The Economics of Tipping Points

The Beijer Institute organizes workshops for economists and ecologists to meet, to talk to each other, and to work together. At one of these workshops in Gozo, Malta, in 1998, the ecologists Stephen Carpenter and Marten Scheffer presented their shallow lake model. Lakes have the characteristic that at some point, a small additional release of phosphorus on the lake flips the lake quickly from “blue water” into “green soup”. Ecological services such as fresh water, fish and amenities are substantially decreased by the flip. Lowering the release of phosphorus afterwards does not restore the lake immediately. It requires more effort or becomes even impossible. The general conclusion was that these flips have to be prevented. An economist challenged this conclusion: what if the possibility to release phosphorus on the lake is for some reason so beneficial that the net result is positive, even if these negative consequences for the ecological services are taken into account? A new research area was born: the economics of tipping points in ecological systems. Of course, this was not the only starting point. New areas usually pop up at different places in the world, but this event definitely had impact.

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