Applying the economic concept of profitability to leaves

Leaf profitability

We calculated the economic profitability of leaves and analysed the patterns in relation to leaf size, environment and durability (longevity). There was wide variation in leaf profitability with a mean value (± SD) of 3.4 ± 3.5% day⁻¹ and 5th/95th percentile range of 0.29–10.3% day⁻¹. There are no previous studies reporting leaf profitability values for direct comparison, but they can be re-calculated based on published values for leaf payback time. For example, Williams et al.²¹ reported payback time values in several Piper species from a Mexican rainforest, corresponding to leaf profitability values between 0.01 and 33% day⁻¹. Poorter et al.²³ calculated payback times corresponding to leaf profitability values of 1.25–50% day⁻¹ , depending on species type, light environment, and growth conditions (very high values were observed for seedlings grown under non-limiting, hydroponic conditions). The mean values of our study are lower, but in line with values calculated from payback time of Kikuzawa and Lechowicz²⁵ (2.2 ± 2% day⁻¹), because they consider the mean labour time and the favourable period length, as we also applied in our calculations (see “Methods” and Supplementary File S2 online).

One factor that could influence profitability is the size of a production unit. For example, a large leaf may imply a higher cost required for structural support; therefore, the changes in profitability will depend on how gains and expenses vary with size. As it turned out, we found that leaf profitability was positively related to leaf size (Fig. 2A), but the percentage of variance explained was not especially high (R² = 0.07, P < 0.001).

Higher benefits have been suggested for species with large leaves, for example species with larger leaves tend to deploy branches with a higher ratio of leaf area to stem dry mass²⁹, which itself could be associated with a higher growth rate^24,30 and therefore profitability. However, there are also disadvantages for species with large leaves, for example, higher within-leaf support costs reflected in their higher leaf mass per area (LMA)^29,31,32, and more structural and less metabolic tissue^32,33, or an increased risk of overheating or frost damage²⁴. Considering global data of many species, Diaz et al.³⁴ did not find a strong relationship between leaf size and either LMA or leaf N concentration, both of which are related to photosynthetic gain^13,34, suggesting that there is no general advantage for a bigger leaf size (but see³⁵). Here we assessed the issue more directly, concluding that a meaningful benefit is evident.

The environment may also have a strong influence on the gains, expenses and profits of leaves¹⁶. We found that leaf profitability varied among biomes (which differ in environmental conditions), with maximum values in the alpine and grasslands biomes and minimum in the woodland biome (Fig. 2B). The high profitability of alpine and grasslands could be related to the short period the leaf is functionally active, thus leaves must be highly profitable to payback the construction cost. Also, most species from alpine and grasslands are herbs and grasses with high photosynthetic rates and low LMA^13,36, and this may explain the higher profitability. In the case of the woodlands and tropical rain forest the main cause of their low leaf profitability could be the more constant environment that favors evergreen species¹⁵ which generally have higher LMA and lower photosynthetic rates^13,36.

We also wanted to unravel the effect of durability on profitability. It is expected that the longevity of the systems could have an influence on the economic profitability. We expect that entities with short longevity should have a higher economic profitability. For example, leaves with a short longevity (e.g. deciduous leaves) have high photosynthetic gains per unit of leaf dry mass and low LMA^13,36,37 together with a low construction cost per leaf area^18,27 that could result in higher profitability compared with evergreens. Indeed, we found that leaf profitability was significantly related to the leaf durability, with higher profitability for deciduous compared with evergreen leaves (Fig. 2C). Eamus³⁸ also found a lower payback time for deciduous compared with evergreens, which indicates a higher profitability of the deciduous leaf habit.

Finally, we want to know which factors can explain the differences in leaf economic profitability, for example if gains (photosynthesis), expenses (maintenance respiration) or assets (investment in construction) are related to profitability. Our results indicate that leaf profitability was strongly positively related to C-gain by photosynthesis (R² = 0.75, P < 0.001; Fig. 3A) and negatively related to the leaf construction cost per leaf area (CC_a, R² = 0.51, P < 0.001; Fig. 3C).

