A recent editorial in the open-access journal PLoS Biology (you can tell it's online because of the acronym title ;-P ) comments on the recent widespread adoption of the Phylogenetic Species Concept as opposed to the Biological Species Concept, and the resulting 'taxonomic inflation' in the number of recognised species around the world. The authors feel that this is a Bad Thing, because increased number of species by definition means more endangered taxa, which means less effective conservation. This is not the first time this point has been made, and I feel the need to put my own oar in on the subject. To do this, I'm going to have to address the two arguments that are really at stake here - I'm going to call them the idealistic and the pragmatic sides of the argument.
The idealistic point is that we should not be using the Phylogenetic Species Concept in recognising species. I wrote a page on Palaeos a while back explaining some species concepts, and I'll refer you there if you want a more detailed description. For now, it'll suffice to say that the 'Biological Species Concept' (BSC) defines a species as a cluster of individuals 'potentially interbreeding to produce viable, fertile offspring', while the 'Phylogenetic Species Concept' (PSC) defines a species as the 'smallest diagnosable population of organisms sharing a distinct pattern of descent'. The latter concept has also been referred to as the LITU (Least Inclusive Taxonomic Unit) by authors who do not necessarily feel that an LITU is equivalent to a 'species'.
One side-effect of using the PSC rather than the BSC is that the latter is indeed generally predisposed to recognise more species. Under the PSC, there is really no place for the concept of 'subspecies' because, after all, if a population can be distinguished as a subspecies then it fulfils the requirements for a species. For vertebrates in particular the subspecies rank has a long history of use, and so application of the PSC results in all those subspecies becoming recognised as species. [Invertebrate workers have, on the whole, been less inclined to recognise subspecies (with the notable exception of lepidopterologists), so this is less of an issue there. I'm not familiar enough with the situation in plants to comment.] Also, there is no theoretical lower limit on how fine distinctions between 'species' can be, so long as those distinctions are accurate.
The BSC, however, has its own problems. Despite being the most commonly quoted species concept, it is usually recognised more in the breach than the practice. The requirements for actually testing whether populations can interbreed soon become prohibitive, and the BSC is difficult to apply in the case of populations that are separated geographically (to ask a strawman question, are two individuals 'potentially interbreeding' if they're never going to meet?) Recognising species using the BSC, therefore, generally depends on the individual author's own subjective judgements about whether or not two populations are conspecific.
In my opinion, the balance weighs overall in favour of the Phylogenetic Species Concept. In practice, the PSC is more objective and falsifiable than the BSC. As an extreme example of taxonomic inflation, the authors of the PLoS Biology editorial refer to Merriam's 1918 classification of North American brown bears into 82 species, and quote George Gaylord Simpson's critique that the distinguishing characters of these species were so finely defined that "On such a system twin bear cubs could be of different species". There are two replies to this: (1) why not recognise 82 species if there are 82 distinguishable populations?, and (2) Simpson's complaint indicates that Merriam's species would not be valid under the PSC, because the PSC requires that a species be a population (the 'distinct pattern of descent' referred to above). If a character varies within a population to the extent that it overlaps with other populations, it is not usable in distinguishing them as species.
In regards to the pragmatic side of the argument, the PLoS authors have more of a point. As the number of species supposedly requiring conservation increases, funds to conserve them become more stretched and the effectiveness of conservation goes down. However, the practicalities deriving from species recognition should be divorced from species recognition itself. Populations of organisms exist in nature independently of whether or not humanity chooses to recognise them, and the role of science is to try and identify what is, not what should be. It is true that as the number of recognised species increases, it becomes increasingly evident that we will not be able to conserve them all. Nevertheless, the appropriate response is probably to try and work out how to direct funds in such a way that the maximum amount of biodiversity is saved. This will probably require some sort of prioritising of conservation targets rather than attempting to save everything, and thinking in terms of ecosystems and taxon groups rather than individual species. It is still better that we keep a clearer view of what is out there than masking diversity within expansive categories.
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