Economics and NMFS: Why And How

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Economics and NMFSWhy? And How?

• James Boyd
• Senior Fellow
• Resources for the Future

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Overview

• Will talk about economics, not as a science, but
  as a means of persuasion
• Emphasize the importance of budget constraints
  (how much economics can you really buy?)

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Questions

• Is economics really necessary?
• How should NMFS do more economics?
• What are the potential pitfalls?
• How much common ground is there between economics
  and ecology?
• What should NMFSs economic analysis priorities
  be?

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Caveats

• NMFS is not alone
• Generic issues arising from the regulation of
  ecosystems

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Is it really necessary?

• Statutory rule-based pressures are one driver
• The power of numbers and expertise
• A two-legged stool
• Bio-physical analysis (NMFS is strong here)
• Economic analysis
• Its about credibility and winning arguments

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Is it really necessary?

• GPRA
• Appropriations
• Litigation
• Rulemaking
• Inter-Agency Consultation
• Internal Analysis and Decision-Making
• The type of economics will depend on the
  decision context

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Why economics?

• Economics is a proxy for the social interest
• Ignoring economics can make it appear you are
  ignoring social impact
• Economics is not the only way to account for
  social impact, but is a good way

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Pitfalls?

• Ethical, moral concerns?
• Important issues, but not the battle to fight
• Pragmatic issues are more important
• Scientifically sound, -based benefit valuation
  is expensive, time-consuming, difficult
• And even then, people can pick at it
• The discipline is still maturing
• Integrate economics, dont isolate it
• Thats hard to do

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So what is NMFS to do?

• It depends on how much money youve got
• If a lot (buy as many good economists as you
  can)
• If a little (see below)
• Adopt the attitude of economics
• Be able to argue effectively about the difficulty
  of economic tradeoff analyses
• Play to your strengths (bio-physical expertise,
  landscape analysis)

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The attitude

• Economics is what happens when you cant have it
  all
• Everything is valuable (true but unhelpful)
• The language of economics
• Services, not just functions
• Co-opt the language basic concepts
• Scarcity
• Economies of scale
• Productivity
• Economics is most powerful when it seems like
  common sense (dont get too fancy)

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Imagine youre in a courtroom .

• Explain why your opponents have an easier time
  than you do
• Public goods, not traded, the product of complex
  underlying biophysical systems
• Highly idiosyncratic to local conditions
• Are there no environmental benefits just because
  we dont have a figure?
• Obviously ridiculous
• Economic impact analysis can also be attacked
• There is no objective truth or unassailable study

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Principles are cheaper than techniques

• Techniques are dollar based (and expensive)
• This parcel produces services worth X
• A cheaper alternative?
• Principles can be combined with indicators
• This parcel supports 7 threatened species, has
  1K visitors annually, is the only such site in a
  10 mile radius and is well-situated for
  recreation given presence of parks, trails, etc.
• GIS data, married to principles, can yield
  defensible indicators of ecosystem benefits

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Proposal Service-rich hot spots

• Map ecosystems on the basis of both bio-physical
  and socio-economic characteristics
• Build in the notion of priorities
• Build in scarcity, complements, demand, risk
• Feature spatial (landscape) analysis
• Merge ecology and economics

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Morals of the story

• Buy the Cadillac if you can
• Short of that
• Adopt the principles, attitude, and language
• Admit to the difficulty (and embrace it)
• Play to your strengths
• Resist the temptation to have non-economists do
  real economics