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Natural capital

Natural capital refers to the mineral, plant, and animal formations of the Earth's biosphere when viewed as a means of production of oxygen, water filter, erosion preventer, or provider of other natural services[?]. It is one approach to ecosystem valuation[?], an alternative to the traditional view of all non-human life as passive natural resources.

In a traditional classical economic analysis of the factors of production, natural capital would usually be classified as "Land" distinct from "Capital" in its original sense The distinction between "Land" and "Capital" was that land is naturally occurring, whereas capital as originally defined referred only to man-made goods. It may however be argued that it is useful to view many natural systems as "Capital" because they can be improved or degraded by the actions of man over time, so that to view them as if their productive capacity is fixed by nature alone is misleading. More importantly, they yield benefits naturally which are harvested by humans, those being nature's services[?], 17 of which were closely analyzed by Robert Costanza[?]. These benefits are in some ways similiar to those realized by owners of infrastructural capital which yields more goods, e.g. a factory which produces automobiles just as an apple tree produces apples.

The term was most closely identified with Herman Daly[?], Robert Costanza[?], the Biosphere II project, and the Natural Capitalism economic model of Paul Hawken, Amory Lovins, and Hunter Lovins[?] until recently, when it began to be used by politicians, notably Ralph Nader, Paul Martin Jr., and agencies of the UK government including the London Health Observatory[?].

Some economists and politicians, including Martin, believe natural capital measures play a key role in money supply and inflation measurements in a modern economy. They point to uneconomic growth and a lack of any direct connection between measuring well-being and such indicators as GDP.

Indicators adopted by UNEP, WCMC[?] and the OECD to measure natural biodiversity use the term in a slightly more specific way. However, all users of the term differentiate natural from man-made manufactured capital or infrastructural capital in some way. It does not appear that the basic principle is controversial, although there is much controversy on indicators, nature's services[?], ecosystem valuation[?], biodiversity metrics[?] and methods of audit that might apply to these services, systems, biomes.

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