Environmental Economics

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

Daily Demand and Supply: Finding another point on the demand curve for National Parks

Law of demand (for National Park visits):  When prices rise, the number of visitors to National Parks will fall.  

We'll see:

The National Park Service proposes more than doubling the entrance fees at 17 popular national parks, including Grand Canyon, Yosemite, and Yellowstone, to help pay for infrastructure improvements.

 

Under the agency's proposal, the entrance fee for a private vehicle would jump to $70 during peak season, from its current rate of $25 to $30.

The cost for a motorcycle entering the park could increase to $50, from the current fee of $15 to $25. The cost for people entering the park on foot or on bike could go to $30, up from the current rate of $10 to $15.

 

The cost of the annual pass, which permits entrance into all federal lands and parks, would remain at $80.

Word of the Day: *%#@!!!!!

No point to this post (like most of my posts) but I just found this amusing, and it's summer, and I like to use profanity, and I think Chris Christie embodies everything wrong with politics right now, and he doesn't care so why should I?

Gov. Chris Christie’s trip to a closed state beach during the state government shutdown didn't go over well, according to a Monmouth University poll released Monday.

Almost all respondents — 86 percent — saw the pictures. When asked to describe it, the most popular word New Jerseyans used was "disgusted," at 7 percent, with "anger" and "disbelief" a close second. Other popular words: "Selfish," "hypocrite" and "arrogant." Less than 10 percent either said something positive or that they weren't bothered by it.

And then there was this: "Another 6% of those polled simply used some form of profanity to express their sentiments about Christie's beach day," said the news release circulated with the poll.

 

I just might know an expert in estimating the value of outdoor recreation

If you are going to calculate the economic impacts of outdoor recreation, maybe, just maybe, you might want to consult with an expert who has a book on valuation methods with chapter titles like: "Modeling the Demand for Recreation," and "Single Site Demand Estimation," and "Site Choice Models."

Outdoor recreation is an economic colossus: its reach is massive, its wealth enormous, and its influence continues to grow as more boots hit the ground. You can see it in Joshua Tree’s crowded campgrounds or in Mount Tam’s trailhead parking lots; in the Appalachian Trail’s thru-hiking numbers or in REI’s record sales. Americans are heading outdoors in huge numbers and paying handsomely for the privilege. But how much, precisely? For years the industry’s contribution to the nation’s economy was as much guesswork as fact.

In 2005, the Outdoor Industry Foundation commissioned the first of the economic studies to measure the industry’s heft. The initial report returned impressive statistics, but it was the follow-up study six years later that stirred the giant from its slumber: the outdoor recreation economy, all $646 billion of it, was nearly as much as Americans paid for pharmaceuticals and motor vehicle sales and parts, combined. Most of the industry’s stakeholders happily accepted the number at face value, and few inquired about how the numbers were derived (primarily through surveys). 

Now, thanks to the passage of a bipartisan bill that sailed through both the House and Senate last month, and was signed into law by President Obama on December 8, the outdoor industry is primed for a gargantuan reveal. The Outdoor Recreation Jobs and Economic Impact Act of 2016, or REC Act, authorizes the Department of Commerce’s Bureau of Economic Analysis to assess outdoor recreation’s contribution to the nation’s gross domestic product, or GDP. 

“It’s one of the most significant policy decisions in support of our industry in the last ten years,” says Amy Roberts, executive director of the Outdoor Industry Association (OIA).

I'm sitting by my phone.

Maybe, just maybe.

The good old days

I'm fielding a post-ride survey for the Blue Ridge Brutal and this was in the comments section:

No concerns, but I was your student at ECU in the 90's for Environmental Econ and I played intramural sports for the Econ Society. If you ride, hope to see you on the road. Cheers

Wow:

• Small world. Q: Would the IRB have a cow if I associated the comment with an email? A: yes
• I have two bikes and neither see enough action.
• I was the captain of the ECU Econ Society IM teams (football, basketball, softball). The highlight was when we won the second summer session co-ed softball tournament. In the finals we upset a team that had beaten us twice. 
• I'll have NABE Student Chapter students do a short economic impact report. In return, I get to ask some goofy questions. With this survey I'm comparing results from a payment card-style willingness to travel question with those from a double-bounded dichotomous choice. Here are some preliminary results:
  
  
  

Short pants

Jim Roumasset comments on my Adam Smith picture:

Looks cold. Valentina Zharkova suggests that the cold summer in Great Britain may be a harbinger of her forecasted return of the (1645-1715) Maunder Minimum (low solar activity), a Granger cause of the Little Ice Age. Since Granger causation is not actual causation, we are left with solar physicist Phil Goode’s summary: "There are large poorly understood contributors to the Earth's temperature changes independent of greenhouse gasses."

