Chapter 4The Economic Valuation of
Agroforestry’s Environmental Services
David Pearce and Susana MouratoAgroforestry practices vary, but their essential feature is that they are explicitly
designed to be multifunctional, that is, to produce multiple products and serv-
ices. Included in these outputs may be conservation outcomes, such as biodi-
versity conservation. Each of these products and services has an economic
dimension. It is no exaggeration to say that all ecological services have an eco-
nomic counterpart, that is, there is an economic value attached to them. Elic-
iting what these values are and how they compare with alternative land use
systems, especially potentially destructive systems such as some forms of slash-
and-burn agriculture, pasture, or monoculture plantations, is crucial to pro-
viding incentives for the expansion of agroforestry.
This chapter outlines the links between economics and biodiversity. It sets
out the basic economics of land use choice, of which agroforestry is one
option, investigates the economic benefits of agroforestry, and illustrates them
in three case studies for northern Nigeria, the Sudan, and Peru. Most atten-
tion is paid to the Peru study because it reveals important insights into how
agroforestry practices should be appraised.
Economics and Biodiversity
To date economic studies of agroforestry systems have largely neglected the
biodiversity gains from agroforestry. Part III of this volume shows clearly that
agroforestry improves the biodiversity profile compared with less diversified
and land-degrading alternatives. However, there are several reasons why the
economic studies lag behind the ecological studies. First, economists have
made substantial efforts to place economic values on many of the outputs
and services supplied by natural and sustainably managed systems. However,
biodiversity typically has been construed to mean wildlife services (e.g., the
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