Environmental Economics

What’s the value of a clean beach? Here’s how economists do the numbers

I was asked to write an article for The Conversation that explains how economists place values on environmental goods (with examples).  Here's what I came up with.   Apologies to all of those involved in the research if this comes across as self-promoting--the perils of writing with an editor.  All of the examples mentioned in the article were team efforts--most were not my idea--and I was a minor part of each team.  It takes a village, and every village needs an idiot.

Millions of Americans head outdoors in the summer, whether for a day at a nearby lake or a monthlong road trip. For environmental economists like me, decisions by vacationers and outdoor recreators offer clues to a challenging puzzle: estimating what environmental resources are worth.

In 1981 President Ronald Reagan issued an executive order that required federal agencies to weigh the costs and benefits of proposed major new regulations, and in most cases to adopt them only if the benefits to society outweighed the costs. Reagan’s order was intended to promote environmental improvements without overburdening economic growth.

Cost-benefit analysis has been so successful as a tool for policy analysis that every administration since Reagan has endorsed using it. However, it requires measuring benefits that are not “priced” in typical markets. Fortunately, putting a price on non-market environmental outcomes, such as safer drinking water and fewer deaths from exposure to dirty air, has proved to be possible, and highly valuable. These estimates help to make the case for actions such as cleaning up beaches and protecting scenic areas as parks. ...

5 out of 7 continents isn't bad, right?

We're working on PhD recruitment this week (if you applied to OSU AEDE and were accepted, join us, we're FUN!).  I put together a Google map with our PhD placements since 2007.  A bit scary that I might be influencing thinking for this many people and this wide an area.   

 

Quote of the day: "...we're in the sixth mass extinction."

Here's the full quote:

"This is definitely human impact, we're in the sixth mass extinction. There's only been five before this and we're definitely in the sixth," WWF conservation scientist Martin Taylor told CNN."

...and here's more of the story:

More than two thirds of the world's wildlife could be gone by the end of the decade if action isn't taken soon, a new report from the World Wildlife Fund revealed on Thursday.

Since 1970, there has already been a 58% overall decline in the numbers of fish, mammals, birds and reptiles worldwide, according to the WWF's latest bi-annual Living Planet Index.

If accurate, that means wildlife across the globe is vanishing at a rate of 2% a year.

...and here's a link to the full story.

...and here's a picture of a giraffe I took in Tanzania two weeks ago.

...and here's a lion that smiled for the camera:

...and here's a young zebra to add gratuitous emotional impact to the story:

 

 

In case you happen to be in Morogoro, Tanzania next week...

IAGRI Workshop Announcement

Introduction to Valuation Methods and Willingness to Pay

Dates: October 12-13, 2016

Location: iAGRI building, Sokoine University of Agriculture campus

Presenter: Dr. Tim Haab, Professor and Chair, Department of Agricultural, Environmental and Development Economics, Ohio State University, Columbus, Ohio USA

Abstract: Understanding of the values that people place on goods and services is critical to making sound economic decisions.  In many cases, markets provide an easy way for people to reveal value through their decisions to buy and sell goods and services.  But in other cases, markets fail to accurately reflect values.   Whether it’s because the good or service being valued does not have a market, or existing markets fail to reflect the full value of the good or service, non-market valuation methods are needed to fully measure the costs and benefits of goods and services.

This workshop serves as an introduction to non-market valuation methods and the economic concepts of willingness to pay and willingness to accept in the context of developing countries.  Through the use of current and classic examples, we will provide an introduction to the economics of valuation, the economic theory of measuring values and the practical tools economists have developed for measuring non-market values.  At the end of this introductory workshop, the attendee will have the knowledge and tools necessary to delve into the rapidly growing field of valuation as applied in developing countries.

