Comprehension: For environmental assets, markets can fail if prices do not communicate society's desires and constraints accurately. Habitat destruction and loss of biodiversity originate in several sources of market failure: public ownership of large open-access land with limited government capacity encourages over-exploitation of wildlife, timber, grazing and crop lands. Lack of secure land tenure gives little incentive to conserve habitat. Biodiversity is a case of non-rivalry and non-excludability and has no price, so such failures are linked to incomplete markets; they can also arise from externality if an outside agent disturbs the ecosystem. This can end the ecosystem unless local people act collectively.
Incomplete markets for biodiversity occur because:
Tap an option to check your answer.