Environmental Economics

Free Webinar: Valuing Environmental Catastrophes (with an impressive lineup of experts if I do say so myself!)

Feel free to promote far and wide. Intended for a non-expert audience (my goal is to get a spot in the sequel to this blockbuster).

If you don't like QR codes, you can register here.

 

 

 

 

And you thought your Recreation.gov user fees were funding National Parks

Nope (As National Parks Visits Surge, Booz Allen Benefits): 

Visitors driving into Montana’s Glacier National Park this summer must buy a vehicle pass on Recreation.gov. The pass is free, but visitors pay a $2 fee to book the reservation.

Visitors might assume that, like entrance fees, the reservation charges help pay for improving trails around the park’s Running Eagle Falls or expanding the park’s volunteer program. But a chunk of the money ends up with consulting firm Booz Allen Hamilton Inc.

Booz Allen runs Recreation.gov, the website and app where people book campsites, hikes and permits on U.S. public land. The company has a five-year contract that is up for renewal this year. In its bid for the work, Booz Allen used data provided by the government to estimate that over the first five years of the contract, it would receive $87 million, and a total of about $182 million over 10 years.

Booz Allen gets paid every time a user makes a reservation on Recreation.gov, per its government contract. That has earned the company money far beyond the projections in its bid.

Booz Allen invoiced the government for more than $140 million from October 2018 to November 2022, the most recent date available, according to documents obtained by The Wall Street Journal in a public-records request. Ten months remain to be counted for that initial five-year period.

You all are a bunch of suckers:

Booz Allen leadership has described the benefits of per-transaction fee structures like the one Recreation.gov uses. “One thing I learned in B-school, for all that money, it’s a small number times a big number is a big number,” Booz Allen president and chief executive Horacio Rozanski said at the 2019 Citi Global Technology Conference. ...

The arrangement has its critics, including members of a lawsuit against Booz Allen seeking class-action status, and other die-hard national park visitors. They say the government has let a multibillion-dollar company profit by charging for access to public lands—access that used to cost less, or nothing. The lawyers said in the suit that the company is “forcing American consumers to pay Ticketmaster-style junk fees to access national parks and other federal recreational lands.”

Booz Allen says such claims mischaracterize its work and its compensation structure. Recreation.gov officials say the arrangement is an example of efficiency in government: Users get a technologically sound website at no cost to taxpayers. ...

At that point I tuned out Booz Allen while reading the rest of the article, wondering why infrastructure at the Blue Ridge Parkway is underfunded when Booz Allen is getting rich but you should read it and decide for yourself. 

Here are a couple of links: 

• National Parks Continue to Set Visitation Records but Remain Underfunded and Understaffed
• Recreation.gov Use & Share Our Data

Hatchery supported trout waters open Saturday*

From the local paper (Hatchery supported trout waters to open April 1):

The N.C. Wildlife Resources Commission will open approximately 1,000 miles of Hatchery Supported Trout Waters at 7 a.m. on April 1. The season will run through Feb. 29, 2024.

The Wildlife Commission has posted the full Hatchery Supported Trout Waters stocking schedule on its website to give trout anglers opportunities to plan fishing trips in advance. The schedule is searchable by county and month and provides information on what days each water is being stocked.

Hatchery Supported Trout Waters, which are marked by green-and-white signs, have been closed since Feb. 28 for stocking. Most trout are stocked April through June, with a few streams selectively stocked in July. Overall, staff will stock nearly 964,000 trout — 96% of which will average 10 inches in length, with the other 4% exceeding 14 inches in length.

One might think that I like to fish as many papers as I've worked on. But nope, I don't seem to be motivated to go fishing. Even with almost one million trout ready to  slay.

I don't like to golf either.  

*It's also my Adoption Day today (i.e., I don't look like my parents). Let me know how you celebrate in the comments.

Last week I began a research project for @FoothillsOfNC

On the Monday of spring break I drove to Morganton, NC and visited Oak Hill Community Park and Forest: 

Located 10 minutes from downtown Morganton, the park will be a hub for outdoor recreation, education, agriculture and archaeological exploration for Morganton residents and visitors.

