The Economics of Resilience

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.