Environmental Economics

"How much do oil spills cost? Controversy over paper oozes into larger debate"

Shelley DuBois at Retraction Watch:

A controversy surrounding a 2014 Journal of Environmental Management paper has tapped into a larger scientific and economic issue — how to tally up the damage after an oil spill.

The original paper, called “A revealed preference approach to valuing non-market recreational fishing losses from the Deepwater Horizon oil spill,” estimates the 2010 explosion of the BP-owned drilling rig cost the Gulf-Coast recreational saltwater angler fishing industry alone nearly $600 million. But Kenneth Train, an economics professor at the University of California, Berkeley who was hired by BP to review the study, has questioned the methods used — both publicly, in a comment that was published in the Journal of Environmental Management, and privately through personal calls with the authors. The first author says Train asked them to retract the paper; he denies ever making that request. While Train, in his comment, says he doubts the accuracy of the $600 million estimate, he does not provide an alternative number.

I'm going to leave a comment in response to the last paragraph:

Indeed, this debate about the proper methodology to calculate oil spill damages has been boiling in the literature before this paper. For example, the authors of the Journal of Environmental Management paper used a technique called contingent valuation to estimate the economic worth of non-market resources. But the method is controversial in some circles. In 2012, an economics professor at MIT named Jerry Hausman decries it in a Journal of Economic Perspectives paper titled, “Contingent Valuation: From Dubious to Hopeless.” Hausman, like Train, previously worked as an oil company consultant. He was hired by Exxon after the 1989 Valdez spill.

Just to be clear, the JEM paper that is the subject of this story used the travel cost method. We also conducted a contingent valuation study for the state of Florida but those results have not been published since they were tied up in the litigation process until late in 2015.  

 

"Behind The Numbers: VSL in Cost-Benefit Analyses"

For all you political candidates who are promising to make sure the government does benefit-cost analysis for new regulations, congratulations! you've already made good on a campaign promise!

Jo Craven McGinty in a Behind the Numbers WSJ blog post:

Government agencies are required to conduct a cost-benefit analysis for every regulation expected to cost $100 million or more in a year, and to help assess the benefits, the agencies often use a device called the value of a statistical life.

The VSL is an estimate of the amount of money the public is willing to spend to save one life. The figure, which agencies derive from economic studies of consumer behavior, is multiplied by the number of lives the proposed regulation is expected to save. That amount, in turn, is summed with values of other expected benefits to arrive at a dollar figure can then be compared with costs.

Here’s an example of how it works:

When the U.S. Department of Transportation considered requiring truckers and bus drivers to log their hours electronically rather than on paper, it conducted a cost-benefit analysis to help decide whether the regulation would be worthwhile.

The rule was intended to reduce the number of crashes related to driver fatigue by improving compliance with limits on the number of consecutive hours the drivers spent behind the wheel.

The existing paper system was virtually impossible to verify, according to the Federal Motor Carrier Safety Administration, and a new automated system would improve roadside enforcement of safety laws.

In this case, the DOT valued a statistical life at $9.2 million and estimated the regulation would save 26 lives annually. In addition, it was predicted to prevent 562 injuries. The total value of the safety benefits, the agency calculated, would come to $572 million.

An additional $2.4 billion would be saved in paperwork, the agency estimated, with the value of all benefits topping $3 billion.

On the other hand, the agency estimated the annual cost of implementing the regulation would be about $1.8 billion annually, including the costs of the equipment, training and enforcement.

Concluding that the net benefit would exceed $1 billion, the agency implemented regulation in December. Commercial truck and bus drivers who currently use paper log books to record their hours of service have two years to comply.

Read more about the value of a statistical life in The Numbers.

Follow that last link from some input from Viscusi, Cameron and Banzhaf. 

This part is interesting:

[The VSL] remains so touchy that last month the EPA said it intends to change the name to something less provocative the next time it adjusts its estimate.

From the EPA's report:

While new nomenclature has not yet been selected, two possible alternatives are “value of mortality risk” (VMR) and “value of risk reductions” (VRR) for mortality. The second of these was suggested by the SAB-EEAC (USEPA 2011) and has been used in at least two published studies since that time (Scotton and Taylor 2010, Hensher et al. 2011). The specific choice of measurement units is arbitrary; as long as consistent units are used in an analysis the results will be valid. Nevertheless, the use of standardized default units could have the practical advantage of promoting some degree of consistency among reported summary statistics describing the results of regulatory impact analyses. For example, default measurement units for reporting estimates of the VMR or VRR for mortality could be $/micro-risk/yr, where a micro-risk is defined as a risk of 1 in 1 million. In this case, a VSL estimate of $10 million per statistical life per year would be equivalent to a VMR or mortality VRR estimate of $10 per micro-risk per year.

I vote for VMR (while VRR gets lives out of there, it could cause confusion is users wonder if it also applies to other risks). And why am I breaking this story? Isn't Tim on the EEAC (and that means he has a vote!)?

MRE Awards "Publication of Enduring Significance"

From the inbox:

Marine Resource Economics (MRE) is proud to announce the inaugural winners of the journal’s Publication of Enduring Significance Award: James L. Anderson, awarded for his 1985 article “Market Interactions between Aquaculture and the Common-Property Commercial Fishery,” and Daniel S. Holland and Richard J. Brazee, awarded for their 1996 article “Marine Reserves for Fisheries Management.” The articles will be available to read for free until June 30, 2016.

