—often can 

be readily estimated, describing expected changes in forest benefits can be difficult, 

particularly when they arise from changes in forest ecosystem processes. Forest 

benefits derive from socially valued outputs of ecosystem services produced from 

the characteristics and conditions of forest landscapes. Evaluating the effects of 

forest policy and management on forest benefits requires information about resulting changes in ecosystem services outputs and their values to society. Toward this 

end, the primary challenges in applying the ecosystem services concept are (1) 

defining a typology of ecosystem services, (2) describing and measuring ecosystem 

services units or outputs linked to policy and management actions, and (3) describing and measuring ecosystem services per unit of values or societal weights. These 

challenges essentially are the same as those long faced by economists tasked with 

describing the multiple benefits arising from public and private forests: What is to 

be valued, how do you measure it, and what is its value to society?

Ecosystem Services Typologies

Well-designed typologies summarize ecosystem services as sets of well-defined 

attributes that can be measured. From an economic perspective, a typology should 

identify those end ecosystem services that directly benefit people. End services are 

the specific ecosystem attributes that enter peoples’ utility functions to produce 

satisfaction or well-being, or enter production functions to produce goods and 

services that are valued in the marketplace. End services differ from intermediate 

services—those services that are instrumental in the production of other services, 

such as the role of riparian habitat in the production of fish, for example. End 

The challenges are 

those long faced by 

economists: What is to 

be valued, how do you 

measure it, and what is 

its value to society? 
General TEchnical REport PNW-GTR-700

services also differ from benefits. End services—a fish population, for example—

when combined with other market goods, such as fishing tackle, produce benefits 

such as recreational angling (Boyd 2006, Boyd and Banzhaf 2006). Of particular 

concern to economists is that ecosystem services typologies identify unambiguous 

measurable attributes of ecosystems that benefit people. This concern arises in 

part from economists’ long tradition of cost-benefit analysis where avoidance of 

double counting costs and benefits is of utmost importance. Some economists also 

suggest that analyses must focus on ecosystem attributes rather than on ecosystem 

functions or processes; processes and functions, they suggest, are not end services 

directly enjoyed by people but rather are the biological, chemical, and physical 

interactions between ecosystem attributes (for example, Boyd 2006, Boyd and 

Banzhaf 2006). Resolving such issues, although of concern to economists, are not 

always of concern to others.

One early typology of ecosystem services suggested by Daily (1997) specifically highlighted beneficial ecosystem functions and processes—mitigation of floods 

and droughts, detoxification and decomposition of wastes, generation and renewal 

of soil fertility, and pollination of crops and natural vegetation, for example (p. 3-4). 

Daily’s focus on functions and processes makes sense from an ecological perspective; ecosystem functions and processes are what ecologists most often study. Other 

services listed by Daily (1997) were more vaguely defined—support for diverse 

human cultures and providing intellectual stimulation, for example. Although useful as a way to inspire thinking about the many ways in which people benefit from 

functioning ecosystems—arguably Daily’s primary intent—Daily’s typology is not 

all that useful for identifying unambiguous measurable ecosystem attributes that 

benefit people (Boyd and Banzhaf 2006). How do you measure intellectual stimulation, for example? For this reason, Daily’s typology is not particularly useful as an 

organizing structure for ecosystem services measurement and evaluation. 

Another ecosystem services typology is from the Millennium Ecosystem 

Assessment (2005). This particular typology is featured on the initial Forest Service Web site devoted to ecosystem services (USDA FS 2006b). The Millennium 

Ecosystem Assessment typology defines four general categories of ecosystem 

services: provisioning, regulating, cultural, and supporting (table 1), providing 

several examples within each category. As a rally point for advocating ecosystem 

protection, the typology works by providing a detailed and extensive list of general 

ways in which ecosystems benefit people. However, as an organizing framework 

for ecosystem services measurement and evaluation, this typology too has problems (for example, Boyd and Banzhaf 2006). As with Daily’s (1997) typology, the 

Millennium Ecosystem Assessment typology includes items that are ecosystem 

Of particular concern 

to economists 

is identifying 

unambiguous 

measurable attributes 

of ecosystems that 

benefit people.
Defining an Economics Research Program to Describe and Evaluate Ecosystem Services

functions or processes—water purification, for example. There also is potential for 

double counting—the value of pollination, for example, arguably would be already 

included in the values of food and fiber produced. Lastly, many items listed again 

are too poorly defined to facilitate measurement. How do you measure inspiration, 

for example? 

One final typology of interest within the Forest Service is that proposed by 

Brown and others (in press). Their typology attempts to both acknowledge and 

distinguish between processes similar to those of Daily (1997)—what they call 

“ecosystem services”—and beneficial attributes—what they call “ecosystem goods” 

(p. 36). Brown and others (in press) qualify their typology by including only 

“naturally occurring services”—those that exist without human action, such as 

agricultural products. In this way, they would seem to distinguish between ecosystem services and human benefits (Boyd 2006, Boyd and Banzhaf 2006). However, 

Brown and others’ (in press) mingling of ecosystem attributes and processes may 

not go as far as others (for example, Boyd and Banzhaf 2006) in defining ecosystem 

services in terms of unambiguous and measurable ecosystem attributes. Arguably, 

however, this was not their intent. Rather, Brown and others (in press) sought to 

describe and delineate, in a general way and from an economic perspective, what 

ecosystem services are and how ecologists and economists might evaluate them. 

As such, their typology, like those of Daily (1997) and Millennium Ecosystem 

Assessment (2005), is motivated by specific informational needs that may not 

always include unambiguous empirical analysis. In contrast, for example, Boyd and 

Banzhaf (2006) are specifically concerned with developing a “green” gross domestic product (GDP) metric as an environmental counterweight to prevailing GDP, and 

this objective motivates their strong concerns regarding definitional issues. 

Table 1—Example ecosystem services typology from the Millennium Ecosystem 

Assessment (2005) 

General service category Example services

Provisioning Food, fiber, fuel, genetic resources, 

fresh water, biochemicals, ornamental

 resources. 

Regulating Air quality regulation, climate regulation, erosion

regulation, water purification, natural hazard

mitigation, pollination. 

Cultural Cultural diversity, spiritual/religious values,

knowledge systems, educational values, 

inspiration, aesthetic values, recreation. 

Supporting Soil formation, photosynthesis, primary

production, nutrient cycling, water cycling. 
General TEchnical REport PNW-GTR-700

10

Other typologies have been proposed (for example, DeGroot and others 2002), 

but these suffice to demonstrate the challenges involved in identifying what is to be 

measured and how to measure it when attempting to describe and evaluate ecosystem services. At issue is the fact that ecosystems are highly nonlinear complex 

adaptive systems, with extensive interconnections among components; they have 

potential for dramatic change resulting from endogenous and exogenous factors 

(Arrow and others 2000: 1401). Translating ecosystem complexity into manageable 

sets of well-defined ecosystem services metrics—simply defining what to measure 

and how to measure it—is the first challenge faced in ecosystem services research. 

