Rethinking economics in a world of tipping points

Ecological tipping points can fundamentally change the way natural resources should be managed. A new review of the economics of tipping points highlights the economic implications of tipping points and the need to better account for human behaviour when managing vulnerable ecosystems.

Economic models of natural resource management have often assumed that ecosystems change predictably. But ecosystems can cross tipping points, critical thresholds beyond which they undergo abrupt and potentially persistent regime shifts, which can be extremely difficult or impossible to reverse.

A new review in Annual Review of Resource Economics by Beijer Institute researchers Anne-Sophie Crépin and Therese Lindahl, and former co-director Aart de Zeeuw, explores what these tipping points mean for economics and natural resource management. Reviewing theoretical, experimental and empirical research, the authors highlight gaps between economic models, ecological evidence and human behaviour.

“Standard economic theory assumed away tipping points in models”, says Anne-Sophie Crépin. “But as tipping points exist in nature and societies manage and harvest these systems, ignoring them can have huge consequences.”

When a resource is more limited than we think

Economics is fundamentally concerned with how to manage limited resources. But the possibility of a tipping point can change the understanding of how limited a resource really is.

For example, conventional fisheries management might seek an economically optimal level of fishing. But if fishing pushes an ecosystem past a threshold into a much less productive state, the consequences can be far more severe.

“The economics of tipping points is important because it brings the health and dynamics of ecosystems more explicitly into questions about how societies use natural resources,” says Anne-Sophie Crépin.

The same risks apply to lakes, forests, coral reefs and other ecosystems, where regime shifts can reduce the services they provide to people.

From models to human behaviour

One distinctive feature of the review is its effort on connecting economic theory with behavioural experiments, which test how people respond to resource dynamics and the risk of crossing tipping points.

Many laboratory experiments broadly support theoretical predictions, but field studies sometimes reveal different behaviours shaped by social, institutional and contextual factors.

People may also misjudge nonlinear ecological dynamics, underestimating how quickly resources deteriorate or expecting recovery to be linear despite information about tipping points and their lasting effects. Such misunderstandings can undermine even well-designed management policies.

Bringing theory and evidence closer together

The researchers call for closer collaboration between economic models and empirical research.

“In an ideal world, you want the models to be realistic,” they explain. “However, realistic models require detailed ecological and socioeconomic data, which are often lacking in tipping-point research,” they point out.

Behavioural experiments can help fill the gap by showing how people respond to tipping-point risks. Models and experiments must also be designed so their results can be meaningfully compared.

“A strength of this review is that it identifies opportunities to design future models and experiments so that they can better inform one another,” says Therese Lindahl.

Reforming economic education

Beyond natural-resource management, Anne-Sophie Crépin highlights the importance of the review’s findings for educating future economists, even in introductory courses

“Basic economic theory often focuses on optimal equilibria. But ecosystems with tipping points can have multiple equilibria, different possible states in which a system can remain. Crossing a threshold can therefore dramatically change the outcome rather than simply lead to a gradual adjustment towards a new optimum.”

She concludes: “Recognising this complexity could change how future economists think about natural-resource management and precautionary policies.”

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Reference: 

Crépin, A.-S., T. Lindahl, and A. de Zeeuw. 2026. Economics of tipping points. Annual Review of Resource Economics 18:269–291