Comparing leaves that developed in either low or high light, Poorter et al.²³ found that the variable having strongest impact on payback time (the inverse of leaf profitability) was LMA, which is directly related to the construction cost per area¹⁸. Also, leaf profitability was negatively related to the C expenses due to maintenance respiration (R² = 0.03, P < 0.001; Fig. 3B), but notably more weakly than were assets (CC_a) or photosynthetic gains. Therefore, the predictions of Kikuzawa¹⁵ related to the effects of C gains and C costs on payback time (the inverse of profitability) are confirmed by our results.

The high variability in leaf profitability between different species leads us to ask why species with high leaf profitability are not more abundant. First, there is the question whether leaf profitability is related to whole-plant profitability. From the scarce data available (24 species, from^9,39) we calculated the profitability of whole plants considering the expenses on construction and maintenance of stems and roots and found that it was lower (20 ± 7.3% day⁻¹) compared to profitability of leaf (40 ± 11.4% day⁻¹), but both profitabilities were strongly correlated (R² = 0.74, P < 0.001, Supplementary File S5 online) and also positively correlated to relative growth rate (RGR) (R² = 0.53, P < 0.0001 for leaf profitability; R² = 0.83, P < 0.001 for plant profitability, Supplementary File S5 online). Therefore, we consider our values of leaf profitability to be a reliable indicator of profitability in a broad sense. One reason why there is a wide variation in leaf profitability may be that high profitability only is possible under certain conditions, which are very constrained in space or time—e.g. biomes with very short growth season (alpine, tundra); deciduous leaf strategies; etc. The high potential profitability of leaves from arctic and alpine regions may be seen not only as insurance for high probability of suboptimal conditions for the photosynthesis but also necessity for accumulation of storage for winter survival. Also, among co-occurring species, time-discounting¹¹ equalises different LMA strategies when considered over the life of the investment. Other reasons could be the existence of trade-offs which may also imply that a high leaf profitability has some disadvantages as for example, leaves with high profitability (low LMA, high leaf N, etc.) tend to suffer higher rates of herbivory³⁶ or operate at higher risk under drought⁴⁰.

Comparisons between leaf and company

Are the results of the leaf profitability analyses similar to those of companies? To answer this question, we conducted a similar analysis for a reference group of 4722 companies in Spain from ‘Sistema de Análisis de Balances Ibéricos’ (SABI)-database and we also use data of NASDAQ and Dow Jones companies to unravel the effect of different longevity. We calculated the economic profitability of companies and analysed the patterns in relation to company size, environment (type of sector) and durability, just as we did for leaves.

Mean values of company profitability were 5.3 ± 5.8% year⁻¹ with a range of 0.41–15.5% year⁻¹ (percentile 5 and 95%, respectively). It is noteworthy that the values of company profitability are much lower (average values of 5% year⁻¹) than those for leaves (average values around 3.4% day⁻¹) (please note that profitability for companies is by year, but for leaves is by day). The high values of leaf profitability can be due to the fact that they have to bear the costs of construction and maintenance of stems and roots⁴¹ and since the proportion of leaves respect to total biomass is usually low (around 5% under field conditions)⁴², leaves should be highly profitable to maintain the plant expenses.

We found a weak positive relationship between profitability and company size (measured by number of employees; Fig. 2D). Preliminary studies^43,44 found that size (measured by assets or sales volume) had a positive influence on profitability, which they attributed to the market power of larger companies. However, later studies^45,46 considered that intrinsic factors of the company predominantly explained the differences in profitability and that size is not relevant.