Linking those metrics to forest policy and management actions, disturbances (for 

example, fire, forest-land development), and other factors whose effects forest 

policymakers and managers would like researchers to examine, is another challenge altogether. In evaluating forest benefits, economists generally have focused 

on estimating values for specific benefits. They largely have sought information 

from ecologists and other biophysical scientists that describes ecosystem attributes 

and how they change over time in response to forest policy and management actions—what many economists sometimes call ecosystem “production functions.” 

Although both types of information are useful in evaluating ecosystem services, 

those production relationships are absolutely critical but all too frequently lacking 

or missing altogether. 

Ecosystem Services Outputs

Evaluating the ecosystem services effects resulting from forest policy or management activities, or disturbances such as fire or forest-land development, involves 

compiling output and value measures describing all affected services produced over 

time under different combinations of resulting forest conditions. For example, if 

evaluating the wisdom of conducting a postfire restoration action or implementing 

an incentive program to reduce forest-land development, economists need to know 

how that action or program will affect ecosystem services production over time 

relative to doing nothing. Describing such changes often is not possible in practice 

owing to a general lack of information describing relationships between ecosystem 

services outputs, forest conditions, and policy and management activities. Ecologists and others have been making progress in describing such relationships (for 

example, DeStefano and Haight 2002, Guisan and Zimmermann 2000). However, 

output measures that may exist for one landscape may not be transferable to other 

landscapes possessing different characteristics. When such measures are available 

they often do not support evaluating potential policy and management effects, 

because they may not be based on data or scales relevant to analyzing those effects. 
Defining an Economics Research Program to Describe and Evaluate Ecosystem Services

11

A problem is that forest ecosystems involve numerous natural processes that are 

not always fully understood by both economist and noneconomist scientists. Formal 

bioeconomic models describing these processes, such as TAMM/ATLAS (Adams 

and Haynes 1996, Mills and Kincaid 1992), often do not exist or are valid only for 

specific regions or landscapes. Economists generally have had difficulty understanding the complex physical interrelationships of ecosystems and linking their 

different parts (Bockstael and others 2000: 1384). Among even biophysical scientists, significant uncertainty can exist regarding ecosystems and their functions, and 

how they change in response to policy and management actions. For economists 

to evaluate tradeoffs among different ecosystem services, they need to express 

each service output as a function of others. Defining such interrelationships among 

ecosystem outputs typically is not the goal of many ecology studies, which tend 

to focus on how policy and management actions impact single or select groups of 

species. Much ecology research also is conducted at landscape or finer spatial scales 

that are not typical of or sometimes even feasible in most economics research. This 

spatial focus is not consistent with the often temporal focus on economic analysis. 

Inconsistency between ecology and economic conceptual framing, data, and the 

units and scales at which analysis is accomplished can be a significant obstacle for 

ecologists and economists to overcome.

As a result, ecologists have not been forthcoming with the types of ecosystem 

output measures economists typically desire or expect for formal economic analysis. Because ecology is not particularly well suited to prediction, production relationships may be highly or purely uncertain (Swallow 1996: 85). Ecosystem complexity, including the spatial and temporal dimensions of policy and management 

effects, coupled with the sheer number of potentially relevant ecosystem outputs 

to be evaluated makes the task all the more daunting. Add to this the uncertainties 

posed by one particular issue of significant contemporary interest—wildfire—and 

the challenges increase (for example, Kline 2004). The general lack of information 

describing ecosystem services outputs and their sensitivity to changes in forest 

policy and management actions is perhaps the most significant obstacle to evaluating ecosystem services benefits. Because of this, many ecosystem services analysts 

suggest that increased research effort first and foremost must focus on defining the 

units and production relationships associated with ecosystem services, with their 

valuation as a secondary focus (for example, Boyd 2006).

Ecosystem Services Values 

In forestry, economic values typically refer to the instrumental values arising from 

the role of forest benefits in satisfying human needs and wants or increasing the 

For economists to 

evaluate tradeoffs 

among different 

ecosystem services, 

they need to express 

each service output as 

a function of others.
General TEchnical REport PNW-GTR-700

12

welfare of human individuals as members of society (for example, Freeman 2003: 

6). The concept of instrumental value differs philosophically from the idea that 

many forest benefits—ecosystem function, for example—may have intrinsic values 

that are independent of their uses or functions in relation to something or someone 

else, but rather are valuable in and for themselves (Freeman 2003: 6-7). Although 

appealing as an argument for recognizing the worth of all things, intrinsic value is 

not a very useful concept in evaluating changes in economic benefits values resulting from forest policy and management alternatives. Economics is the study of how 

societies organize themselves to provide for the sustenance and well-being of their 

members. Thus, economic values of ecosystem services and functions arise from 

their contributions to human well-being (Freeman 2003: 6-9). Evaluating forest 

policy and management effects on forest benefits, from an economic perspective, 

means examining the ways in which resulting changes in forest benefits affect 

human welfare. 

This economic notion of value is just one perspective of value found in ecosystem services research literature—other perspectives exist including sociocultural, 

ecological, biological, and biophysical, for example (Costanza 2004, Farber and 

others 2002) (table 2). Sociocultural value perspectives focus on the distribution 

of ecosystem services among members of society. An ecological value perspective 

measures value as the degree to which ecosystem services contribute to ecological 

objectives or conditions, such as healthy ecosystem function. Similarly, a biological 

value perspective measures the value of ecosystem services by their contributions 

to meeting biological objectives, such as the survival of individual species. A 

biophysical value perspective defines value in terms of direct and indirect inputs 

and outputs of mass and energy among ecosystem components. Although each of 

these noneconomic value perspectives may have merit, my focus in this paper is on 

economic value.

Natural resource valuation methods at times have involved varying levels 

of controversy, but associated scientific debate generally has led to significant 

refinements in method. Prevailing opinion now among most economists is that 

well-designed studies following generally accepted protocols outlined in published 

literature generally will result in useful information regarding the values of nonmarket forest benefits such as those arising from ecosystem services. Guidelines 

for evaluating environmental benefits are now even outlined by federal agencies 

(for example, Environmental Protection Agency 2000, Office of Management and 

Budget 1996). 

In forestry, the multiple-use mandate of public forests combined with early 

development of nonmarket benefit valuation methods stimulated significant interest 

Prevailing opinion 

among economists 

is that well-designed 

studies following 

accepted protocols 

will result in useful 

information about 

values of nonmarket 

forest benefits.
Defining an Economics Research Program to Describe and Evaluate Ecosystem Services

13

in how to value wildland resource and amenity benefits arising from forests (for 

example, Bowes and Krutilla 1989, Peterson and Randall 1984, Peterson and others 

1988). Today there are generally accepted protocols for measuring forest benefits 

values and for transferring values to different locations (for example, Desvousges 

and others 1992, Loomis 2005, Rosenberger and Loomis 2001). Still, forest benefits 

valuation can be a tricky and expensive enterprise. Although values for some outputs, such as timber, can be estimated from market prices, values for other outputs, 

such as recreation, may involve nonmarket values that can only be estimated by 

using specialized survey methods, such as travel cost and contingent valuation (for 

example, Champ and others 2003). These methods can be expensive and require 

specialized expertise to implement. Such demands often place benefits valuation 

beyond the reach of public agencies for routine policy and management decisions. 

