International Review of Environmental and Resource Economics > Vol 11 > Issue 4

The Economics of Resilience

Chuan-Zhong Li, Uppsala University and The Beijer Institute, Royal Swedish Academy of Sciences, Sweden, Chuanzhong.Li@nek.uu.se , Anne-Sophie Crépin, The Beijer Institute, Royal Swedish Academy of Sciences and Stockholm Resilience Centre, Stockholm University, Sweden, asc@beijer.kva.se , Carl Folke, The Beijer Institute, Royal Swedish Academy of Sciences and Stockholm Resilience Centre, Stockholm University, Sweden, carl.folke@beijer.kva.se
 
Suggested Citation
Chuan-Zhong Li, Anne-Sophie Crépin and Carl Folke (2018), "The Economics of Resilience", International Review of Environmental and Resource Economics: Vol. 11: No. 4, pp 309-353. http://dx.doi.org/10.1561/101.00000096

Publication Date: 30 Aug 2018
© 2018 C.-Z. Li, A.-S. Crépin and C. Folke
 
Subjects
Environmental Economics,  Uncertainty
 
Keywords
JEL Codes: Q20Q54Q57
Resilienceregime shifteconomic valuationsocial-ecological systems
 

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In this article:
1. Introduction 
2. The Science of Regime Shifts and Resilience 
3. Economic Models with Regime Shifts 
4. Economic Valuation of Resilience 
5. Resilience Management 
6. Concluding Remarks 
References 

Abstract

This paper provides an interpretive overview on the economics of resilience with special reference to social–ecological systems. We address the basic sciences of regime shifts and resilience in different settings linked to empirical cases and review the economic models related to these aspects. In particular we discuss models to assess market outcomes when thresholds exist and are known and particular characteristics of such systems when they are optimally managed. We also examine multiple aspects of uncertainty including unknown but learnable thresholds and systems where either the threshold or the stock dynamics are uncertain because they change in a stochastic way. Moreover, we discuss resilience in relation to measurement and valuation using approaches that focus on the role of biodiversity for resilience, the insurance value of resilience and the value of resilience as a stock that influences social welfare. Finally, we discuss issues related to practical resilience management and identify knowledge gaps that future research efforts could address.

DOI:10.1561/101.00000096