Foothills Conservancy's Executive Director Andrew Kota (one of my former MBA students) led us on a hike where you can get a view of the South Mountains. In the foreground of the picture you can see the plantings of native trees (I forget the species). 

We'll be putting up signs with a URL and QR code to an online survey when the park opens later this year. Combined with a trail counter we can develop estimates of economic impacts and do a benefit-cost analysis (an "estimate of probable costs" can be found in the Oak Hill Master Plan (see the park link above). The data is from a convenience sample but some data is better than no data. As these studies can be used to decide whether a more representative (and much more expensive) sample is necessary. The out-of-pocket cost estimate for this study is less than $1000. The signs will be about $250 and a trail counter is between $620 and $800. 

Back in 2021 I worked on a Beech Mountain trails study and this will be similar to that, although I'm hoping to get better at this sort of thing as more lessons are learned. For example, I need separate surveys for different data collection methods. At Beech we had signs with URLs and QR codes and a team of students passing out rack cards with the same information. It would have been very useful to see where the data came from but the links went to only one survey. Also, Beech Mountain is full of vacationers so it is difficult to estimate a recreation demand model. 

The (horrible) gift of government shutdowns?

The US government did not shut down in FY 2023. That is immensely unremarkable...

But, I had a social media memory pop up about the most recent shutdown in the US, so I'm going to write about them. It was the longest shutdown in US history: 35 days (December 22nd 2018 to January 25th 2019) because agreement could not be reached to fund a giant wall between the United States and Mexico. The federal government has had major shutdowns under each of its last three presidents, so it will probably happen again soon. *See the end of this post for a quick primer on how shutdowns occur.  

Flashback 10 years: I was in grad school during a sixteen-day shutdown in 2013 under President Obama and was deep in literature on the local impacts of EPA Superfund remediation. Several papers estimate the impact of cleanups on local housing markets (when they are discovered, housing prices fall; when they are cleaned, housing prices increase). I remember thinking, 'WHAT A HORRIBLE GIFT a shutdown is researchers!' Horrible because shutdowns are very costly (380,000 federal employees were furloughed due to the 2019 shutdown), but a gift because shutdowns may be a true, sharp, random shock to government programs that are uncorrelated with local characteristics. They hurt... but, they give us a good shot at some causal estimates of program impacts! 

But... thankfully... this line of research is pretty much a non-starter in environmental... I think. Today (2.9.2023) I searched "government shutdown" in JAERE, JEEM, REEP, and ERE and found 0 results of environmental econ papers that work with government shutdowns. And that may good news for society... because when shutdowns happen, the EPA mostly stays operational if it involves human health. The EPA actually regularly publishes a contingency plan for government shutdown. All cleanups underway (or site discoveries) that involve immediate harm to human health continue operation. Benign waste sites and work-in-progress at safe sites get halted.  

Good for society, bad for researchers. If a Superfund site does experience a shutdown pause, it's likely becuase it is not a risk to human health... which means it is perhaps not located near a large population, and potentially correlated with other local characteristics. Darn... exogeneity ruined. 

There may be other interesting environmental questions to answer with shutdowns, however. For example, I found a paper by Todd Gabe in Applied Econ Letters estimating the impacts of shutdown-induced National Parks closures on local tourism and gate fees. Insofar as we don't get to observe high quality counterfactual data in a world where massive national parks don't exist, government shutdowns may provide us the opportunity to value the local impacts (hey, John! Talking about valuation over here!). 

**A quick primer: each year, congress has to pass twelve budget appropriations to fund crucial entities, like many of the EPAs activities. The twelve bills are consolidated into one large appropriations bill and usually passed at the end of the year. If congress can't pass the bill, they can pass a "continuing resolution" which uses the previous year's budget to fund activities until the new appropriations pass. If they can''t do either of those, the government shuts down until the appropriations pass. The BIG result is that many government programs come to a screeching halt. 

