Environmental Economics

For all of you who callously talk about moral hazard this and perverse incentive that

And yes, I'm looking at me:

Standing in the living room of their house, now full of mud, slime and debris, Helen and Peter Kelly cannot believe that Congress is bickering over disaster aid to people like them.

The stories are truly heartbreaking and yes, I feel like a total heel. But still, the economics is impeccable. Am I right?

But note that one's wasteful spending might be someone else's government program with positive social net benefits:

The government, [a female flood victim] said, would have more money for disaster assistance if it spent less on inessential amenities: “a park where people sit to watch the river and eat lunch; a playground in the middle of an empty field.”

Er, I imagine the hapless lunch eater might say if folks didn't live in risky places and ask to get bailed out all the time there might be more money for parks. Am I right?

I can dream, can't I?

One of these days, when we are not so busy and the kids are on their own, I dream of the day when Tim and I can once again meet near Cecilia, Ky and bag a sandhill crane:

A plan to allow hunting of once-endangered sandhill cranes in Kentucky has cleared a major hurdle by securing the approval of the federal government.

With the endorsement of Kentucky’s crane hunt plan given this week by the U.S. Environmental Protection Agency, Kentucky Department of Fish and Wildlife Services officials now say they are on pace to open the hunt as planned as early as Dec. 17. ...

Crane numbers in the Eastern United States had been depressed for decades. But hunting bans and habitat conservation have helped restore the population of the big birds, which stand 5 feet tall with a 6-foot wingspan.

In Kentucky, the cranes gather each winter by the thousands near Cecilia, in the Barren River Lake Wildlife Management Area and Barren River Lake State Resort Park, and are popular attractions for birdwatchers.

Hunters argue that it’s their right to harvest the birds for sport and meat. Others, however, contend that there’s no evidence that the birds are a nuisance in Kentucky, which had been argued as a justification for a hunt in other states.

via www.courier-journal.com

Of course, we'll have both passed our online crane identification test so that we don't accidently shoot a whooping crane (and we'll have also passed our gun safety course so that we don't accidently shoot anything else).

Overestimating economic impacts of the Grandfather National Scenic Area

From Wild South:

Wild South seeks a congressional designation to establish the Grandfather National Scenic Area, which would permanently protect 25,000 acres of forest comprising the viewsheds of Blowing Rock and Grandfather Mountain.

From the first (link added) article of a recent series of articles in one of the local papers:

To make [the designation] happen, Wild South activists are busily canvassing area businesses for support. The group’s new white paper and related website make a strong economic appeal—a message tailored to unstable economic times.

While Wild South’s white paper covers a lot of ground—it pointedly cites a 2008 economic impact study by Colorado State University. The research predicts scenic area designation for this now lightly used part of Pisgah National Forest would bring significant economic benefits—an estimated 1.5 million new visitors a year, $38.4 million a year in added economic activity and the creation of 724 new jobs.

From the most recent article

Proponents of establishing a Grandfather National Scenic Area in the Globe area of the Pisgah National Forest primarily tout tourism benefits as an argument for this designation, which could prohibit timber harvests. They maintain that the designation could facilitate the development of more hiking and mountain biking trails and other recreational opportunities, drawing more tourist dollars to the area.

... Wild South, a conservation group working to promote the Grandfather National Scenic Area, commissioned a study assessing the impact of establishing the Grandfather National Scenic Area on tourism in Caldwell, Avery and Watauga counties. The study, from Colorado State University, claimed that 1.5 million visitors per year would come to the three counties if the designation was established.

Mike Evans, professor of business [at Appalachian State University] and expert on tourism in the High Country, believes that 1.5 million is an overestimation. He explained, “They had no real-world data, so they used a general econometric model that frankly did not work well in this case.”

I agree with Mike, the visitation estimate is likely overestimated. Theoretically, the study proposes that protection of an existing forest area from logging would increase visitation. It seems to me that protection from logging would little change visitation, but more likely preserve the current visitation and other amenity values. The economic value that should be estimated is the willingness to pay to avoid the diminished values (and then compare that to the value of the logging foregone).

Empirically, the model that generates the 1.5 million figure is a regression of national recreation area visitation on state population, recreation area acreage and contiguous state population (the latter two variables are statistically insignificant). The sample size is only 25 and it looks like the constant was suppressed (raising the red flag).