Also, relative values for different ecosystem services almost certainly change over 

time. Unless existing inventories of measured values (for example, Loomis 2005, 

Rosenberger and Loomis 2001) are routinely updated by using new studies, they 

eventually become inaccurate. 

Estimating values for ecosystem services that people are more familiar with, 

such as recreation, generally is considered easier than estimating values for services 

with which people may be less familiar, such as biodiversity. Linking technical 

ecological measures of habitat quality or biodiversity, for example, to attributes 

that can be understood and perceived as valuable by the public remains difficult 

(Schaberg and others 1999: 337). Also, values for some ecosystem services may 

include combinations of use and nonuse values, further complicating estimation of 

their values. Use values are values that people hold for specific uses of ecosystem 

Table 2—Example perspectives on ecosystem services values

Variable Description

Economic Value arises from presence of ecosystem service in utility function,

either directly, or indirectly as inputs in the production of final

goods and services. 

Sociocultural Concerned with sociocultural implications of resource allocation or

use, such as equity. 

Ecological Value arises from degree to which service contributes to ecological

objective or ecosystem condition. 

Biological Value arises from degree to which service contributes to the

survival of individual species. 

Biophysical Value arises from direct and indirect inputs and outputs of mass and

energy among ecosystem components. 

Note: Adapted from Costanza (2004) and Farber and others (2002), among other sources.
General TEchnical REport PNW-GTR-700

14

services and may include consumptive uses, such as timber harvesting, and nonconsumptive uses such as sightseeing (for example, Freeman 2003: 140-142). Nonuse 

values on the other hand do not involve direct use of ecosystem services. According to conventional value typology, nonuse values may include option (knowing a 

resource will be available for future personal use), existence (knowing a resource 

exists even when the likelihood of using it is small), bequest (knowing future 

generations will be able to enjoy the resource), and stewardship (knowing forests 

are maintained in a healthy condition) values (for example, Freeman 2003: 137-159). 

These types of values can be more difficult for people to comprehend and evaluate. 

Evaluating changes in nonuse values associated with policy and management actions thus tends to be more complex and attracts more controversy than evaluating 

use values. 

Indeed, some people object to monetary valuation of ecosystem services 

altogether or question the merit in doing so. Some people object to economists’ anthropocentric or utilitarian treatment of natural systems, which may be inconsistent 

with how some people believe ecosystem management decisions should be made 

(for example, Bengston and Xu 1995, Mazzotta and Kline 1995). Some people may 

feel that monetary valuation of ecosystem services is inadequate to address their 

appropriate management if they believe that human values cannot be reduced to a 

single measure or that natural resource values transcend human-determined values. 

People may view particular resources as morally considerable (Booth 1992), believing that nature has a right to exist in its own right. Indeed, even some scientists 

object to valuing ecosystem services based on their instrument values to people 

or may feel that such information is irrelevant to questions of ecosystem management and protection (for example, Brown and Ulgiati 1999). To some extent this 

is why different value perspectives exist in ecosystem services research literature. 

Although the reasonableness of such views can be debated, their practical effect 

is to complicate the study and measure of values for a broad range of ecosystem 

services. 

Some economists also warn that deriving hypothetical values for the complex 

and inter-related parts of the environment and reducing them to a single monetary 

measure can result in a significant loss of information (for example, Vatn and 

Bromley 1995: 3). Ecosystems respond to policy and management changes through 

numerous physical, biological, and chemical feedbacks and cycles, which are central to the processes that link species to each other and to their respective habitats 

(Bockstael and others 2000: 1387). Evaluating the component parts of ecosystem 

services, such as habitat for particular fish, habitat for particular animals, or particularly large or old trees, may be subordinate to the continued functioning of the 

sum of the parts (Vatn and Bromley 1995: 11). Such views question the merit of 
Defining an Economics Research Program to Describe and Evaluate Ecosystem Services

15

evaluating tradeoffs among particular ecosystem parts when different parts rely 

on the existence and health of other parts. Estimating values or changes in values 

for each part and then summing them to estimate total ecosystem value also can 

be meaningless, because the functional value of each part can be as valuable as the 

whole, given that the whole could not exist without each part. Even if accurate, total 

ecosystem values provide little guidance to policy or management decisions unless 

those decisions can be expressed as marginal or incremental changes in ecosystem 

services (Pagiola and others 2004: 18-19). This requires information describing 

marginal or incremental changes in ecological services outputs, which often is not 

available from ecologists. 

Limitations in measuring nonmarket benefits have led to the use of nonmonetary indicators describing ecosystem benefits. Ecosystem indicators are objective, 

quantitative measures of factors that give rise to ecosystem services. For example, 

you might use a habitat suitability index to “indicate” the potential prevalence of a 

particular species when you do not know the actual population of the species or its 

value to the public. They are both biophysical and economic in nature, are organized around environmental and economic principles, and provide an alternative to 

dollar values for describing ecosystem benefits (Boyd 2004). Ecosystem indicators 

can be used to represent many of the complex relationships among habitats, species, 

land uses, and human activities to facilitate public policy and management decisions that acknowledge these factors. Indicators also can form the basis of ecological indices similar to gross domestic product (for example, Boyd and Banzhaf 

2006). Ecological benefits indicators are appealing for their affordability and ease 

of use relative to valuation, and have gained acceptance among many academic 

researchers and policy analysts as one way to address the need for quantitative 

measures of ecosystem outputs (for example, Boyd and Wainger 2002, Johnston 

and others 2002, King and Mazzota 2005). Although avoiding value estimation is 

an advantage, it also is a key weakness. Lack of a common metric of value or social 

preference, such as dollars, makes it difficult to determine what mix of outcomes 

might be preferred (Boyd and Wainger 2002). Some type of indicator weighting 

scheme, such as multiattribute utility analysis, still must be applied to evaluate 

tradeoffs among indicators. 

Other Considerations

One failing of many economists is that they often do not address equity issues related to who does or does not gain from policy and management actions. All taxpayers 

bear the financial costs of implementing government policies and management actions affecting public and private lands. Those who gain might include neighboring 

property owners who benefit from increased aesthetics and proximity to outdoor 
General TEchnical REport PNW-GTR-700

16

recreation, and individuals who use or value particular forest benefits. Policies and 

management can affect the welfare of individuals differently because individuals 

typically bear unequal tax burdens associated with them and reap unequal net gains 

or net losses from resulting changes in forest benefits. By focusing on the net social 

effects of proposed policies or management actions, economic (for example, costbenefit) analyses can support outcomes that are socially suboptimal (for example, 

Just and others 1982: 334-335). Opportunities that maximize social welfare may be 

overlooked or not considered. Social welfare considerations must focus on choosing 

the best policies or management actions to pursue rather than deciding whether or 

not to pursue a specific alternative (Just and others 1982: 335). Although difficulties 

exist in evaluating social welfare (Broadway and Bruce 1993: 137-138, Just and 

others 1982: 42-45), welfare economics can provide help in evaluating policies and 

management actions by describing their efficiency and distributional implications 

(Broadway and Bruce 1993, Just and others 1982). 

