This article examines some of the characteristics of biological diversity and the appropriateness of the standard economic model in developing policies to protect genetic resources. It is argued that the assumptions of the standard model of perfect competition, including perfect information, reversibility, the emphasis on marginal analysis, and the appropriateness of discounting the future, place severe limitations on the usefulness of this approach in formulating reasonable policies to protect biodiversity. I discuss how biological resources are treated in a market economy, the importance of context in valuing species, and the problem of within‐species genetic variability. I argue that the sustainability of biological resources should be a binding constraint overriding traditional market considerations.