Presenter: Professor Tim Haab is an internationally recognized expert on methods for measuring the value of goods and services not adequately represented by market prices.  He is the author of over 50 academic journal articles and 4 books on valuation methods, including the now standard book for valuation methods in environmental and resource economics: Valuing Environmental and Natural Resources: The Econometrics of Non-Market Valuation.  He has worked on projects applying valuation methods in such diverse settings as payments for environmental services to the rural poor in developing countries, the value of improved drinking water access and quality in developing countries,   the economic damages from oil spills, the environmental, health and resource effects of bio-based fuels, incorporating ecosystem service valuation into marine planning, the economic value of marine recreational fishing, the economic impacts of climate change, the economic costs of invasive species, the value of agricultural extension programs, and the impact of agricultural pollution on hypoxic zones of oceans.  As Chair of the Department of Agricultural, Environmental, and Development Economics at The Ohio State University, Professor Haab oversees a faculty of 21 world-class applied economists.

Field Research: The Effects of Climate Change on a Florida Vacation

With apologies to my loyal readers (OK, just John) for my intermittent posts, I spent the last week doing some 'field research' in the Florida Keys.  My goal was to observe the effects of climate change first hand.  And let me tell you my field observations are revealing.

1. It's freaking hot in August in the Keys.  And it's been getting hotter for the last couple of decades--at least according to Captain Tony--the Lyin' Hawaiian.  And who wouldn't trust someone with that name?
2. Despite my many efforts, climate change makes it extremely difficult to keep beer cold outside. I tried again, and again, and again, and again...to keep my beer cold until I reached the bottom, but the only reliable solution I came up with was to drink faster.    
3. 90 degree water temperatures are only mildly refreshing when the heat index is 110. 
4. Sea grasses in the flats and bays south of the Everglades are struggling to survive high water temperatures--at least according to Captain Tony (the Lyin' Hawaiian--see #1).  Water temperatures in Key Largo Bay are about 4 degrees above normal (according to the Lyin' Hawaiian).  According to SeaWeb (I don't know--I just Googled it): "Increases in water temperature would reduce the productivity and cause the die-back of those seagrasses growing in areas already around the upper limit of their thermal tolerance."  Captain Tony says the current die off rivals that of the early 2000's and he doesn't have much hope for a recovery of the sea bed in and around the flats of Key Largo--He even suggested the only reasonable solution would be for the Federal Government to invoke eminent domain ("They should use eminent, er, what's that word?  Damn it's hot out here") to preserve he sea beds in the flats.
5. During my field research, my assistant (14 year old only son of Env-Econ--OSEE) and I were able to observe close-up some of the fish species in the flats of Key Largo and South Florida.  Here's are a couple of observational exhibits.  The first is OSEE (and the Lyin' Hawaiian) battling Jaws--a 5 foot bull shark.  The second is the 4.5 foot black tip I was able to observe.  No fish were harmed (other than the bate fish) in this observational study--although I think the two sharks wanted to harm some humans before we released them back to their habitat.  The last picture is me and OSEE with another of OSEE's catches.  I don't remember the specie, because at that point climate change had affected my cognitive abilities-even the Lyin' Hawaiian was complaining how hot it was.

 

 

Raise your hand if you want to work with me...

The Department of Agricultural, Environmental, and Development Economics (my department) in the College of Food, Agricultural and Environmental Sciences (my college) at The Ohio State University (my university) is hiring for four new faculty positions--and I am not ashamed of taking advantage of this blog to promote the positions.  If you have (or are close to earning) a PhD with interests in agricultural economics, environmental economics, regional economics, development economics or some combination of those fields along with other interests, then we can probably align your interests with one of our four positions. 

Come join me in a top rated department (according to the National Research Council at least) in a top 20 public university (according to US News at least) in the Best Opportunity City in the U.S. (according to Forbes at least).