Related to social welfare issues are additional concerns about environmental 

justice. Generally, environmental justice is about relationships between race, 

poverty, and environmental problems, benefits, and remediation (for example, 

Albrecht 1995, Floyd and Johnson 2002). Environmental justice is relevant to 

evaluating forest benefits if policies and management actions might result in widely 

disproportionate distributions of benefits accruing to select groups of people or to 

the detriment of others. If, for example, political pressure from relatively affluent 

landowners living adjacent to national forests results in a disproportionate amount 

of public funds being allocated to manage nearby lands for a particular recreational 

activity, less affluent people who do not live adjacent to forests may feel that their 

own management preferences are underrepresented. Critics of environmental 

justice suggest that it is a reasonable concept for which strong empirical evidence is 

lacking (for example, Bowen 2002). In the context of ecosystem services produced 

on public and private forest lands, although all citizens may have individual preferences regarding different services, there is the potential for some citizens to benefit 

from specific policies and management actions more than others. To some extent, 

such concerns form the basis of sociocultural perspectives of ecosystem services 

values. 

Relevance of Past Forest Benefits Research to 

Ecosystem Services

Three influential research papers written about forest benefits in the context of 

multiple-use forestry—Gregory (1955), Hartman (1976), and Swallow and others 

(1990)—help to characterize the relevance and appropriate role of forest benefits in 

Social welfare considerations must focus on 

choosing policies or 

management actions 

to pursue rather than 

deciding whether or 

not to pursue a specific 

alternative.
Defining an Economics Research Program to Describe and Evaluate Ecosystem Services

17

forest policy and management (Sedjo 2003). Along with general economic theory of 

multiple-use forestry (for example, Bowes and Krutilla 1989), these works characterize economic thinking regarding multiple forest benefits and remain relevant to 

conceptualizing economics research regarding ecosystem services. 

Gregory (1955) applied traditional production economics theory to forestry to 

develop a conceptual framework that defines multiple-use forest management as a 

problem of joint production of multiple outputs that benefit people. Joint production 

defines forests in terms of their production possibilities—combinations of different output levels that are possible to produce on a given landscape given existing 

resource endowments, inputs (for example, land, labor, and capital), policies, and 

management. Establishing benefit ranges that are feasible on a given landscape 

is necessary to evaluate the reasonableness of landscape objectives, and identify 

policy and management strategies to achieve them. Gregory (1955) formed the 

foundation of contemporary economics research regarding multiple forest benefits 

(for example, Calkin and others 2002, Rohweder and others 2000). In Gregory’s 

conceptual framework, ecosystem services would be beneficial forest outputs. His 

joint production framework thus provides a formal method for examining tradeoffs 

among different ecosystem services and defines the information needs that tradeoff 

analyses require. That required information includes (1) information regarding the 

production of ecosystem services of interest and (2) information regarding the relative values or social weights of those services consistent with public preferences. 

Hartman (1976) showed that the presence of recreational or other “nontimber 

services” provided by standing forests will tend to delay the utility-maximizing 

rotation age when those services are an increasing function of stand age or volume. 

For example, if forest owners derive utility (personal benefit or satisfaction) from 

the aesthetic characteristics of standing large trees as well as from harvesting 

timber, they may have an incentive to delay harvest beyond the utility-maximizing 

rotation age that would hold if owners’ utility were derived from timber harvesting 

alone (for example, Bowes and Krutilla 1989: 106-107). Hartman (1976) inspired 

numerous papers examining the influences of forest amenity effects on optimal 

rotation age (for example, Binkley 1981; Bowes and others 1984; Dennis 1989, 

1990; Englin and Klan 1990; Hyberg and Holthausen 1989; Max and Lehman 1988; 

Strang 1983; Swallow and Wear 1993; Tahvonen 1999). Their relevance for forest 

policy and management is that maximization of timber value as an overarching 

forestry objective is not solely appropriate in understanding private forest owners’ 

behavior regarding harvest, because many private owners are motivated by nontimber objectives (for example, Kline and others 2000a, 2000b; Kuuluvainen and 

others 1996). Given the multiple objectives motivating society’s interest in public 
General TEchnical REport PNW-GTR-700

18

lands management, Hartman (1976) also showed that from an economic perspective, public forest managers may be justified in delaying harvest or not harvesting at 

all when significant nontimber values are present. 

What Hartman (1976) called nontimber services translate well as a subset of 

ecosystem services—recreation opportunities and forest scenery, for example—that 

benefits forest owners, be they private individuals or the public. The potential for 

enhancing the provision of these services influences the forest owners’ choices 

about what to produce. A key limitation of Hartman’s analysis, however, derives 

from the assumption that nontimber services increase as a positive function of stand 

age or timber volume, placing timber production in direct competition with recreation or aesthetic potential. This assumption oversimplifies the role of forest and 

stand characteristics in providing many ecosystem services. The habitat needs of 

some wildlife species, for example, may favor younger forests or even open patches. 

In reality, the individual species present on any given forest landscape change over 

time as species respond to the stand age, volume, canopy closure, and other site 

characteristics (for example, Calish and others 1978, Giles 1978). Thus the relationship between stand age or timber volume to the provision of ecosystem services is 

not always positive nor is it the only factor determining what services are produced 

at a given location and point in time.

Building upon Hartman (1976) is work by Swallow and others (1990). They 

showed that variations in the responses of individual timber and nontimber services 

to stand age and volume can confuse determining an optimal forest rotation age. 

This confusion occurs especially when nontimber benefits peak well before the 

optimal timber-producing rotation age and when nontimber benefits are at least 

as great as timber benefits, potentially leading to premature harvest. As such, 

Swallow and others (1990) and papers that build upon it (for example, Boscolo and 

Vincent 2003, Pattanayak and Butry 2003, Swallow and Wear 1993, Swallow and 

others 1997) began to acknowledge the spatial and temporal complexity involved in 

managing forests to produce multiple benefits. The ecosystem services produced at 

a given location can increase or decrease over time depending on stand ages, timber 

volumes, and other stand and landscape characteristics. 

There are other important economics papers in forestry, but these three serve 

to illustrate two points regarding the state of conceptual thinking regarding 

multiple forest benefits and its applicability now to ecosystem services: (1) economists have been thinking about benefits in the context of forestry for a long time 

and this thinking remains relevant if benefits are now framed as accruing from 

ecosystem services and (2) economists have well-defined conceptual frameworks 

Developing better 

information 

regarding ecosystem 

services depends 

on economists and 

ecologists working 

together.
Defining an Economics Research Program to Describe and Evaluate Ecosystem Services

19

for incorporating multiple benefits arising from ecosystem services into analysis 

of forest policy and management issues. Why then have forest benefits not been 

more routinely incorporated into the analysis and development of forest policy and 

management? The reason involves persistent difficulties in the practical application 

of economics theory regarding multiple-use forestry to real world problems. Those 

difficulties include (1) a general lack of information describing benefit outputs and 

their relationship to forest conditions, processes, policies, and management actions 

and (2) a general lack of information describing the relative values or social weights 

of different benefits consistent with public preferences regarding forests. Indeed, 

Gregory (1955) noted these difficulties half a century ago: the principal obstacles to 

solving joint production problems in forestry are describing forest benefit production functions as returns to management and obtaining values for nonmarket forest 

benefits (p. 13). As noted before, these challenges remain even with an ecosystem 

services framing of forest benefits. 

