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We consider a world economy, in which the global public good ’biodiversity’ is positively correlated with that share of land which is protected by land-use restrictions against the deterioration of habitats and ecosystems. The willingness-to-pay for biodiversity conservation is positive in ’rich’ developed countries (North), but very low in ’poor’ developing countries (South). Taking the no-policy scenario (Regime 1) as our point of departure, we analyze the changes in allocations and welfare when the North financially supports biodiversity conservation in the South – as stipulated in the Convention on Biological Diversity (1992). We model that support as a market for biodiversity conservation and distinguish the cases, in which the North does (Regime 3) or does not (Regime 2) coordinate its biodiversity conservation actions. Our numerical examples exhibit various unexpected and even undesirable results. The move from Regime 1 to Regime 2 hardly improves welfare and biodiversity in our examples irrespective of whether governments act strategically. That may explain the low level of North’s financial support of biodiversity in the South we observe in practice. Without strategic action, the move from Regime 1 to 3 enhances aggregate welfare, because Regime 3 is efficient, but the North or the South may be worse off due to unfavorable changes in their terms-of-trade. If governments act strategically, the aggregate welfare may decline when moving from Regime 1 to 3, but the welfare changes with opposite signs for North and South tend to be smaller than without strategic action.

Based on economic methodology we model an ecosystem with two species in predator-prey relationship: mice feed on grain and grain feeds on a resource. With optimizing behaviour of individual organisms a short-run ecosystem equilibrium is defined and characterized that depends on the farmer's use of fertilizer and on the mice population which, in turn, is affected by pesticides. In that way, a microfounded agricultural production function is derived. Linking a sequence of short-run ecosystem equilibria yields the growth function of the mice population which is thus derived rather than assumed. In each period the farmer harvests all grain in excess of some given amount of seed. If she maximizes her present-value profits, optimal farming is shown to depend on the prices of pesticide and grain. It is either optimal to use no pesticide or a moderate amount of pesticide or to apply a chattering control. Pest eradication is never optimal. On the other hand, if the farmer takes into account steady state mice populations only, it may be optimal to eradicate mice or to use no or a moderate amount of pesticide depending on prices as well as on the shape of the grain production function which is determined by micro parameters of grain reproduction.

In an integrated economy-ecosystem model humans choose their land use and leave the residual land as habitat for three species forming a food chain. The size of habitat determines the diversity and abundance of species. That biodiversity generates, in turn, a flow of ecosystem services with public-good characteristics for human consumption. The ecosystem submodel yields (rather than assumes!) population growth functions with each species? growth depending on the size of habitat. First the relationship between habitat and species growth (sustenance, decline and extinction) is explored. The laissez-faire economy is shown to result in an underprovision of habitat, making the case for land use restrictions for nature protection. The optimal land use policy is characterized with full regard of ecosystem dynamics. Finally, labor-augmenting technical change is introduced to generate ever increasing pressure towards further habitat reductions. In the laissez-faire economy the habitat is consequently squeezed to zero in the long-run so that all species are doomed. Social optimality demands, however, to refrain from using all land for economic purposes despite ever-growing labor productivity.

Ecological systems (ecosystems, for short) are complex systems of interacting species, plants and animals, where each of the species consists of individual organisms that interact with organisms of the same or other species in various ways: they compete for scare resources and they are involved in predator-prey or mutualistic relationships. The challenge to understand the performance and changes of ecosystems over time was taken up long time ago by ecologists. In the ecological literature a vast number of models address ecosystem dynamics, taking populations as the relevant endogenous variables and investigating how populations develop and interact over· time. For brevity, we call them ecological population models. Many of them focus on the simplest case of a single species as an aggregate entity developing over time. The prototype (heuristic) model for one large homogenous population in a constant environment is the logistic growth curve based on the so-called Verhulst-Pearl equation. Pierre Francois Verhulst (1838) introduced the logistic equation and Raymond Pearl (1930) applied it to population growth in the US; this equation turned out to become an important analytical tool in ecosystem analysis...