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The Social Value of Using Biodiversity in New Pharmaceutical Product Research

Author

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  • Simpson, R. David
  • Craft, Amy
Abstract
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 yet 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.

Suggested Citation

  • Simpson, R. David & Craft, Amy, 1996. "The Social Value of Using Biodiversity in New Pharmaceutical Product Research," RFF Working Paper Series dp-96-33, Resources for the Future.
    • Handle: RePEc:rff:dpaper:dp-96-33
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    References listed on IDEAS

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    10. Sedjo, Roger & Simpson, R. David, 1996. "Valuation of Biodiversity for Use in New Product Research in a Model of Sequential Search," RFF Working Paper Series dp-96-27, Resources for the Future.
    11. Sedjo, Roger A. & Simpson, R. David, 1996. "Investments in Biodiversity Prospecting and Incentives for Conservation," Discussion Papers 10821, Resources for the Future.
    12. Sedjo, Roger & Simpson, R. David, 1996. "Investments in Biodiversity Prospecting and Incentives for Conservation," RFF Working Paper Series dp-96-14, Resources for the Future.
    13. Reinganum, Jennifer F., 1989. "The timing of innovation: Research, development, and diffusion," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 14, pages 849-908, Elsevier.
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    Cited by:

    1. Amy Craft & R. Simpson, 2001. "The Value of Biodiversity in Pharmaceutical Research with Differentiated Products," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 18(1), pages 1-17, January.
    2. van Beukering, Pieter J. H. & Cesar, Herman S. J. & Janssen, Marco A., 2003. "Economic valuation of the Leuser National Park on Sumatra, Indonesia," Ecological Economics, Elsevier, vol. 44(1), pages 43-62, February.

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