James R. Kahn

Linking Ecology and Economics for Ecosystem Management

Abstract This article outlines an approach, based on ecosystem services, for assessing the trade-offs inherent in managing humans embedded in ecological systems. Evaluating these trade-offs requires an understanding of the biophysical magnitudes of the changes in ecosystem services that result from human actions, and of the impact of these changes on human welfare. We summarize the state of the art of ecosystem services–based management and the information needs for applying it. Three case studies of Long Term Ecological Research (LTER) sites—coastal, urban, and agricultural—illustrate the usefulness, information needs, quantification possibilities, and methods for this approach. One example of the application of this approach, with rigorously established service changes and valuations taken from the literature, is used to illustrate the potential for full economic valuation of several agricultural landscape management options, including managing for water quality, biodiversity, and crop productivity.

Handbook on contingent valuation

Contents: 1. Introduction Anna Alberini and James R. Kahn PART I: CONTINGENT VALUATION AND ECONOMIC THEORY 2. Fifty Years of Contingent Valuation V. Kerry Smith 3. A Practitioners Primer on the Contingent Valuation Method John C. Whitehead 4. The Use of Contingent Valuation in Benefit-Cost Analysis John C. Whitehead and Glenn C. Blomquist 5. Hypothetical Preferences and Environmental Policy Gregory Cooper 6. Protest Bids, Commensurability, and Substitution: Contingent Valuation and Ecological Economics Brent Haddad and Richard Howarth PART II: ECONOMETRIC AND EMPIRICAL ISSUES IN CONTINGENT VALUATION 7. An Introduction to Choice Modeling for Non-market Valuation Steven Stewart and James R. Kahn 8. Experimental Methods for the Testing and Design of Contingent Valuation Laura O. Taylor 9. Designing a Contingent Valuation Study to Estimate the Benefits of the Conservation Reserve Program on Grassland Bird Populations Mary Clare Ahearn, Kevin J. Boyle and Daniel R. Hellerstein 10. Modelling Behaviour in Dichotomous Choice with Bayesian Methods Carmelo J. Leon and Roberto Leon 11. Temporal Reliability in Contingent Valuation (with a Restrictive Research Budget) Paul M. Jakus, Becky Stephens and J. Mark Fly PART III: APPLICATIONS 12. Non-market Valuation on the Internet Hale W. Thurston 13. Use of Contingent Values of Wildlife and Habitat Preservation in Policy and Benefit-Cost Analyses John B. Loomis 14. Valuing Wildlife at Risk from Exotic Invaders in Yellowstone Lake Todd L. Cherry, Jason F. Shogren, Peter Frykblom and John A. List 15. The Demand for Insecticide-Treated Mosquito Nets: Evidence from Africa Christine Poulos, Maureen Cropper, Julian Lampietti, Dale Whittington and Mitiku Haile 16. Choice Modeling of Farmer Preferences for Agroforestry Systems in Calakmul, Mexico James F. Casey 17. The Use of Contingent Valuation in Developing Countries: A Quantitative Analysis Dan Biller, Karoline Rogge and Giovanni Ruta 18. Combining Stated-Choice and Stated-Frequency Data with Observed Behavior to Value NRDA Compensable Damages: Green Bay, PCBs, and Fish Consumption Advisories William S. Breffle, Edward R. Morey, Robert D. Rowe and Donald M. Waldman 19. Public Preferences Toward Environmental Risks: The Case of Trihalomethanes Richard T. Carson and Robert Cameron Mitchell 20. Conclusions Anna Alberini and James R. Kahn Index

Economic losses associated with the degradation of an ecosystem: The case of submerged aquatic vegetation in Chesapeake Bay

Abstract This study employs theoretical and empirical concepts from ecology and economics to derive a lower bound of the marginal damage function for reductions in the level of submerged aquatic vegetation (SAV) in Chesapeake Bay. These reductions in SAV are believed to be a consequence of the runoff of agricultural chemicals, discharges from waste treatment plants, and soil erosion. The study examines the indirect ecological consequences of pollution in Chesapeak Bay fisheries, in a fashion which is consistent with the economic theory of benefit measurement.