Our open positions are:

• Assistant or Associate Professor in Global Economic Modeling: a tenure-track assistant/associate professor position in the area of global economic modeling and integrated assessment. Economic modeling approaches of particular interest include dynamic optimization and computable general equilibrium modeling, as well as familiarity with approaches for handling decision making under uncertainty. Individuals with experience integrating economic models with physical/biological models are encouraged to apply.
• Assistant or Associate Professor in Sustainable Food and Farm Policy:  tenure-track assistant/associate professor position to conduct innovative research on policies related to food, farming and sustainability and to provide intellectual leadership to the Department and to the University’s Discovery Theme Initiatives in the area of sustainable food and farm policy. 
• Assistant Professor in Agribusiness: a tenure-track assistant professor with teaching and research responsibilities in agribusiness.  Applicants with interests in agricultural markets and marketing, finance, supply and demand analysis, industrial organization, international trade or agricultural and food policy, that complement a primary interest in agribusiness are encouraged to apply.
• Assistant or Associate Professor in Sustainable Development and Economy: an assistant/associate professor, tenure-track position to develop an internationally recognized program of research and teaching focused on sustainable development and the trade-offs among economic development, social equity and environmental protection in international or regional contexts.  Areas of interest include, but are not limited to: economic growth; equity; resource use; technological change; socio-ecological systems; sustainable and resilient communities. 

Click on the links for full descriptions and application info.  

We must have faces made for blogging

Browsing through the streaming videos available on Amazon Prime last night, I came across a documentary series called "wetheeconomy."  I'm probably slow to the party but the series features a series of short (5-10 minute) documentaries introducing basic economic topics like supply and demand, measuring GDP, what is money,...  Of particular interest to this blog, one of the documentaries is titled "A Bee's Invoice: The Hidden Value in Nature," which is designed to answer the question: Are natural resources vital to the economy?  

The environmental economist in me is excited to see environmental valuation included in Chapter 1 of a series introducing a wide array of economic topics.  Maybe, this whole environmental economics thing is gaining some traction. 

The jealous, rapidly aging human in me is jealous that the film features appearances by two economists, both of whom have interacted on our blog, and neither of whom is named Whitehead or Haab. Anyway, nice work Gernot Wagner and Jodi Beggs* in promoting the cause.  I presume they were chosen because the producers thought  John and I were unavailable--either that or they wanted younger faces to attract a different demographic than the epitome of boring middle-class soccer/baseball dads.

*Jodi once called us cool, and Gernot stoops so low as to occasionally contribute to Env-Econ.  I'm going to go as far as say we had a part in launching the careers of these two film stars.  Hopefully they remember us when the riches start to flow.

A Dam Mess

“It’s the end of life as we know it at Buckeye Lake.”

That was the cut-to-the-chase verdict that general manager Deb Sturm delivered to her boss, Tracy Higginbotham, owner of the Buckeye Lake Winery, after returning Wednesday night from a hastily called meeting with a handful of area civic leaders. They had gathered to discuss the sobering Army Corps of Engineers’ report on the 177-year-old Buckeye Lake dam that was released on Wednesday.

Because of the dam’s poor condition, compromised by more than 370 homes built directly into the 4.1-mile earthen structure, the “likelihood of dam failure is high,” said the report, and it “poses a significant risk to the public.”

Among the options to prevent “catastrophic failure,” as recommended by the Corps to the Ohio Department of Natural Resources, which owns the dam and lake and paid for the study: Build a new dam or turn the lake into a 3,000-acre mud puddle by emptying it.

“The safest solution for eliminating the risk of flooding due to dam failure is to drain the lake permanently,” the report says.

...

The risk of dam failure, however, is significantly higher when the lake is at summer’s depth. Should the dam fail, approximately 3,000 people live within the projected flood zone.

“The resulting flooding would most probably occur without sufficient warning or evacuation time,” the report said. It goes on to say that those homes and businesses, and people, within the flood zone would “face the potential of being hit by up to an 8-foot wave of water, mud and debris.”

“The economic impact to the area doesn’t outweigh the possible loss of life,” said [Ohio Department of Natural Resources spokeswoman Bethany McCorkle]. “Public safety is the top priority. It’s a very serious situation. The dam could go at any minute according to the report.”