I don't know if climate change is real or not. But if 90%+ scientists believe it is real then I feel like it is my job to do the appropriate sort of environmental economics (i.e., discuss incentive-based policy and suggest it should be implemented).

Plus, it was warmer later in the week. Here I am hiking up Salisbury Crags:

 

My Memorial Day weekend post (via RFF)

Margaret Walls:

As Memorial Day approaches and the National Park Service’s 100th anniversary draws near, I’ve been looking back at a pair of 2009 reports on America’s “great outdoors.” An RFF report that I coauthored reviewed the status of public lands, demand for outdoor recreation, and conservation funding trends. The study was in support of the Outdoor Resources Review Group, a 17-member bipartisan commission comprising conservation, public lands, and parks experts. US Senators Lamar Alexander (R-TN) and Jeff Bingaman (D-NM) were honorary co-chairs, and the commission was created by two long-time elder statesmen in the field, noted environmental lawyer Henry Diamond and Conservation Fund Chair Emeritus Patrick Noonan. The commission released its own report (published by RFF) with a set of recommendations, many of which formed the basis for President Obama’s America’s Great Outdoors initiative, launched in April 2010.

Although the two reports are now seven years old, many of the findings still resonate. Here’s a brief summary—some food for thought as we approach the summer outdoor recreation season. ...

What’s happened in the seven years since these reports were published? The recession, which was just hitting the US economy as the reports were completed, had a devastating effect on state and local government budgets. In many states, the first agencies to see cuts were parks and natural resources agencies. State parks saw huge budget cuts and many of them have not fully recovered. The same is true of the federal land management agencies. The National Park Service’s deferred maintenance backlog has ballooned to nearly $12 billion. The state conservation programs funded by dedicated revenue sources were hit hard and legislatures in many states diverted what money there was to other programs. Some of those programs are starting to recover but some of the diversions have remained in place. The LWCF [Land and Water Conservation Fund] Act came up for reauthorization in October 2015 and, after much debate, was renewed for only three years. While the LWCF maintains some bipartisan support in Congress, a minority group of conservative lawmakers wants to stop funding land acquisitions altogether and sell off federal lands to the states. These disputes continue, leaving the LWCF—and support for land conservation more broadly—in limbo.

All of this means we’re a long way from adopting the primary recommendation put forward by the Outdoor Resources Review Group in the commission’s report: Establishing a new, independent trust operating outside of the confines of the congressional appropriations process, with $3.2 billion of dedicated annual LWCF funding (an amount equal to the $900 million authorized in the 1970s adjusted for inflation) serving as base support.

Both of these reports stand the test of time. The RFF report and the numerous background studies that RFF researchers undertook or oversaw are a treasure trove of information about our country’s outdoor resources. If you’re interested in learning more, all of these publications can be found on the RFF project page.

via www.rff.org

More on user fees at national parks

Margaret Walls (emphasis added):

The parks have been blessed, and cursed, with an overwhelming number of visitors in recent years—a record 307 million in 2015. After many years in which visitation stayed relatively constant, many parks have seen increases of 20 to 25 percent over the past 10 years. ...

This growth in popularity has led to overcrowding, especially during the peak summer season. ... 

The Park Service is making some gentle suggestions to travelers to alleviate the problems. It is encouraging people to come to the parks during winter months or eschew the most popular parks and visit some of the lesser-known ones instead. It is also considering more Draconian long-term measures, such as daily limits on the number of visitors and establishing a reservation system for entry. 

But there is a more efficient approach that the Park Service should be seriously considering: changes in the pricing structure. ...