Developing better information regarding the production of ecosystem services 

depends on economists and others—most notably ecologists—working together to 

address the development of ecosystem services output measures and their responses 

to policy and management. Economists generally already know how to gather 

information regarding relative values or social weights of different forest benefits 

(for example, Champ and others 2003, Freeman 2003, Johnston and others 1999), 

but such information still can be expensive to gather and frequently pertains to 

specific sites or situations. Additionally, Forest Service researchers face obstacles in 

collecting value data; they must seek approval for any survey-based research from 

the Office of Management and Budget for compliance with the Paperwork Reduction Act of 1995. This can lengthen study times considerably. The costs of obtaining 

production and value information regarding the ecosystem services produced on 

forest landscapes and affected by policy and management can be prohibitively 

expensive. Barring significant new ecological and economics research investment, 

we may simply never have complete information about ecosystem services benefits 

and their responses to policy and management in many cases. 

Evaluating Policy and Management Alternatives 

To date, economics has tended to play a fairly limited role in research focused 

on evaluating the ecological effects of forest policy and management—limited 

to predicting potential future forest-land development (Kline and others 2003) 

or timber commodity outputs under different policy and management scenarios 

(Johnson and others, in press), for example. This limited role arises in part because 

Multidisciplinary 

research into 

landscape-level policy 

and management 

questions are seldom 

conceptualized as 

economic or joint 

production problems.
General TEchnical REport PNW-GTR-700

20

multidisciplinary research efforts that are intended to address landscape-level 

policy and management questions tend not to be conceptualized as economic or 

joint production problems. They are not structured to identify what combinations of 

policies and management actions will yield the greatest benefit. Rather, they more 

typically involve merging data and models from different disciplines, predominantly ecology and biophysical sciences, to simulate policy and management effects 

on select vegetation, habitat, and socioeconomic measures (for example, Hayes and 

others 2004, Spies and others 2002). Such relatively informal modeling structures 

enable predicting the likely outcomes of policy and management alternatives under 

consideration, but these outcomes may not represent maximum amounts of ecosystem outputs possible nor will they necessarily be socially preferred. Defining those 

production possibilities—expressing one benefit as a function of others— identifies 

the ranges of outcomes that may be possible, and is what enables evaluating tradeoffs associated with different alternatives (for example, Haynes and Quigley 2001).

From an economics perspective, a production possibilities frontier for two ecosystem services outputs—say, timber and biodiversity—might appear as shown in 

figure 1. The production possibilities frontier (curved line) represents combinations 

of timber and biodiversity that are possible given existing landscape endowments 

and inputs. Points inside the frontier, such as A and B, also represent combinations 

of timber and biodiversity that are feasible but inferior. We could have more of both 

timber and biodiversity if we could only choose the correct combination of policies 

and management to achieve them, such as is the case with point C. The production 

possibilities frontier also defines necessary tradeoffs between services. If we are at 

point C on the frontier, for example, we would have to give up some timber production to move to point D where we would gain additional biodiversity. Identifying 

appropriate or socially optimal target combinations of ecosystem services outputs 

to produce would depend on additional information describing the relative values 

society places on each service. Economics attempts to define production possibilities and search for policies and management actions to maximize multiple forest 

benefits outputs. 

Evaluating tradeoffs among benefits necessarily may involve finding ways 

to ease the difficulties in measuring their ecosystem services outputs and values. 

Dollar values, for example, may not always be necessary; sometimes it may be 

more practical to evaluate policy and management alternatives based on rankings or 

prioritizations of expected outcomes (King and Mazzotta 2005). Ecosystem indictors can be less expensive to use and may be more broadly accepted in policy and 

management evaluations than dollar values. Advocates for their use have begun to 

delineate formal typologies (for example, Banzhaf and Boyd 2005). Opportunities 
Defining an Economics Research Program to Describe and Evaluate Ecosystem Services

21

also may exist to inform policy and management decisions by enabling members 

of the public to evaluate or rank comparative tradeoffs among ecosystem services 

directly by using conjoint and similar choice modeling methods without having to 

resort to measuring benefits values (for example, Breffle and Rowe 2002, Dennis 

1998, Garrod and Willis 1997, Gregory and Slovic 1997, Gregory and others 1993, 

Johnston and others 2002, McDaniels and Roessler 1998, Zinkhan and others 1997). 

Enabling people to consider how much of an ecosystem service output they are 

willing to exchange for others may provide sufficient guidance to justify particular 

policy and management decisions. All of these options, however, do still require 

sufficient information about ecosystem services outputs. 

Along with persistent lack of data describing ecosystem services production 

and value relationships are difficulties in quantitatively solving joint production 

problems. These typically call for the use of optimization methods and mathematical algorithms (for example, Hof 1993), which can be difficult for policymakers, 

managers, and even many researchers to understand. There also can be limits 

Timber

Biodiversity

A

B

C

D

Figure 1—Example production possibilities frontier for timber and biodiversity.
General TEchnical REport PNW-GTR-700

22

in computational feasibility for the most complex problems, which may involve 

describing multiple ecosystem services outputs in terms of numerous forest conditions, landscape characteristics, and resource inputs over space and time. For 

example, simulation models that predict the effects of management of various 

resources often are too complicated and time-consuming to incorporate directly 

into optimization models (Stevens and Montgomery 2002: 24). Challenges become 

greater as current research trends increasingly favor fairly complex landscape-level 

models designed to simultaneously examine multiple ecological and socioeconomic 

effects. Increasing sophistication of modeling methods coupled with greater availability of data describing interactions among forest uses could improve the future 

feasibility and usefulness of tradeoff analysis (Stevens and Montgomery 2002: 29). 

The complexity of forest ecosystems means that policy and management decisions often must be made with imperfect and uncertain information (Wear 2003: 

206-207). When gathering information on ecosystem services outputs and values 

is infeasible owing to complexity, expense, or lack of expertise, only a partial 

accounting of potential changes in services associated with alternative policy or 

management actions may be possible. Partial evaluations can present problems 

if they lead to biased results favoring one action over another. Policymakers and 

managers must carefully consider the potential implications of missing information 

when comprehensive evaluation of the ecosystem services benefits is impractical. 

Still, it often is possible to provide meaningful value estimates for relatively welldefined consequences we do understand (Bockstael and others 2000: 1388). For 

others, we simply may never know the exact relationships among all of the potential 

inputs and ecosystem benefits derived from forests. Choosing not to decide among 

particular policy or management actions for lack of information is a choice in its 

own right with its own set of implications. Just as there may be uncertainty about 

how bad a resource decision might be for a particular ecosystem, there also may be 

uncertainty that doing nothing (until more information is available) would be better.

Given uncertainties and public concern for ecosystem protection, there can be 

value in retaining viable options that otherwise might be lost (for example, Krutilla 

and Fisher 1975: 69-72). Given the many challenges in ecosystem policy and 

management, evaluating the actual tradeoffs associated with policy and management alternatives may be less useful than taking an adaptive management approach 

that incorporates precautionary principles (Arrow and others 2000: 1405). Analyses 

of ecosystem services could incorporate safe minimum standards that constrain 

policy and management choices to ensure ecosystem protection with some level of 

certainty (for example, Randall 1994). Policy and management decisions that must 

be made based on imperfect information and that involve potentially irreversible 
Defining an Economics Research Program to Describe and Evaluate Ecosystem Services

23

changes may sometimes call for caution, with policymakers and managers choosing 

to err on the side of overprotection of species and ecosystems. 