The new Publication of Enduring Significance Award recognizes articles published in Marine Resource Economics that are important for contemporary researchers and other literature that is built on them, or that remain relevant for current policy issues. Two articles were selected to receive the first award; both articles were ahead of their time and continue to be relevant to current policy issues.

“Market Interactions between Aquaculture and the Common-Property Commercial Fishery,” by James L. Anderson and published in Marine Resource Economics, Volume 2, Issue 1 (1985), won for establishing conceptual links between farm-raised fish and capture fisheries, deriving the implications of growth in aquaculture for wild fish stocks using an elegant bioeconomic model and anticipating the importance of the aquaculture industry for global seafood markets.

“Marine Reserves for Fisheries Management,” by Daniel S. Holland and Richard J. Brazee and published in Marine Resource Economics, Volume 11, Issue 3 (1996), won for launching the economics literature on marine reserves for fisheries management, accurately situating marine reserves as a second-best policy, clearly framing the inter-temporal tradeoffs involved in forming marine reserves, and anticipating most of the issues that subsequent literature explored in greater detail.

Award-winners are selected from the archive of articles published at least eight years ago in any of the journal’s three sections: “Articles,” “Perspectives,” and “Thalassorama.” When a winner is selected, the award is announced every other year in the journal’s second (April) issue.

For additional information, or to download the articles, visit here: http://www.journals.uchicago.edu/journals/mre/pesa or follow the links under the titles of the articles above.

Congratulations to Jim, Dan and Richard for this recognition of their significant contributions!

Not that I'm complaining, but huh?

From the inbox:

Thank you for agreeing to review this manuscript. Unfortunately we have had to make a fast decsion [sic] on the paper which means that your review is no longer necessary. I hope that we can call upon you at a future date to referee manuscripts for us in your area of expertise.

Hey John, If I'm the first to go*, this is the sendoff I want

This is how to celebrate the life of a friend.

*For the record, I'm not planning to go anywhere anytime soon.

I've been slow to adapt but my new research field is "ecosystem services valuation" #chump

Following up on my Sarah Ryker keynote presentation at CNREP 2016 post, here is some language from the "Incorporating Ecosystem Services into Federal Decision Making" memo from the Obama Administration (emphasis added):

Specifically, this memorandum:

(1) Directs agencies to develop and institutionalize policies to promote consideration of ecosystem services, where appropriate and practicable, in planning, .investments, and regulatory contexts. (Consideration of ecosystem services may be accomplished through a range of qualitative and quantitative methods to identify and characterize ecosystem services, affected communities' needs for those services, metrics for changes to those services and, where appropriate, monetary or nonmonetary values for those services.) 

(2) Sets forth the process for development of implementation guidance and directs agencies to implement aforementioned policies and integrate assessments of ecosystem services, at the appropriate scale, into relevant programs and projects, in accordance with their statutory authority.

Here is another slide from the talk ... environmental economists should have a lot to say about the last item under the first bullet point (a later slide mentioned "ecosystem services valuation" under "research agenda"):

Sticks and stones

Tim points out that "AndyG55" has called him "gullible twit":

at no point does SG draw long term conclusions, in fact he does the opposite

He just points out the FACT that so-called “climate scientists” have drawn some pretty stupid long term conclusions, and made some very stupid statements, based on zero evidence.

I think even a gullible twit like you would have to agree with that.

And "wannabe kook":

I find it quite hilarious that all it takes is SG posting a simple FACT that the Atlantic sea board sea level has been dropping for the last 6 years, and every wannabe kooks comes out of their crevasses.

Unable to dispute this first FACT, they resort changing the time period to a longer period which shows the general very steady small trend over the last, but are still totally unable to dispute SG’s second FACT……

…..that there is ABSOLUTELY NO INDICATION of any human effect on sea level.

Well done SG. Proven correct on both counts. :-)

And I disagree, Tim is a twit but not a gullible one. 

Students! AERE/SEA Call for Papers for student sessions

Submitted by Elaine Frey:

Graduate students or advanced undergraduates who have research interests in environmental and natural resource economics are invited to submit an abstract for a designated student AERE sponsored conference session at the SEA meetings. Interested students should email Elaine Frey ([email protected]) a brief description of their research (no more than 100 words) by April 8. Presenters are not expected to provide a research paper and will not be asked to serve as a discussant. Benefits of presenting include getting valuable feedback on your work and opportunities to network with economists in the field.

More information about the AERE sessions at the SEA meetings can be found here: http://www.env-econ.net/2016/01/call-for-papers.html. 

Someone called me a moron (and it wasn't one of my kids)

Apparently Steven Goddard doesn't like me pointing out his misrepresentation of the NOAA sea level data:

Lies, Damn Lies and Sea Level Data

A Drudge headline this morning points to this story that claims sea levels have been falling for the past 6 years.  And the story is correct.   Here's the graphic proof based on data from the National Oceanic and Atmospheric Administration:

Nothing to look at here.  Everyone's safe.  No worries. 

But, perhaps unsurprisingly, given the source, the picture fails to tell the whole story. 

Here is the same graph extended back to 1910. 

According to the data--yes, the same data used in the top graph--sea levels fell from about 1920-1930, and again from 1945-1950, and again from 1970 to 1980, and again from 2000-2005 and from 2008 to 2009 and from 2010-2016. 

Yet somehow sea levels rose from 1910-2016. 

By almost .4 meters.

Upshot:  Part of the story doesn't tell the whole story.  As I tell my students in my econometrics classes:  If you tell me the conclusion you want people to draw, I can find data to support your conclusion.  But the trick to good statistics is to draw conclusions from the data and not draw data for the conclusions.