Speaker Info

Dr. James Boyd
Director of Social Science and Policy at SESYNC
National Socio-Environmental Synthesis Center

Email: boyd@rff.org

Biography:

Dr. James Boyd is the Director of Social Science and Policy at SESYNC (the National Socio-Environmental Synthesis Center), as well as the Director of RFF’s Center for the Management of Ecological Wealth and a Senior Fellow at Resources for the Future (Washington, DC). Dr. Boyd’s work focuses on the quantification and management of ecological resources and services. He graduated from the University of Pennsylvania’s Wharton School in 1993, with a PhD in microeconomics. Dr. Boyd has been a visiting Professor at both Stanford University and Washington University in St. Louis. He has also served with a variety of environmental advisory groups (including for the National Academy of Science and the US EPA Science Advisory Board) and has performed environmental consulting work for a variety of consulting firms and agencies including the European Commission and the World Bank.



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Seminar Abstract

This lesson is intended as a primer for understanding environmental economics, focusing particularly on the valuation of ecosystem services. The first section of the presentation focuses on an economist’s typical perspective on how ecosystem services are to be analyzed – and in particular on the kinds of ecological analysis and outcomes needed for economic evaluation.  Boyd stresses the importance of being able to describe the effect of specific management actions on changed ecological outcomes via ecological “production functions.” He also stresses the importance of measured or modeled ecological outcomes that can be understood by lay audiences. Ecological analysis that causally relates specific management actions to changes in socially understandable biophysical outcomes allows for those outcomes to be valued in monetary terms.

 

The second section of the presentation focuses more heavily on how to economically quantify the importance of ecosystem services.  In order to fix a monetary value on an environmental variable that will affect ecosystem services, a variety of factors need to be taken into account: how many people are affected by this environmental outcome? What is the scale of the problem you are trying to address? How scarce are the resources involved? Are there substitutes for the ecosystem services that are becoming damaged or lost? As a result, when one is trying to fix a monetary value on an ecosystem – or communicate its benefit in non-monetary terms – it is important to capture such factors in the analysis. Boyd also discusses reasons why many economic studies under-estimate the total value of ecosystems.

