The Social Value of Using Biodiversity in New Pharmaceutical Product Research

Biologists and conservation advocates have expressed grave concern over perceived threats to biological diversity. "Biodiversity prospecting" -- the search among naturally occurring organisms for new products of agricultural, industrial, and, particularly, pharmaceutical value -- has been advanced as both a mechanism and a motive for conserving biological diversity. Economists and others have attempted to estimate the value of biodiversity for use in new pharmaceutical project research. Most of these existing approaches are incomplete, however, as they have not considered full social welfare, i.e., both consumer surplus and profit. This paper addresses social welfare by calibrating a model of competition between differentiated products with data from the pharmaceutical industry. We find that the magnitude of losses from even catastrophic declines in biodiversity are negligible in comparison to the value of world production. While social values of biodiversity prospecting might motivate habitat conservation in some areas, these values are likely to be small relative to land value in other uses in even some of the more biologically rich regions of the world.

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Working or Discussion Paper
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JEL Codes:
D43; L13; Q29
Series Statement:
Discussion Paper 96-33

 Record created 2017-04-01, last modified 2018-01-22

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