Whereas we analysed plant data with respect to biomes, in the case of companies we used sector type as a proxy for the environment, since it describes the market conditions in which companies must survive. As in the case of leaves, there were differences by economic sector (Fig. 2E), as previously reported by Schmalenesee⁴⁷ and Wernerfelt and Montgomery⁴⁸. The sectors of education, health, social and the scientific and technical sector had higher profitability (around 7% year⁻¹), whereas the construction and primary industry sectors had the lowest. This difference is related to the role of innovation^49,50,51,52 and the use of human capital^53,54,55, and it is due to higher sales margins (they sell at higher prices). The innovator has a period of monopolistic gain before the imitators enter the market, and while they get established⁵⁶.

It is difficult to find a mechanism to compare plants and companies in relation to longevity. Companies, unlike leaves, do not have a genetically predetermined longevity; therefore, they are not classifiable according to intrinsic factors such as life-span. Since technology companies have a shorter longevity⁵⁷, we could draw a parallel between NASDAQ companies (technology companies) and deciduous leaves, and between Dow Jones companies and evergreens leaves, to establish a comparison. We calculated the relative growth rate of the stock market capitalization for both types of companies (Supplementary File S6 online). We found that NASDAQ companies, like deciduous leaves, showed a higher profitability (measured as stock market capitalization rate) than those of Dow Jones (Fig. 2F), as a consequence of the greater risk that the investor supports⁵⁸.

Unlike the case of the leaves, company profitability was not well explained by any of the other variables considered: sales (R² = 0.02, P < 0.001; Fig. 3D), expenses (R² = 0.01, P < 0.001; Fig. 3E) or assets (R² = 0.06, P < 0.01; Fig. 3F).

Statistically, the different results between leaves and companies can be understood because for leaves photosynthetic gains were unrelated to construction cost per leaf area (CC_a) (Fig. 4A), whereas respiration expenses were positively related to CC_a (Fig. 4B), meaning that overall benefits (photosynthetic gains—respiratory expenses) were negatively related to CC_a (Fig. 4C). Thus, leaf profitability was negatively related to assets (CC_a) (Fig. 3C). However, in the case of the companies there is a direct relationship between benefits and assets (with a slope of 1), since sales and expenses vary proportionally in similar amounts with the volume of assets (Figs. 4D–F). Therefore, the ratio of benefits/assets (profitability) became very constant and it is not well correlated with assets (R² = 0.06, Fig. 3F).

The disparity between the results of the leaf economy and the companies is surprising a priori. However, from an economic point of view, this disparity can be understood as logical. In human economics, the resources migrate constantly from the less profitable companies to the more profitable ones³. Markets are in a permanent process of adjusting to equilibrium at a single rate of return through exchange, but they are also affected by a permanent innovative process of the companies that separate them from that equilibrium⁵⁶. Conversely, it is not feasible for a plant to transfer part of its resources to another that is more productive (except for example for clonal plants). Leaf profitability depends, in addition to the available resources, on its genetically predetermined structure. There is no exchange and there is no adjustment towards a single rate of return. This difference may explain the contrasting results (Fig. 3A–C compared with Figs. 3D–F).

Boulding⁵⁹ states that “The world of economics is fundamentally organized by exchange“. This role of exchange, typical of the social facet of the human being, will always make a difference between plants and human beings. However, the plants are optimizing subjects and have economic behaviours in the sense of the Robbins definition. Therefore, identifying measurable variables of these processes, as we do in this work, broadens our perspective and may open unexplored paths in our study on issues in which the optimizing behaviour of plants is evident, e.g. accumulation of resources, growth, and limits to growth, etc. In the age of breaking of disciplinary limits⁶⁰, we think that it is possible to extract advances in knowledge if we analyse the economic behaviour of plants.

We argue that the calculation and use of profitability at leaf and plant level can be a useful tool for understanding plant strategies, the success in certain environments and plant evolution. Profitability at the level of human economics is an essential and indisputable variable for understanding the economy and applying economic models. We have used the analogy between the company and the leaf and we have analysed similar trends that arise in relation to size, environment and durability. Therefore, the application of this variable in the context of plant functioning will facilitate conceptual advances and new understanding of plant evolution and ecological function.

Source: Ecology - nature.com