Seminar Transcript

>> So yeah, I want to go -- I'm going to give you what I'm calling two versions here. I don't know, Lisa, if you've already primed the crowd. But the first vision is the more intuitive common one. We're going to put dollar values on things. The first version I want to talk through is these stopping short of putting dollar values. We can quantify and choose indicators that allows the thing about these outcomes in an economic context. It's giving us more economic content about how important these things are to different beneficiaries. The virtue there is, again, I'm going to try to give you the sense that this actually helps teach people about these ecosystems. And it's cheap. And it's, again, it's quantitative in a way that you can't really argue with. You can always argue with what an economist does to get a dollar value. There's going to be trade-offs here. The key thing is I'm not violating the principles of economics when I talk about these indicators. They're completely consistent. They both require the kind of ecology we've already been talking about. So, this is a tactical question of which -- what kind of audiences you're trying to reach. How much money you have. That kind of thing. So, these nonmonetary benefit measures, again, what we're trying to do is quantify things that we know from basic economic principles are going to affect the value of these ecosystem services. Lisa and I will refer to these and others in the field as benefit relevant indicators. And let's talk about what those are. They're measuring things like what can we -- how many people are actually going to benefit from this? How scarce is what we're talking about at different scales: whether we're talking about a county or the whole bay watershed or the nation? Obviously, the more people who benefit; the better. The more scarce this service is, the more valuable it is as opposed to if it's completely abundant. Another thing that we can quantify often is are there substitutes? Should we, you know, we can talk about a forest depending on the benefit in play. Maybe grasslands are a substitute for that forest? It really depends on what specifically we're talking about. And then are there complementary features present? So, an example of this would be if you're talking about -- we got the trout. The recreationally valuable trout. Are they in a place that anyone has access to? Can we actually talk about access, quantify it, and things like that? And you'll note that what this is all about is basically about where you are in the landscape. And so, this is -- and the reason Lisa and I have been married for 20 years is we kind of connected, again, 20 years ago, she was a leader on GIS analysis and I wasn't. And -- but anyway, we started doing this kind of spatial counting of this stuff. And of course, the capability there -- not only the software but the data has gotten much, much better. And so, you can do a lot of things pretty easily now. Just some more examples of what we mean here. Let's say we're constructing wetlands or restoring them. You know, how many farmers in a local area would actually benefit from a positive increase in -- let's say -- groundwater recharge? Can we count the number of structures and infrastructure and housing that would be protected from flooding by these? How many recreators will benefit from their contributions to increase species abundance? This is common sense. That's all it is. But the point is you can quantify some of this common sense and present it in an economic framework. These are old slides. I apologize. Lisa made these probably 15 years ago, but I still love them. And I'm just going to give you one simple example of how you quantify one of these kinds of things. So, I'm doing this in a context that we're comparing these two sites. So, Rich, maybe, I don't know if this is starting to get at what you're talking about but. And let's think about the aesthetic benefits we're going to get from those two sites. So, one thing you can do with GIS, of course, is actually ask the question where can you see that site from? It's literally a topological -- topographic issue. So, you could start quantifying the size of the view sheds. That would be a very crude measure. You can then intersect the view shed with different kinds of land uses. This would tell you something about where people are. How many of them are there. Whether -- maybe even where there are kids? Or whether they're poor. And then you can kind of, again, just with basic spatial data -- and these are made up numbers -- you can start delivering a message like this. Well when was your time at Project A versus Project B? We're delivering this outcome that is intuitive to people and here's the quantitative answer that is one piece of what you might want to think about. It's got economic content but it is not dollar value. So just to add some other examples of what you could do. You could be counting the number of wells that are being protected from saltwater intrusion by these sites. Again, you're using aquafer mapping, for example, to do that and well data which is available from the census. You can similarly -- if these wetlands are protecting against storm surge, you can actually just be counting structures and even adding up the value of those structures that you're protecting. So now the question is if you go -- your decision maker or whoever your audience is. Is this working for you? And -- or would you really rather just have someone come in and take all of that and give you -- well, here's what you know Site A is worth versus Site B. And that's -- we can disagree on that. But now let's talk about where those numbers would actually come from and why. It's not as simple as: Oh, someone's just going to tell us the answer. Okay. So just a word here. This is not a seminar about these economic methods. We could do that some other time. But one slide on it. There's a suite of methods we use. They rely on different data. They can get different kinds of ecological benefit. You know sometimes we look at, "Well, if the wetlands are protecting flooding, we don't need to build the levees." So, the benefit of the wetlands are part of the benefit of the wetlands. We could use the cost of building the levees as one measure. We can look at people's behavior. Where they recreate? How much they spend when they recreate? And kind of try to estimate a value of the site. A beach, for example, based on that kind of behavior. We can measure how much homes right on the water cost versus the same kind of home that's a mile away from the water. And that tells us something about the value of the water to the homeowner. And then there's stated preference methods. This is glorified opinion polling in effect. It's glorified in that it's rigorous and there are all these kinds of rules that we as a discipline apply. But you're basically simulating choices that people make in order to back out a value. So, that's enough on that. A key thing -- and now this is kind of your consumer guide to if you start seeing valuation studies. The key thing is that most of the studies you'll see are only capturing a very sliver of the value of a wetland let's say or a green space. And that's because these resources tend to be either bundles of things that are providing the variety of benefits or because they're kind of inputs to the system in effect -- again, that's kind of cascade of ecological effects. So, this picture -- you know, if you want to come up with the total value of a nearby park or -- yeah, state park let's say. It's providing a lot of things. It's providing again habitat for species. We may value the existence of those species. It's providing visual amenities. It's providing recreational opportunities. It may be avoiding flooding. It may be contributing to commercial harvests. And the point here is that if you want to capture that whole smear of benefits, you kind of need to hire five different economists. We don't all do all of these. And a lot of times what you'll see is a study that just is taking like one piece of that benefit. And what you see in the published literature is usually this kind of thing. So just be aware of that. Okay. We've already talked about how the value of these things really depends on where in the landscape it is. Both are about physical reasons and social reasons. We've talked about how evaluations are incomplete a lot of the times. And again, we know that. But we don't always do a good job of putting that right up front. And now I want to just kind of conclude with a kind of a word of buyer beware that some valuations you'll see are primarily for promotional purposes and are less kind of what I call scientific or relevant to management certainly. And just a couple slides on this. Ecosystems are incredibly important. They're incredibly valuable in one sense of the word "value." But something that's really important to understand is that economics doesn't measure importance. It seems like it kind of should. But it really doesn't. All it really does is it measures the benefit in one of these incremental changes. And one way to convey this is to talk about diamonds and water. So, which is more important; water or diamonds? Audience? >> Water. >> Water. Thank you. But if you look at the price of water and diamonds. Diamonds are incredibly, incredibly expensive and water is not. And why is that? Well, because what the price of something is, is just measuring that incremental, that next one. And diamonds are scarce. Whereas water usually isn't. And so, all the value is capturing is the importance of things under a specific supply and demand condition. That's all that economics can tell you about. So, key theme. Don't ask economics to tell you the value of the bay. It cannot ever do that. Because removing the bay as an entire bay is not something we have any information on or it's not realistic and, again, economics can't tell you that. What we can tell you about is the value of having a little bit more of something about the bay or a little bit less of it. Coincidently, that's what decisions are about too. So, that's okay. But just to reiterate, this is not about the value of nature, the value of the Chesapeake Bay. And if someone tells you they can tell you the value of the bay, they're selling you snake oil. Which brings me to this famous paper that I have a love-hate relationship. This is the Costanza paper. And I'll make the point. This is the final one I'll make it. This is been incredibly influential paper. It's been good for me. But I would call this a promotional result rather than an actual result. And they would too I think to a certain extent -- the authors. And you know, one critique of this is, you know, when you say the value of the world in effect is 33 trillion. No, it's not. It's a lot bigger than that. And so, you know, what would you actually pay to preserve the world? You'd pay everything you could. Which is a lot more than 33 trillion. So, that gives you a sense of why the numbers is kind of bogus. The technical reason is that, again, it's not based on any kind of realistic choice or supply and demand conditions in my terminology. So, again, I don't know if you'll see that kind of study but it is just something to be aware of. And with that, I will turn it back to you all. [ Applause ]

Seminar Discussion

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