When asked whether the current earthen dam is salvageable, Mike Spoor, engineer with the Huntington District of the Corps, which assessed Buckeye Lake, flatly said, “No.”

via www.dispatch.com

Ohio isn't know for its natural lakes (besides Lake Erie the largest natural lake in the state is 345 acres and it is called Aurora Pond).  But, Ohio does have its share of unnatural lakes (reservoirs) of which Buckeye Lake is in the top 10 in size at 3100 acres.  Because of its proximity to the second largest combined statistical area in the state, the Columbus CSA--yes the Columbus CSA is bigger than Cincinnati CSA--and 25th largest in the country, Buckeye Lake is a popular recreational and vacation home destination.  For now.

But the state is faced with some difficult economic decisions.  As the Army Corp of Engineers report summarizes:

Considering the immediate proximity of the downstream population, a catastrophic breach of Buckeye Lake Dam could pose unacceptable life loss and economic consequences. Therefore, immediate interim risk reduction measures are recommended to reduce risk of catastrophic dam failure as a result of breaching during normal pool retention. The District recommends that interim risk reduction measures be implemented immediately. The District further recommends that comprehensive risk reduction alternatives be evaluated, selected, and implemented by ODNR. Selection of remediation alternatives should be based on the potential for proposed actions to reduce risk to a tolerable level.

hmmm...time to call in the economists to assess the 'tolerable' level of risk? (our number is in the book)

"Speaking Ecosystem Services"

Christian Neumann, Linwood Pendleton, Marianne Kettunen and Tundi Agardy:

The value of ecosystems and the associated services they provide is receiving growing attention both in the public and decision-making arena. The language of Ecosystem Services essentially translates the complexity of ecological processes and functions into descriptors that define the socio-economic-ecological link. To overcome the challenge of scientific and non-scientific communities having to find a common language, it is worth keeping a few key aspects in mind.  

Talk about the big picture

The concept of Ecosystem Services has the potential to reconcile growth of the three pillars of sustainability (social, environmental and economic), often considered to be mutually exclusive: the concept recognises functional ecosystems as a foundation for social and economic development. ...

The recent scientific advancement of the Ecosystem Services concept and its application in planning and decision-making have added substantial credibility to the understanding of the role that healthy, functioning ecosystems play for human well-being as well as social and economic development. Consequentially, Ecosystem Services have received growing attention from policy-makers as well as the public. However, this increased attention reveals the science to a broader, non-scientific audience, which is a challenge for both communities, as they often don’t speak a common language.

Know whom you are talking with

Within the scientific community it is important to maintain the scientific precision essential to advancing scientific understanding. However, in communication with the public, policy- or decision-makers or private sector representatives, it is important to recognise that while people might be familiar with the ecosystem services themselves, they are less so with the related concepts and its specific terminology. ...

Different kinds of values and metrics serve different audiences

Assessing the Total Economic Value (TEV) of Ecosystem Services, especially in monetary terms, has played an important role in bringing public attention to the value of nature’s non-market elements. TEV can continue to play such a role in relevant circumstances. In the context of more concrete planning and decision-making situations, however, particularly when informing trade-off decisions, focusing on marginal values of Ecosystem Service change rather than assessing the total values may better respond to audiences’ needs. ...

Credibility matters

Ecosystem Services can be used to support arguments for specific, already existing objectives such as the conservation of a certain area, ecosystem or habitat. To avoid undermining scientific credibility, it is important to reveal such objectives when communicating about Ecosystem Services. Similarly, care should be taken to not ‘oversell’ claims about benefits associated with Ecosystem Services (for example coastal protection from extreme weather events), to avoid later disenchantment of stakeholders and policy- and decision-makers. ...

The language of Ecosystem Services creates new connections

When carefully applied in a relatable manner, the concept of Ecosystem Services has the power to bring together decision-makers and scientists from different disciplines. In turn, the resulting exchanges serve to further support the concept itself, as relationships are built and mutual understanding is developed.

By connecting people and ecosystems, the concept of Ecosystem Services can support the reconcilement of environmental protection and sustainable use with social and economic development – if we speak a language everyone can understand.

via us8.campaign-archive1.com