Protecting Forest Land 

An emerging interest of the Forest Service involves developing and evaluating appropriate and effective economic and market-based incentives to protect or enhance 

the provision of ecosystem services on private lands to augment those produced on 

public lands (for example, Collins 2005). This can include both policies designed 

to prevent the loss of forest land to development and policies to encourage management activities that enhance services on remaining private forest lands. Developing 

and evaluating such policy instruments has long been an interest of land economists 

(for example, Barlowe 1978). How do we encourage private forest landowners to 

continue to provide valued ecosystem services when development presents them 

with other lucrative opportunities? The success of any policy intended to protect 

forest land depends on (1) how well it addresses the socioeconomic factors that motivate forest landowners to sell land for development, and (2) how well it balances 

the interests of private landowners with the land conservation interests of society. 

Choosing the best approach involves balancing our national desire for forest-land 

conservation with socioeconomic realities and the needs of individual landowners. 

Forest-land development results from market forces. Population, income, and 

economic growth combine to increase demands for land in residential, commercial, 

and industrial uses, and public infrastructure. Demands also increase with people’s 

lifestyle choices when, for example, people relocate to rural areas or desire second 

homes in scenic forest settings. When demands for developed land uses increase, 

so do the financial incentives some forest landowners have to sell land for development. The incentive is the revenue they can earn from selling land over and above 

what they can earn from maintaining land in forest. When these market forces are 

at play, some forest-land development is inevitable. Detailed discussion of different types of policies that can be used to counter these forces can be found in other 

sources (for example, Bengston and others 2004a). The choice, however, generally 

is between land use regulations and financial (economic or market-based) incentives 

(Kline and Alig 2005, Kline and others 2004a). 

Regulatory approaches, such as zoning, can be a first line defense, but their 

long term effectiveness is limited by our national commitment to upholding certain private property rights. For this reason, policies that encourage the voluntary 

participation of private landowners in providing particular ecosystem services or 

compensate them for land use restrictions imposed can be important complements 

to regulation. All states, for example, have preferential taxation programs that 

It is uncertain whether 

taxpayers would 

support compensating 

forest landowners for 

what some view as 

simply good forest 

stewardship.
General TEchnical REport PNW-GTR-700

24

reduce property taxes on forest and farm lands, lowering the costs of keeping land 

in forest even as its potential developed value increases. Greater protection comes 

at greater expense, such as leasing lands for conservation purposes, or purchasing 

development rights, easements, and land in fee. 

Directly compensating forest landowners for ecological services produced on 

their lands—through increased forest commodity prices and other economic incentives—is another approach currently of interest to forest policymakers and managers (for example, Collins 2005). Owners would be induced to retain forest land 

by the creation of markets for the ecosystem services their lands produce and the 

public enjoys. Examples include enabling forest landowners to sell carbon credits or 

receive compensation for wetlands banking. Whether such compensation actually 

could reduce forest-land development in the United States is uncertain. Success 

would depend on (1) how much compensation would be necessary to outweigh 

financial opportunities of development and (2) how much consumers and taxpayers 

would be willing to pay in higher prices for forest commodities and higher taxes to 

fund economic incentives. Technological innovation, tree planting, and the global 

transition from extensive forestry to plantations conceivably could greatly increase 

forest productivity in the near future (for example, Binkley 2001). Much less forest 

land may be needed to supply world forest commodity demand. It is uncertain 

whether consumers would be willing to pay sufficiently higher prices for U.S. forest 

commodities to offset the development opportunities of forest landowners in a 

global forest commodity market characterized by over-production. Ever-increasing 

prices for developed lands do not improve the prospects. Also uncertain is whether 

taxpayers would support compensating forest landowners for what some may view 

as simply good forest stewardship. 

There can be limits to how effective public policies can be at protecting private 

forest lands. Land use policies and programs tend to emerge from political processes involving concession and compromise. Although they may make sense in theory, 

what emerges might not always provide ideal solutions, or may work against other 

policies and programs already implemented. Preferential taxation programs, for 

example, generally do not differentiate between lands of significant social value and 

lands of little value. Landowners generally receive preferential property tax treatment as long as they meet broad land use criteria, regardless of how much public 

benefit their land actually provides. Purchasing development rights, easements, and 

land in fee simple can yield lasting protection, but these tend to be expensive and 

limited to willing sellers, often resulting in a spotty patchwork of protected land. 

Economic and market-based incentives providing direct compensation for ecosystem services produced can be effective, but do favor forest landowners by placing 
Defining an Economics Research Program to Describe and Evaluate Ecosystem Services

25

the financial burden of forest-land protection solely on the non-forest-owning public. 

Policymakers must continually weigh the effectiveness, costs, and equity considerations of policies when devising strategies to protect forest land and the ecosystem 

services benefits it produces. Ideally, they also should try to structure new policies 

and programs in ways that complement other measures already in place. 

Making Future Progress 

The research community has a significant role to play in creating socially acceptable forest policy and management (Shindler and others 2002: 53). The economics 

discipline, in particular, is uniquely focused on developing and analyzing policies 

and economic incentives to enhance the provision of ecosystem services. Economics research focused on describing and evaluating the benefits of ecosystem services 

can provide important input into natural resource decisions and improve the likelihood of socially acceptable outcomes. Forest Service research has a comparative 

advantage relative to universities and other research organizations in their capacity 

to integrate social science, including economics, with biophysical science to address 

difficult forest policy and management issues (Clark 2005: 44). Within Forest Service research, Pacific Northwest Research Station social scientists and economists 

have been as involved as anybody in multidisciplinary landscape-level research that 

evaluates ecological and socioeconomic outcomes of forest management alternatives (for example, Hayes and others 2004, Spies and others 2002). Opportunities 

exist to build on the relationships developed in these efforts to address emerging 

interest within the Forest Service in describing and evaluating ecosystem services.

Policymakers and managers, however, must have reasonable expectations. 

Greater use of economics can help to resolve policy and management choices 

regarding the multiple objectives held by the public regarding the Nation’s forests. 

However, the idea that describing and placing values on all ecosystem services 

produced on the Nation’s forests will cleanly resolve the most complex policy and 

management issues we face is ill-founded (Knetch 1993: 251). Economics methods 

and the ecological information necessary to use them are imperfect, budgets and 

expertise are limited, and the need to make timely resource decisions is often 

pressing. What, then, can be done to assist forest policymakers and managers when 

intelligent policy and management calls for information describing ecosystem 

services benefits associated with policy and management decisions? How can we 

provide useful information regarding ecosystem services benefits to inform natural 

resource decisions? 