Third-world debt and tropical deforestation

Abstract The deforestation and degradation of tropical forests are taking place at an extremely rapid pace. According to the Food and Agriculture Organization (FAO), the estimated annual rate of tropical deforestation during the 1981–1985 period was 113 846 square kilometers or 0.6% of the 1981 total forested area. The implications of the loss of these forests are staggering (Myers, N., 1989. Deforestation Rates in Tropical Forests and Their Climatic Implications. Friends of the Earth, London). Tropical forests are extremely rich ecosystems which support a disproportionately large share of the worlds plant and animal species. Forests play a crucial role in both nutrient and hydrological cycling and may provide sustainable economic benefits through managed harvesting of timber and the collection of non-timber products such as fruits, nuts, and rubber. Also, deforestation is a significant source of global warming through its effects on the global carbon cycle. This paper focuses on the relationship between debt and deforestation, examining conceptual and empirical arguments that debt is a source of deforestation pressure. Our study develops a behavioral model which suggests that debt can lead to myopic behavior, leading to deforestation rates that may not be optimal in the long run, but are necessary in the short run to meet current constraints. Then, country-by-country data on debt, deforestation, and other variables are analyzed with regression analysis. It is shown that debt is significantly correlated with deforestation under a wide variety of assumptions and specifications. Our results indicate that debt is an important factor in the deforestation of tropical countries. There are certainly other sources of deforestation, both micro- and macroeconomic, which may vary significantly from country to country. However, we focus on debt because of its dominant role in the economies of developing countries, and because of the increased use of debt-for-nature swaps. The link between debt and deforestation that is suggested in this paper implies that debt-for-nature swaps may have a dual effect on deforestation. First, the contractual agreement is designed to preserve forests as part of the swap. Second, the reduction in debt may itself reduce the pressure to deforest, although this indirect effect is small. Our research provides evidence that reducing debt reduces deforestation, which may be an argument to offer deforesting third-world countries some form of debt relief, and to utilize more fully debt-for-nature swaps as a tool for preserving environmental quality.

On the Scarcity Value of Ecosystem Services

In this exploratory paper, we first make a case for considering the scarcity value of ecosystem services in analyses of jointly determined ecological-economic systems. Next, we point out that insight into the scarcity value of an ecosystem service can be gained generally by examining the manner in which the state of an ecosystem responds to changes in environmental conditions. Following this, we specialize our discussion to the case of eutrophication in lakes. This leads us to pose and analyze a stochastic control problem of lake management in which ecological thresholds are salient. Finally, we show that this stochastic control theoretic framework can be used to obtain a numerical value that is closely related to the scarcity value of an ecosystem service provided by lakes.

The two-stage hedonic wage approach: A methodology for the valuation of environmental amenities

Abstract This paper extends the hedonic wage model to a two-stage model in which willingness to pay may be estimated for specific amenities. In concert with supply relationships, which may be estimated independent of the hedonic model, these willingness to pay functions allow for the computation of the value of changes in the level of the amenity. The technique has several important advantages over other valuation techniques, including less stringent data requirements and fewer econometric problems such as intractable identification problems and truncation biases. The model is applied to freshwater fishing and benefits associated with changes in fishing quality are estimated, both generically and through specific water quality improvements.

Demand-side policies for environmental protection and sustainable usage of renewable resources

Abstract Since many renewable resource systems such as tropical and temperate forests, coral reefs, and wild fisheries are often exploited at unsustainable rates, studies aimed at reducing these trends have focused on the market failures associated with over-exploitation. Within this framework, the literature devised what we term supply-side policies to correct these market failures. Here we introduce demand-side policies into the mix of renewable resource and environmental management policies. These policies are designed to increase the demand for goods produced in a sustainable fashion by: (1) promoting the long-term conservation of natural capital assets, (2) promoting the attainment of economic efficiency, and (3) providing greater political acceptability relative to supply-side policies.

Ecological Interaction as a Source of Economic Irreversibility

Irreversibility can be either physical or economic in origin. For example, the extinction of a species is physically irreversible. On the other hand, contamination of lake-bottom sediments by mercury is not physically irreversible (the mercury and/or sediments can be physically removed), but the cost is so high that it can be said to be economically irreversible. This paper argues that economic irreversibility associated with environmental change is much more common than typically discussed in the economics literature. The source of the problem is the inherent complexity of ecological relationships. The paper discusses the origin and policy importance of these indirect irreversibilities.

The double dividend, second-best worlds, and real-world environmental policy

Abstract The recent series of papers by Bovemberg, Goulder, Parry and others argue that the double dividend is unlikely to exist because of second-best problems. They argue that the imposition of environmental tax in an economy already distorted by income taxes will further distort the economy by reducing incentives to supply labor. Our paper argues that this is not likely to be the case because of the restrictive assumptions made by these models, and because of the role of the environment as a factor of production.

Beyond strong sustainability

SUMMARY Since the Brundtland Commissions delineation of the term sustainable development in 1987, virtually every country has incorporated the terms sustainability and sustainable development into their planning vocabulary and criteria for decision-making. However, many issues remain unresolved. Broad and sweeping references to sustainability and sustainable development do not necessarily translate into implementable policies to achieve these goals. In particular, unresolved issues include developing an understanding of how one sector of the economy can contribute to the sustainable development of the economy as a whole and the role of ecological resources in sustainable development. Our paper provides an initial conceptual examination of these questions by folding mining and ecological quality into the sustainability discussion. We use the Brazilian Amazon as an application of our sustainable development model.