I’ve made the case before that caution should be exercised when employing user fees to finance public goods such as parks. But that’s because user fees ration use. When one person’s visit to a park doesn’t appreciably diminish the experience for others, the fee to use the park should be zero. That doesn’t apply when the public good starts to experience congestion problems, and that’s what’s happening in some of our national parks. Rather than just suggesting that people visit during the winter and go to alternative, less-popular sites, the Park Service should incentivize such behavior through a differentiated fee structure based on season and location. ...

Equity and accessibility are important issues, but an entrance fee is a tiny fraction of the overall cost of visiting a national park, most of which are located far from centers of population. For example, a family of four traveling from Chicago to the Grand Canyon is likely to incur costs of between $1,500 (driving) and $3,000 or more (flying) for a week’s vacation. The $30 entrance fee is a drop in the travel expense bucket. What’s more, the experience itself is diminished if it is spent jostling with crowds on trails and in restaurants and parking lots or if the overcrowding leads to degradation of the resource, which has happened in some parks.

Overcrowding is not the only problem the parks are facing that could be helped out by a shift in the fee structure. The parks are in dire need of a cash infusion. The Park Service’s deferred maintenance backlog sits at $12 billion and includes serious problems with critical water and sewer systems, roads and bridges, and visitor centers, lodges, and other buildings. ...

Figuring out an efficient and fair fee structure will not be easy. It requires detailed data on visitation, for starters, and analysis to shed light on price elasticities of demand for different groups of visitors at different locations. It may also require some experimentation. But to preserve our national parks for the next 100 years, it is necessary. 

via www.rff.org

My guess is that there would be much less resistance to an increase in user fees at National Parks if the fee structure is differentiated. Increase fees when demand is high and reduce them when demand is low. 

The Property and Environment Research Center is great and all but ...

Reed Watson:

Today’s myth: As taxpaying citizens, we should not pay to visit our national parks.

Fact: Our national parks are chronically underfunded and visitor fees provide critical, though currently insufficient, funding for park operations and maintenance.

We Americans fancy ourselves a nation of conservationists. We claim ecologically sensitive and culturally significant places are worth protecting for future generations. We celebrate the creation of the national park system as “America’s best idea.” Yet we oppose paying to maintain the national parks we claim to cherish so deeply.

Whether that opposition is rooted in the belief that public parks should be free or that, by paying our taxes, we have already paid our fair share, the result is the same: our national parks have become a crowded and crumbling mess.

As evidence, consider the National Park Service’s $12 billion deferred maintenance backlog. That is $12 billion in crumbling roads, leaking water systems, and dilapidated trails that should have been maintained or repaired, but weren’t because the Park Service lacked funding.

To put that number in perspective, consider that the Park Service’s annual budget is approximately $3 billion. With similar finances, a household with annual income of $100,000 would have $400,000 in unfunded home repairs. Yikes!

If protecting treasured places as national parks was America’s best idea, we have failed to make that idea a reality.

Visitor fees offer the National Park Service an opportunity to climb out of the deferred maintenance hole. Visitor fees align the incentives of park managers with the desires of park visitors for fun and safe experiences, and they provide park managers with a funding source not subject to whimsical congressional appropriations.

Currently, visitor fees make up less than 10 percent of the Park Service’s annual budget. This number is hardly surprising given how cheap most fees are: a seven-day pass into Yellowstone National Park is a paltry $30; day passes to the Cape Cod National Seashore are $3; and nearly two-thirds of all national park properties charge nothing at all.

Park managers, not Congress nor the Park Service, should be allowed to set visitor fees. Congestion pricing—charging more during the busiest seasons—would allow park managers to capture much needed revenue for deferred maintenance projects, while simultaneously addressing the congestion that sours so many visitor experiences. Moreover, technological innovations make recreational fee collection a breeze, while a voucher program would ensure visitation is not limited to the rich.

This week is National Park Week and today is tax day, but those taxes will not save our parks for the future. Sadly, the National Park Service is celebrating its centennial by offering “free” admission into every park. Park visitors should realize that their taxes are not paying the full cost of park maintenance.

On alternating Mondays, PERC’s executive director, Reed Watson, will bust a widely-held environmental myth using research by PERC scholars.

via www.perc.org

This is great stuff but, considering the last sentence, I'm not sure if PERC scholars discovered the efficiency of user fees ... or if user fees are a widely-held environmental myth.