Economics can and should play a central role in defining conceptual structures 

for evaluating the effects of policy and management alternatives on ecosystem 
General TEchnical REport PNW-GTR-700

26

services benefits. Greater success in evaluating benefits will arise when ecosystem 

services effects are relatively well known and can be readily evaluated by using 

standard nonmarket valuation methods or alternative approaches. Difficulties 

increase as researchers move from evaluating ecosystem services effects resulting from relatively specific or localized policy and management actions affecting 

a small subset of services—closing a specific hiking trail or thinning a specific 

stand, for example—to evaluating the effects of actions affecting whole landscapes 

or regions—providing tax incentives to forest landowners to maintain key habitat 

attributes, for example. Particular challenges exist in defining a typology of services and their appropriate units of measurement over space and time. The greatest 

difficulty occurs when ecological effects are complex and uncertain, and involve 

changes bordering on the abstract in the minds of affected people—evaluating the 

effects of policy or management actions on a species’ survival when the species and 

its habitat needs are poorly understood. 

In even the most complex and uncertain situations, some evaluation of ecosystem services benefits may be feasible if we need only evaluate whether the benefits 

of a proposed action are greater than its costs (Bockstael and others 2000: 1388, 

Krutilla and Fisher 1975: 125). A comprehensive accounting of benefits may be 

unnecessary. In some cases, simply adding up the relatively familiar and certain 

instrumental values associated with known ecosystem services may be sufficient to 

distinguish desirable policy and management actions from undesirable ones. There 

may be other situations where evaluating potential benefit changes resulting from 

ecosystem changes affected by proposed policy and management actions may be so 

complex that the wisdom of attempting any comprehensive analysis is questionable. 

These situations are most likely when the potential ecological effects of policy and 

management actions are spatially and temporally extensive and numerous. 

When information for describing resulting changes in ecosystem structure and 

functions is absent or incomplete and the sheer number of relevant ecosystem services that must be evaluated tax existing budgets and expertise, policy and management decisions may need to derive more from the reasoned professional judgment 

of policymakers and managers based on incomplete information. Many natural 

resource decisions simply cannot be made without some uncertainty. Often we have 

to rely on professional judgment (Haas 2003). Basing policy and management decisions on imperfect information need not be viewed as negligent. Indeed, detailed 

information about ecosystem services outputs and values may be unnecessary in a 

wide variety of situations. As a society, we have routinely made many complex and 

lasting environmental decisions with incomplete (and sometimes no) information 

regarding their costs and benefits (Vatn and Bromley 1995: 20). This includes the 
Defining an Economics Research Program to Describe and Evaluate Ecosystem Services

27

decision to create national forests as well as our seemingly persistent assumption 

that the current extent of public and private forest lands is socially optimal. Economists must continue to engage and encourage ecologists and biophysical scientists 

to address persistent uncertainties regarding ecosystem structure, function, and 

their relationships to the provision of ecosystem services. In the near term, significant marginal gains also are likely to result from research focused on developing 

conceptual frameworks and methods for describing forest benefits provided by 

public and private lands, and using these to design and evaluate policy and management alternatives consistent with public preferences.

Identifying Potential Research Areas

Conceptually, ecosystem services can be thought of as a key factor of interaction 

between human systems comprising socioeconomic and political processes and 

ecological systems comprising ecosystem functions and processes (fig. 2). Human 

systems affect ecological systems through human use and management of natural 

resources, environmental degradation and remediation, and natural resource and 

environmental policies, among other factors. How ecological systems respond to 

these human factors influences what human systems get in return—ecosystem 

services. The cycle of interaction involves numerous socioeconomic, political, 

ecological, and biophysical factors, which alone and in combination shape the 

disciplinary and topical bounds of potential inquiry regarding ecosystem services. 

Very generally, an economist might study human demands for and supply of natural 

resources and environmental amenities provided by ecological systems, and consider policies for alleviating critical scarcities. An ecologist might study the numerous 

interactions among different components or agents within ecological systems, and 

the effects of human actions on specific components. Significant opportunities exist 

for multidisciplinary research. 

To meet the needs of Forest Service policymakers and managers, the greatest gains are likely to come from research focused on areas where Forest Service 

scientists have a comparative advantage. Within the Forest Service, Pacific 

Northwest Research Station, for example, opportunities exist to build on existing 

research capacities in land economics, which is fundamental to addressing adequate 

provision of ecosystem services. Virtually any land use or land cover anywhere 

in the United States is the result of human decisions (or lack of decisions) about 

where and when to pursue particular uses or covers, including natural succession, 

and of management actions that influence ecological conditions and processes and 

ecosystem services produced. Economics research conducted by Pacific Northwest 

Research Station scientists and their cooperators has focused on examining how 

Ecosystem services 

can be thought of as a 

key factor of interaction 

between human and 

ecological systems.
General TEchnical REport PNW-GTR-700

28

private forest owners respond to policies and socioeconomic factors (for example, 

prices and other opportunities) in their land use and forest management actions 

with implications for ecological systems (for example, Alig 1986, Alig and Healy 

1987, Butler and others 2004, Kline 2005, Kline and Alig 1999, Kline and others 

2000a, 2000b, 2004b). Significant work also has focused on projecting how these 

factors will influence future land use and management changes on private lands 

(for example, Alig and others 2003, 2004; Kline and Alig 2005; Kline and others 

2003) and expected outputs of select ecosystem services such as timber and carbon 

sequestration at various spatial scales (for example, Alig 2003, Alig and Butler 

2004, Alig and others 2002, Haynes 2003). 

Much of this work has been done as part of multidisciplinary research to evaluate forest policy and management effects on public and private lands and resulting 

beneficial outputs (for example, Hayes and others 2004; Spies and others 2002, in 

press; USDA FS 2001) or to facilitate such multidisciplinary efforts (for example, 

Everest and others 2004; Houston and others 2002; Kline 2003, 2004; Kline and 

others 2001). Scientists also have examined issues involved in protecting and managing forest lands across public and private ownerships to augment the ecosystem 

services produced on public lands with private lands protection (for example, Kline, 

in press; Kline and others 2004a). This includes examining socioeconomic and 

other factors that influence public demands for select ecosystem services produced 

on public and private lands (for example, Garber-Yonts 2005, Houston and others 

2003, Kline and Swallow 1998) and demands for open space protection generally 

(for example, Kline 2006; Kline and Wichelns 1994, 1996a, 1996b, 1998).

Figure 2— Human and ecological systems interactions: examples of related 

economics research areas existing within the Pacific Northwest Research Station. 

Human

system

Ecological

system

Ecosystem services

Public lands

management

Private forest

owner behavior

Prices and

Policies Actions

opportunities
Defining an Economics Research Program to Describe and Evaluate Ecosystem Services

29

This large body of research remains relevant to current Forest Service interests 

in ecosystem services and is a foundation on which to expand and initiate new 

ecosystem services research tailored to current and specific needs of policymakers 

and managers. It augments existing comparative advantages of economics programs 

at other research stations. For example, economics research at the Rocky Mountain 

Research Station focuses largely on valuation methods (for example, Brown 1984, 

Brown and others in press, Champ and Bishop 2001, Champ and Loomis 1998, 

Champ and others 2002, 2003; Peterson and Randall 1984; Peterson and others 

1988). At the Northern Research Station, related economics research focuses on the 

dimensions of human perceptions, attitudes, and values concerning ecosystem management (for example, Bengston 1994; Bengston and Fan 2002; Bengston and others 

2004b; Bengston and Xu 1995, 2001; Manning and others 1999) and designing and 

evaluating conservation strategies (for example, Haight and others 2005, Ruliffson 

and others 2003, Snyder and others 2004). At the Southern Research Station, 

research focuses on improving methods for measuring nonmarket forest values, 

their distribution across society and regions, and incorporating them into policy (for 

example, Scarpa and others 2000, Schaberg and others 1999, Sills and Abt 2003, 

Zinkhan and others 1997). Other research programs exist, but these suffice to show 

the diversity of interests within Forest Service research. Opportunities exist as well 

to work collaboratively across research stations.

