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Natural and social capital

Capital is traditionally defined as manufactured means of production. In contrast, Costanza and Daly distinguish three broad types of capital: natural, human and manufactured, ‘which correspond roughly to the traditional economic factors of land, labour and capital’ (Costanza and Daly, 1992: 38). Natural capital consists of natural ecosystems that yield a flow of valuable ecosystem goods or services into the future (Costanza, 2008). For example, a population of trees or fish provides a flow or ‘natural income’ annual yield of new trees or fish that, if properly managed, can be sustained year after year. Natural capital may also provide environmental services such as recycling waste materials, or water catchment and erosion control, which also count as natural income. Since the flow of services from ecosystems requires that they function as whole systems, the structure and diversity of the system is an important component in natural capital (Costanza and Daly, 1992: 38).

These authors furthermore differentiate between two types of natural capital: (1) renewable or active natural capital, and (2) non-renewable or inactive natural capital (‘funds’ and ‘stocks’ in Georgescu-Roegen’s terminology). Renewable natural capital is active and self-maintaining using solar energy (e.g. ecosystems). Ecosystems can be harvested to yield ecosystem goods (e.g. wood) but they also yield a flow of ecosystem services when left in place (e.g. erosion control, carbon capture, recreation). Non-renewable, natural capital like fossil fuels and mineral deposits yields no service until extracted (Costanza and Daly, 1992).

In addition to natural capital, they distinguish between (1) human capital, i.e. the stock of education, skills, culture and knowledge stored in human beings and (2) manufactured capital such as factories, buildings, tools and other physical artefacts. Human, manufactured and renewable natural capital decay at substantial rates and must be maintained and replenished continuously. The stock of non-renewable natural capital also decays, but at a slower pace. Still, once it is extracted and used, it is gone. Renewable natural capital, which produces ecosystem goods and services, renews itself using its own capital stock and solar energy, however excessive harvest of ecosystem goods can reduce the ability of renewable natural capital to produce services and to maintain itself.

Manufactured capital, renewable natural capital and non-renewable natural capital interact with human capital and economic demand to determine the level of marketed goods and service production (Costanza and Daly, 1992). As such, much discussion on sustainability in ecological economics revolves around the issue of the limits to substitution between the different forms of capital (see weak vs. strong sustainability). Some ecological economists however, criticise the use of the concept of capital for natural resources and emphasise property relations over funds and stocks.

References

Costanza, R. and Daly, H., E. (1992) Natural Capital and Sustainable Development. Conservation Biology 6 (1) 37-46.

Costanza , R.  (2008) Stewardship for a ‘full’ world. Current History, 107 (705) 30-35.

For further reading:

Costanza, R. (Lead Author), Cleveland, C., J. (Topic Editor) (2008): Natural capital. In: Encyclopedia of Earth. In: Cleveland, C., J. (Eds), Encyclopedia of Earth [online] URL: http://www.eoearth.org/article/Natural_capital [First published in the Encyclopedia of Earth February 26, 2007; Last revised July 31, 2008; Retrieved November 11, 2012].

This glossary entry is based on contributions by Willi Haas, Simron Jit Singh and Annabella Musel

EJOLT glossary editors: Hali Healy, Sylvia Lorek and Beatriz Rodríguez-Labajos

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