Cascades and chains: how does value reach the valuer?

Browsing through a presentation online the other day, I came across an interesting slide titled the ‘Ecosystem service cascade’, produced by Roy Haines-Young at Nottingham University (see below in Fig.1 and here). The slide visualises a chain of events that leads to people benefitting from the environment. There are a series of natural (ie. ‘non-human’) inputs that are modulated by other environmental inputs.

ES Cascade

Fig. 1: Diagram of the ‘Ecosystem Services Cascade’, whereby biophysical processes lead to human utility

The slide is helpful, because it ties in neatly with the ‘value chain’ concept used in business. This was the justification for the ‘customer is always right’ mantra. If a product or service was demanded by someone, then they defined its exact specification – provided they were willing to pay for it. The original model viewed a supply chain as an accumulation of value, although the ‘cascade’ viewpoint might be more relevant in considering inefficiencies and losses from the system, such as through trophic levels.

The value chain concept implies that, as the products or service nears completion to the consumer’s specificiation, so monetary value gradually accretes. Svensson (2003) takes a different view, suggesting that any product or service is of zero value until it exactly fits the consumer’s specifications. This seems an unrealistic viewpoint. A product that is very nearly ready for the consumer is valuable to another actor in the supply chain, as it can be easily made ready. A good example is an unfinished house. It will be worth less than a finished one, but not as little as a plot of bare ground.

The value chain concept helps us deal with some of the trickier questions arising from the ecosystem services concept. A common but confusing question is whether nature has infinite value (George Monbiot thinks it does, here). Processes like the carbon cycle support (almost) all life on Earth. These supporting services sit right at the beginning of the ecosystem services waterfall, and are crucial to every ecosystem service that comes after them. If the supporting service is a sine qua non, does that mean its value is infinite?

The Value Chain theory suggests not. Value is defined by utility recieved by the consumer and each link in the value chain that comes closer to delivering the demanded service adds some value.

 

References:

Svensson, G, Consumer driven and bi-directional value chain diffusion models, European Business Review Volume 15, Number 6, 2003, pp. 390-400