Economics can be fundamental to designing and evaluating polices for addressing the public goods characteristics of ecosystem services produced on both public 

and private lands. In also can contribute to conceptualizing and evaluating the ways 

in which forest landowners respond to polices, prices, and other socioeconomic 

factors in making land use and management decisions that affect ecological systems 

and ecosystem services. Economics also can help describe and evaluate human 

demands for ecosystem services that are unpriced in markets, including describing 

the perceptions, attitudes, and values people hold for the Nation’s public and private 

forest lands. Among these more general contributions, specific areas where Pacific 

Northwest Research Station economics research might be most helpful and productive in ecosystem services analysis and evaluation are:

• Reviewing past and current forest benefits research to identify situations in 

which forest benefits information was effectively used in forest policy and 

management decisionmaking, with a focus on merging ecological information 

with economic conceptual frameworks and benefits measurement and valuation 

(or weightings). Examples of studies might include:

F	 Synthesizing research studies that have evaluated policy and management 

effects on one or more forest benefits at a landscape level, and evaluating 

Economists can 

be fundmental to 

addressing the public 

goods characteristics 

of ecosystem services 

produced on both 

public and private 

lands.
General TEchnical REport PNW-GTR-700

30

the usefulness of specific approaches and information produced. 

F	 Developing frameworks for developing and using ecosystem benefits indicators to evaluate forest policy and management alternatives (for example, 

Boyd and Banzhaf 2006) and providing empirical examples of evaluations 

using real landscapes.

• Defining aspects of changing demands for ecosystem services as public goods, 

including their production on both public and private lands, their relative 

importance or value to society, and how demands influence and are influenced 

by socioeconomic change. Examples of studies might include:

F	 Evaluating demands for preserving open space and how they are influenced 

by changing socioeconomic factors such as population growth, incomes, 

and open space scarcity, building upon work by Kline (2006) and Kline and 

others (2004a). 

F	 Collaborating with ecologists and other biophysical scientists to describe 

ecosystem services production functions and outputs to facilitate describing ecosystem services produced by public and private forest lands, and 

analyzing policy and management effects. Such work might build upon past 

multidisciplinary research efforts (for example, Hayes and others 2004, 

Spies and others 2002). 

F	 Describing and evaluating the ways in which ecosystem services and their 

relative scarcities are perceived by rural and urban residents, and how these 

are shaping land use patterns and forest land development arising from 

inmigration of new residents attracted to forest amenities, including what 

economic effects these changes bring for rural communities (for example, 

Garber-Yonts 2004).

• Defining specific ecosystem services, measuring the relative magnitudes of 

their social benefits, and evaluating their changes resulting from specific forest 

policy and management actions when those actions are well-defined and potential resource changes known with fair certainty. Examples of studies might 

include:

F	 Measuring health benefits of outdoor recreation opportunities and other 

quality-of-life factors resulting from proximity to national forests, and 

commenting on their national implications, building upon Rosenberger and 

others (2005), for example.

F	 Measuring and evaluating the effects of specific policy or management 

actions (for example, fuel treatments, riparian buffers, or access fees) or 

disturbances such as fire on specific recreation uses in well-defined locations, including potential changes in users’ welfare and potential changes in 
Defining an Economics Research Program to Describe and Evaluate Ecosystem Services

31

local economic activity (for example, Brown 2006).

F	 Identifying and evaluating the potential interrelationships in the production 

of multiple ecosystem services, their responses to specific management 

changes, and ways to mitigate potential conflicts and enhance potential 

complementarities. 

• Identifying examples of and evaluating opportunities for joint production of 

ecosystem services, including evaluating and describing ways in which forest 

policies and management actions can contribute to joint production opportunities. An example of a study might include:

F	 Estimating production possibility frontiers describing the production of 

ecosystem services (for example, timber and biodiversity) on specific 

landscapes, and evaluating the potential effects of policies and management 

actions on benefit production relationships (for example, Calkin and others 

2002, Stevens and Montgomery 2002).

• Identifying the practical limitations of existing economic conceptual theory in 

evaluating ecosystem services effects of policy and management, and consider 

ways to remedy existing limitations and identify alternative approaches that are 

consistent with economic theory. Examples of studies might include: 

F	 Examining and evaluating the practical usefulness of alternative approaches for including and evaluating ecosystem services in analyses of forest 

policy and management alternatives, such as ecosystem indicators and 

multiattribute decision criteria, among others (for example, Kline 2004). 

F	 Examining the conceptual and practical applicability and current use of 

the “safe minimum standards” and adaptive management approaches (for 

example, Stankey and others 2005) to public forest policy and management 

decisionmaking. 

• Identifying and evaluating policies, incentives, and other strategies to induce 

private forest owners to internalize externalities associated with public benefits 

provided by private forest lands. Examples of specific studies might include:

F	 Building on existing research to examine the factors motivating land use 

decisions of private forest landowners, and identify and evaluate potential 

policy instruments for influencing those decisions (for example, Alig and 

others 2004, Kline 2005).

F	 Building on existing research to examine the factors that motivate forest 

management decisions of private forest landowners, identify methods for 

differentiating among different types of owners, and identify and evaluate 

potential market-based and regulatory policy instruments for influencing 

diverse owners’ decisions (for example, Kline and others 2000a, 2000b).
General TEchnical REport PNW-GTR-700

32

F	 Evaluating the policy or management effects on the provision of specific 

ecosystem services, such as the effect of land use regulations on maintaining stored carbon (for example, Cathcart 2000, Kline, in press).

Although economics can contribute to addressing ecosystem services, any economic evaluation of services can only offer additional information needed for effective policy and management decisionmaking. A single correct answer regarding 

what policy or management path might be most appropriate where and when will 

never be forthcoming—“No one would suggest that economic values should rule 

the day” (Bockstael and others 2000: 1389). Rather, economics, as other disciplines, 

can only help to provide better and more complete information with which to 

weigh the effects of different policy and management alternatives. Progress toward 

evaluating ecosystem services will require that economists and ecologists work 

together. That process will demand that economists gain some fundamental level 

of understanding of the biophysical and other processes involved in the production 

of ecosystem services. It also must involve ecologists, as well as policymakers 

and managers, in gaining at least some fundamental level of understanding of 

economics. Economics offers a powerful set of tools that can be useful to examining and resolving ecological and natural resource issues. To take full advantage of 

those tools, economists must find effective ways to help ecologists and biophysical 

scientists, policymakers, and managers see how their interests align with economic 

approaches to evaluating ecosystem services. 

Acknowledgments

I thank Ralph Alig, David Bengston, Patty Champ, Richard Haynes, Linda 

Langner, and Randall Rosenberger for helpful comments.

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