The report ignores better U.S. Forest Service baseline data (in the report's defense, it looks like these data were not available at the time of the research). In this report, there are about 4.6 million total visits (a visit can include multiple days) to the two national forests in western North Carolina (WNC) -- Nantahala and Pisgah. Therefore, the scenic designation is estimated to increase total WNC national forest visitation by about 33%. The increase would be even higher if it was compared only to Pisgah visitation. To put 1.5 million visitors further in perspective, the entire North Carolina population is 9.5 million. To be blunt, this number doesn't pass the laugh test.

This doesn't mean the national scenic area designation is a bad idea, just that the economic impacts that are being used to lobby for the designation are overestimated (and benefits suitable for a benefit-cost analysis, which is more appropriate in this case, are not estimated at all).

Note: I haven't thought much about the issue and don't have an opinion either way. It just rubs me the wrong way when economic analysis is not appropriately used.

While John was working this weekend, I got to play

Subtitle: What I did on my 4th of July weekend.

Some things I learned while I spent the weekend on a houseboat on Dale Hollow Lake on the Kentucky/Tennessee border (right):

1. Marina operators are amazingly trusting of early middle-age men who have never driven or docked a houseboat before.  
2. Thankfully the marina offered damage insurance.
3. It's fricking hot in Tennessee this time of year.
4. The air conditioning on houseboats is spotty at best (and at $5 per gallon of gas and a gallon an hour to run the generator, the kids suffered).
5. There's a very fine line between a houseboat 'toilet' and a port-o-pot.  The smells are similar.
6. I can still water ski and it's still fun (haven't tried in about 15 years).  
7. If you shave your head, wear a hat in the sun (right).  
8. Quote from my 9 year old while sitting on the upper deck one night."There are a lot more stars in Kentucky then there are in Ohio." 
9. People from Kentucky talk funny.
10. Some people shouldn't wear bikinis. Just sayin'.

 

 

...and then we are going to retrofit all of our windmills to turn them into electricity generating carnival rides

Waste-burning power stations rarely pass for stylish weekend resorts. But in an industrial town on the fringes of Copenhagen, an old incendiary plant is set for a seductive alpine makeover.

The 40-year-old power station, which converts domestic waste into electricity, is being rebuilt to incorporate a 31,000 square-meter ski slope around its towering exterior.

"What we have here is a synthesis of beauty and function -- a bit of architectural alchemy," said Bjarke Ingels, a Danish architect and founder of the Bjarke Ingels Group (BIG), which won an international design competition to secure the €420 million ($570 million) project.

"Why must buildings be defined by one particular function?" asked the 36-year-old. "Rather than create another part of the city that is lost to more mechanical infrastructure, our ambition is to add a social space that will enrich the local community," he said.

via edition.cnn.com

Click on the link.  The pictures are pretty cool.

At least one good thing has come out of the recession

Economic efficiency requires that the additional benefits of state park attendance is equal to the additional costs. User fees can be used to accomplish this (In state parks ...):

The vast majority of states have cut park financing, often significantly, since the economic downturn took full hold in 2008, and some were cutting long before that. Some parks are closing altogether ..

Here in Washington, one of only a handful of states that has not charged entrance fees to state parks, the revenue stream is about to change. Beginning July 1, the parks will no longer receive state money for their operating budgets. Instead, they will rely directly on new entrance fees — $30 for an annual pass, $10 for one day. It is far from clear that the new plan will compensate for the $70 million in state money that parks are losing each year.

The knock on park user fees has always been that they are not equitable, those who can not afford to pay the fees are not able to visit parks.

Yet some officials also worry that rising fees, rising gas prices and a need to “market” parks to people who will spend money will keep those with lower incomes from enjoying public lands.

I'm sympathetic to this argument but equity cuts both ways. The state government subsidy seems to attach overly large social benefits to attracting visitors who can't afford the lower user fees, and it is not clear that taxpayers would choose to pay that subsidy if faced with it in a referendum (especially when state parks are competing with education and health care spending).

Another argument for the subsidy is that state parks generate positive spillovers -- healthier and better (e.g., less likely to commit crimes) citizens. That may be true but those benefits decline with declines in state park attendance.

Finally, are state parks public goods? Most of the visitors reach it by access roads so they are mostly excludable goods.

While I'm happy to hear about user fees, I'm not so sure about this innovation:

One of the most inventive efforts is in Ohio, where the Legislature is set to approve a bill that would allow drilling for oil and gas in the shale beneath some state parks. Lawmakers say parks would directly benefit from revenues. The number of full-time Ohio parks employees has declined by nearly 40 percent over the last decade, and the state says it faces $1 billion in delayed repairs and maintenance.