Abstract Monday: Correcting On-Site Sampling Bias

Today's entry in Abstract Monday is a little technical, but it's a problem I've been interested in for a long time, and it looks like my and John's former colleague, Ju-Chin Huang*, and co-author have found an improvement (if not solution).  If I ever get around to writing a second edition of my nonmarket valuation econometrics book, this is definitely going to be in there.

*I'm sure John will agree, Ju-Chin was the smartest of the three of us.

 

Title: Correcting On-Site Sampling Bias: A New Method with Application to Recreation Demand Analysis

Author(s): Wei Shi and Ju-Chin Huang

Journal: Land Economics, 2018, 94(3): 459-474

Objective: A new method for dealing with truncation and endogenous stratification in on-site sampling of recreational site users.

 

Background: Assessing recreational site use can involve random samples of the general population, random sample of subsamples of users (e.g. boat owners), or on-site sample of current visitors.  While convenient, and often less expensive, on-site samples of current visitors introduce modeling challenges due to truncation (no non-users are sampled), and endogenous stratification (the probability of interviewing an avid visitor is higher--sometimes called avidity bias).  Both biases have puzzled recreation demand models for decades and the literature is still fraught with examples of misunderstanding and confusion about the correct way to handle on-site sampling. Most past studies have tried to simultaneously solve both problems, but such solutions depend critically on the assumed statistical distribution of trips.  Separating the issue of stratification from truncation may provide recreation demand estimates that are less sensitive to distributional assumptions. 

 

Methods: Shi and Huang first correct endogenous stratification by weighting the assumed expected number of trips taken, after truncation at zero, by the inverse of the observed number of trips.  This weighting effectively 'scales down' the probability of interviewing those who take large number of trips, creating a sample that more closely mimics the likelihood of a sample drawn from the general population.  The weighted sample is then used to estimate a truncated count data model, thereby separating the issue of truncation from the issue of endogenous stratification.

 

Results and Conclusions:  Using simulations and a case study, Shi and Huang demonstrate that the distribution free re-weighting approach to on-site sampling reduces the sensitivity of results to the researcher-assumed distribution of trips.    

Abstract Monday

A while back I tweeted: 

Econ-world: Anyone else wish econ journals would require abstracts be written like some medical journals? Just wondering. https://t.co/yEBdJb31cN

— Tim Haab (@tim_env_econ) November 2, 2018

Even though I only got 3 likes on the Tweet (sad face emoji), I've been thinking about how I might use alternative abstracting formats as I write, and read, papers.  So today I decided to try it with a 'recent' paper I've been wanting to read.  Here's my attempt at writing an abstract/summary of a paper in medical journal style. 

NOTE:  This is my attempt to summarize someone else's publication.  All stupid mistakes and misinterpretations are mine and NOT the authors of the paper. 

Who knows, if I like how it turns out, and I can find the time, I might make Abstract Mondays a regular thing.

Title: Decoupling the Value of Leisure Time from Labor Market Returns in Travel Cost Models

Author(s): Patrick Lloyd-Smith, Joshua K. Abbott, Wiktor Adamowicz, and Daniel Willard

Journal: Journal of the Association of Environmental and Resource Economists 2019 6:2, 215-242 

Objective: To improve the measurement of the value of people's leisure time by allowing for different values for each individual derived from a stated preference survey.

 

Background: The opportunity cost of leisure time is a key piece in calculating a 'price' for travel (the travel cost).  Traditional methods of estimating/calculating the value of time rely on labor market theory resulting in individuals trading off labor and leisure at the wage rate, or some fraction thereof.  Measurement error (self-reported income), non-labor income, labor-force non-participation, and individual differences call into question the link between fixed wage rates (or proportions thereof) and the opportunity cost of time.  Improved methods are needed to accurately reflect the value of time in travel cost models.

 

Methods: Stated preference questions are added to a recreational fishing survey to assess how respondents react to hypothetical trade-offs between time and money.  Respondents are offered hypothetical payments for participation in hypothetical activities that take time: participation in an 8-hour focus group, and work sorting paper files. The responses to the hypothetical money/time trade-offs are used to structurally estimate and individual-specific marginal utility of income in a Kuhn-Tucker site choice/quantity recreation demand model.  Results are compared to standard methods of valuing time at a fraction of the wage rate.  The value of price and site quality changes are calculated using traditional and new methods. 

