A 300-year history of nature’s economisation — and what it means for today’s natural capital markets.
“In barely three decades, ecosystem functions became tradable commodities.”
— Gómez-Baggethun et al., Ecological Economics, 2009
Nature as a Factor of Production — Classical Economics
When Adam Smith wrote The Wealth of Nations in 1776, land was self-evidently central to the economy. For the Physiocrats — led by Quesnay — the earth was the sole source of all wealth. Ricardo and Mill also recognised land as a distinct category, fundamentally different from capital and labour: non-reproducible, non-manufacturable, a gift to society as a whole.
What these early economists did not do was quantify nature’s non-agricultural services — clean water, pollination, climate regulation — in monetary terms. These services were taken for granted because they were simply there.
Nature’s Disappearance from Economics (1870–1970)
With the neoclassical revolution, land vanished as a distinct category. Marshall, Walras and Jevons subsumed land under “capital.” Economics turned to equilibrium models — abstract, mathematical, with no room for the biophysical limits of the earth. The market became the universal allocation mechanism for everything with a price. What has no price does not count.
This era created a consequential blind spot: for a hundred years, leading economics textbooks treated nature and its services as mere raw materials — timber, coal, soil — not as the systemic infrastructure of life.
The Return: Ecosystem Services as a Concept (1970s–1990s)
The first counter-voices came from ecology. In 1977, Walter Westman asked in Science: “How Much Are Nature’s Services Worth?” — using the term “nature’s services” for the first time. In 1981, Paul Ehrlich and Anne Ehrlich coined “ecosystem services” to raise public awareness about the consequences of species loss.
It was a rhetorical tool: translate nature into the language of economics and politicians and investors can understand its importance. Not a moral argument — a pragmatic one.
Mainstreaming: Costanza 1997 and the Millennium Ecosystem Assessment
The breakthrough came in 1997 with Robert Costanza’s landmark article in Nature: he valued global ecosystem services at $33 trillion per year — more than the world’s GDP at the time. The figure was methodologically contested, but it made headlines. Nature suddenly had a price tag.
Between 2003 and 2005, the UN-initiated Millennium Ecosystem Assessment followed: the first global systematic stocktaking of the state of ecosystems and their services to humanity. The MEA established an influential taxonomy — provisioning, regulating, cultural and supporting services — that still shapes the field’s vocabulary today.
From Valuation to Markets: PES and MES
Once the concept was established, the next logical step followed: if nature has value, that value can be traded. Payments for Ecosystem Services (PES) first emerged at the national level — Costa Rica is the earliest and best-known example. International carbon markets, biodiversity offsets, and water quality certificates soon followed.
Today we speak of Mitigation and Ecosystem Services Markets (MES) — a global growth market in which natural processes are structured as tradable assets. Germany’s and Austria’s eco-point systems are part of this development: legislatively anchored, methodologically standardised, financially interesting.
Tool or Ideology?
Gómez-Baggethun and his co-authors end with a critical question: is the economisation of nature a tool for biodiversity protection — or is it an ideology that permanently transforms nature into a commodity, thereby undermining its intrinsic value?
Their answer is cautious: the tool can work — but only if embedded in robust public institutions and used as a complement to, not a replacement for, regulatory protection. Natural capital markets are not a licence for further consumption, but a financing mechanism for protection and restoration.
For landowners and investors entering eco-point markets today, this history is no abstract academic exercise. It shows that what looks like a niche market is the result of 300 years of intellectual development — and that the institutional foundations are already in place.
Source: Gómez-Baggethun, E., de Groot, R., Lomas, P.L. & Montes, C. (2010). The history of ecosystem services in economic theory and practice: From early notions to markets and payment schemes. Ecological Economics, 69(6), 1209–1218.