What would Adam Smith do?

As an economist who doesn't necessarily mind the outdoors (one definition of an environmental economist) I'm a bit horrified by this. As an economist first, I guess I can't argue against it too much:

With the summer tourist season now in full gear, officials at Yellowstone National Park expressed a growing sense of concern and agitation Monday about a competing 3,500-square-mile nature reserve that recently opened directly across the street from their own park.

According to its detractors, the newly built Yello-Stone Natural Park, draped in strings of multicolored pennant flags and identified by a flashy hand-painted sign, is blatantly attempting to capitalize on the older location's long-established reputation by offering similar flora, fauna, and geothermal features at a cut-rate price....

Already reeling from budget cuts, the National Park Service acknowledged its new competitor posed a grave threat. Yello-Stone's owners have reportedly installed dozens of modern high-flow geysers, conveniently situated their most impressive ravines just 40 feet from the parking lot, and offered enticing daily promotions, such as 'Pet a Bighorn Sheep Day' and geode giveaways for children under 12.

However, Yellowstone's corps of rangers has taken aim at some of the new park's most heavily advertised features, casting doubt on its claim of possessing the World's Largest Boulder and arguing that its so-called Tomb of Lewis and Clark was "not even close" to being historically accurate....

When contacted, Yello-Stone's principal owner Rick Zeller, whose park in Northern Arizona is credited with driving the Grand Canyon into bankruptcy in 2007, stated that he was simply exercising his right as an entrepreneur.

via www.theonion.com

On the other hand, I will be horrified if Yellowstone decides to raise entrance fees in order to avoid a drop in revenues. It won't work for the Yankees parking lot and it won't work here.

Ah, multiple use management

How'd you spend your weekend? Mine was (i.e., I am so very) awesome. On Sunday, we went to Roan Mountain State Park and did* 3+ miles of forest trails. Then we drove to Carvers Gap (see below for proof, the "welcome to NC" road sign is right behind) and did** 1.5 miles on the Appalachian Trail (and 1.5 miles back). Both of these are my first visits after almost 7 years living about one hour away***.

Afterwards, we watched the fourth John Adams (he becomes VP), 60 minutes (yikes) and Old School (did you know 24's Kim Palmer is also the high school volleyball player who is the daughter of Mitch's boss?).

*i.e., trail run (23 + 17 minutes, up and down). After some chores yesterday, I'm starting the work week exhausted ;->

**This time walking, rather slowly.

***Using rational choice theory you know that I value the trip more than $46 ($0.55 per mile, wage = $10, value of time = 0.33 wage). I'm not sure what my consumer surplus might be, but I probably would have paid a $100 entrance fee even with all of the other freebies nearby. You need to do that part of the AT at least once.

 

Awkward

WSJ:

Membership in the two big nudist umbrella groups has been flat or declining for years, prompting a youth-recruitment effort that includes reverse-strip-poker nights, volleyball tournaments, naked 5K road races and music festivals like Nudepalooza and Nudestock. ...

John Whitehead, 22, visited the Sunsport Gardens resort for the first time last year. He enjoyed being naked until he spotted a man his father's age he knew from work, then spent the day avoiding him.

In case there is any confusion in the econoblogosphere, wrong John Whitehead! I'm not 22, although that was a very good year. I don't even like to go "skins" during noontime basketball. Note that part of the reason is that I don't like to break up an outfit that I spent so much time picking out.

Hat tip: BG

Intervention

Matt Kahn:

My Chicago teachers were wrong about one key point.  You can get work done in the sunshine.  I work harder here than I did when I was a graduate student in Chicago, or when I worked in New York City or when I worked in "glamorous" Cambridge.  The state's budget crisis will end, UCLA will become "self-sufficient" (i.e privatize) and order will be restored to the Star Wars galaxy.  This is paradise.  Life is too short to be miserable 9 months of the year (we did like Boston's May, September and October).

via greeneconomics.blogspot.com

Matt,

We get it. UCLA is awesome and you are glad you made the move. That's cool. But, now it is time to move past the mantra and simply live the dream. The folks back in Chicago, New York and Boston who (apparently) give you a hard time about not being serious anymore (you moved to California, you blog, you write books) are likely jealous that you have broken the chains and are now soarly freely. Try to ignore their jabs and don't look back.

Sincerely,

John W.