 

Results:  The stated preference method produces an average value of time of "$35 (median $31) with a range of $11-$112" per hour.  The traditional wage-based method produced estimates of "$38 (median $34) with a range of $0–$429".  Traditional methods typically use 1/3 the wage rate to allow for non-marginal trade-offs between labor and leisure.  The correlation between the stated-preference estimates, and the 1/3 wage rate estimates is 0.34.  Kuhn-Tucker demand system estimates show "relatively modest" improvements in model fit using the stated preference value of time estimates. The welfare impacts of three policy scenarios are estimated: A price increase, and two fishing site closure scenarios.  The use of stated-preference value of time vs the fractional wage causes little difference in welfare impacts for the price change scenario.  The stated-preference approach leads to a 38% and 43% increase in the estimated welfare loss dues to Summer and Fall site closures compared to the fractional wage approach.  Using the full wage (90% of wage rather than 33% of wage) yields average results closer to the stated-preference approach, but does not fully explain the difference.

 

Conclusions: Using stated-preference to elicit the value of time introduces flexibility and captures heterogeneity in the value of time across individuals that traditional wage-based approaches fail to capture at a relatively low additional survey cost.  

At What Cost? Legislators come up with solutions to Harmful Algal Blooms. Environmental Economists come up with cheaper solutions.

The Legislature of the State of Ohio is currently considering legislation to reduce Phosphorous loadings into Lake Erie by 40%.  This is a good thing, as reducing Phosphorous going into Lake Erie will reduce the incidence and impact of Harmful Algal Blooms in the Western Lake Erie Basin.  

The proposed legislation establishes a Clean Lake 2020 plan that includes:

A significant new Clean Lake Capital Fund that may appropriate up to $100 million per year for five years for both Lake Erie algae reduction, and agricultural best practices.  Funding may include establishing facilities to improve manure application processes, projects to reduce open lake disposal of dredged materials, funds to local governments for water quality-based green infrastructure, water management projects to help reduce nutrient and sediment runoff impacting the lake and other strategies.

A new Soil and Water Support Fund, with some of the funding provided directly to soil and water conservation districts to assist farmers in soil testing, nutrient management plans, installing edge of field drainage devices, encouraging inserting of nutrients (subsurface placement), and agreed to conservation methods that may include riparian buffers, filter strips and cover crops.

To the casual observer, this all looks good.  The proposed bill has widespread support among agricultural groups, and local and state authorities. As one of the bill's sponsors notes:

“These are not brand new ideas, just a greater sense of urgency to implement them,” Arndt said.  “There appears to be widespread agreement with state officials, environmental and agriculture groups, tourism advocates and business leaders that many of these strategies will make a big difference.”

And he is right, these strategies could make a big difference. 

But as economists we are trained to ask, 'At what cost?' 

New publication: "Estimating willingness to pay for a cycling event using a willingness to travel approach"

John C. Whitehead and Pamela Wicker, Tourism Management, Volume 65, April 2018, Pages 160-169

Abstract

This study examines the monetary value of nonmarket benefits to participants of an active sport tourism event, such as happiness and pride from participating in an event. Willingness to travel (WTT) greater distances for future events is assessed and converted into willingness to pay (WTP) estimates using travel costs. Using survey data from the 2014 and 2015 Blood Sweat Gears bike ride, the intended visitation models show that changes in travel cost have a significant negative effect. WTP to revisit the event was between $41 and $57. The likelihood of return visit decreases as travel costs increase, indicating that WTP estimates are internally valid. WTP estimates stemming from two years of data collection are stable, suggesting that they are also temporally reliable. This study demonstrated the feasibility of using stated preference WTT questions to assign a monetary value to nonmarket benefits of active sport tourists.

 https://doi.org/10.1016/j.tourman.2017.09.023