A biodiversity index is a summary measure of biological diversity that combines information about how many species are present and how evenly they are represented.
Why it belongs in economics
Economists use biodiversity measures when evaluating habitat loss, conservation policy, ecosystem services, and the long-run cost of environmental degradation. A simple species count is often not enough. An ecosystem with ten species dominated by one species is less diverse than one where those ten species are more evenly distributed.
That is why biodiversity indices help convert ecological complexity into data that can enter cost-benefit analysis, environmental accounting, and policy evaluation.
Common measures
Two common approaches are:
- the Shannon index, which rises with both richness and evenness,
- the Simpson index, which places more weight on concentration and dominance.
Different indices answer slightly different questions, so economists need to know what the measure is actually capturing before using it in a model.
Economic interpretation
A falling biodiversity index can signal that land use, pollution, or extraction is generating environmental costs that markets are not pricing properly. That makes the concept relevant to:
- externalities,
- public-good problems,
- sustainability debates,
- development choices that trade off current output against future ecological resilience.
The index is not itself a welfare measure, but it can be an important input into welfare analysis.