17.1 Introduction
17.1.4 Role of Economic Impact
Assessment in the
Ecological Assessment
Economic analysis is needed in ecological assessments to provide a measure of economic performance in the past and a measure of potential economic impact of changes in both ecological and
economic systems. Valuation of the worth of resource and ecological assets in dollar terms is necessary to provide a measure common to the rest of
the economic system. Economic analysis provides
a measure of economic feasibility of various alternatives that are viable in ecological terms. Decisions in natural and environmental resources, both
in public and private sectors, are made on the basis of economic feasibility, among many other considerations (e.g., ecological, social, political, psychological). Financial feasibility is usually the first
to be considered, because proposed management
activities require a budget that must be justified on
economic grounds.
Ideally, economic impact assessments should
show how current and future uses of natural resources affect the economic system and how workings of the economic system have and will in the
future affect the environment. Unfortunately, this
ideal condition has not been achieved and is unlikely to be achieved in the near future.
An ecological assessment is concerned with all
linkages in a region. Broadly interpreted, it includes
social and economic linkages, although these concerns are usually considered separate fields.
17 .1.5 Valuation Problem: The Benefit
Side and the Cost Side. Incidence
of Benefits and Costs
A serious problem in environment and natural resources is that organized markets do not value
many goods and services. This situation is found
both on the benefit and cost sides. For example, on
the benefit side, amenities are not valued directly
by the market. On the cost side, damages to natural resources by water and air pollution are not
valued directly by markets.
Economic analysis assumes that both inputs to
the analysis in physical terms and financial terms
are correct. For example, consider timber, a product valued by markets. Total market value of a timber stand consists of a measurement of merchantable volume and market price. Economic
analysis assumes that both variables are correctly
measured. Note, however, that significant costs
247
(e.g., increased erosion, decreased visual quality)
generally are not included in setting market prices.
Similar cases can be cited for other resources.
Economic impact analysis requires the use of
market prices. Use value, not utility value, is measured. Of course, utility values (e.g., from contingent valuation studies) could be used if all linkages
were valued in that way (Chappelle and Webster,
1993). Generally, such an approach would be extremely costly, since primary survey data would be
required for every good and service in every sector of the economy.
The question then is how to value nonpriced
goods and services. A practical approach is to derive impacts on the basis of expenditures made for
the array of products involved. In such cases, impacts of nonpriced goods and services have to be
derived indirectly, because there is no direct expenditure. It is possible to trace spending by users
of natural resources. For example, even if recreationists are not charged entry to a recreational area
or for use of the resources, other costs are incurred.
This method quantifies any spending involved in
making use of the recreational area (e.g., spending
for groceries, gasoline, restaurants, motels) (e.g.,
see Pedersen et al., 1989).
17.1.6 Need for Both Stock and
Flow Information
To conduct ecological assessments, it is necessary
to have both stock and flow information on the regional economy. Flow information is provided by
input-output accounts, but there is a severe lack of
stock information. Data on stocks are not easily collected since the federal government in this country
does not regularly conduct stock accounts. Wealth
accounts, the major type of stock accounts, have
been developed only periodically and none have
been completed recently.
In the natural resource and environment area,
however, there are information sources that, although fragmentary, can provide a useful picture
of the wealth represented by certain natural resources and environmental resources. For example,
the Forest Service, USDA, conducts resource inventories that are essentially wealth accounts in
physical units. For those goods and services priced
by organized markets, these physical inventories
can be multiplied by market prices to develop
wealth in economic terms. Unfortunately, these
data are not comprehensive, and there are always
missing data that only can be overcome with great
effort and cost. It stands to reason, therefore, that
17.1.4 Role of Economic Impact
Assessment in the
Ecological Assessment
Economic analysis is needed in ecological assessments to provide a measure of economic performance in the past and a measure of potential economic impact of changes in both ecological and
economic systems. Valuation of the worth of resource and ecological assets in dollar terms is necessary to provide a measure common to the rest of
the economic system. Economic analysis provides
a measure of economic feasibility of various alternatives that are viable in ecological terms. Decisions in natural and environmental resources, both
in public and private sectors, are made on the basis of economic feasibility, among many other considerations (e.g., ecological, social, political, psychological). Financial feasibility is usually the first
to be considered, because proposed management
activities require a budget that must be justified on
economic grounds.
Ideally, economic impact assessments should
show how current and future uses of natural resources affect the economic system and how workings of the economic system have and will in the
future affect the environment. Unfortunately, this
ideal condition has not been achieved and is unlikely to be achieved in the near future.
An ecological assessment is concerned with all
linkages in a region. Broadly interpreted, it includes
social and economic linkages, although these concerns are usually considered separate fields.
17 .1.5 Valuation Problem: The Benefit
Side and the Cost Side. Incidence
of Benefits and Costs
A serious problem in environment and natural resources is that organized markets do not value
many goods and services. This situation is found
both on the benefit and cost sides. For example, on
the benefit side, amenities are not valued directly
by the market. On the cost side, damages to natural resources by water and air pollution are not
valued directly by markets.
Economic analysis assumes that both inputs to
the analysis in physical terms and financial terms
are correct. For example, consider timber, a product valued by markets. Total market value of a timber stand consists of a measurement of merchantable volume and market price. Economic
analysis assumes that both variables are correctly
measured. Note, however, that significant costs
247
(e.g., increased erosion, decreased visual quality)
generally are not included in setting market prices.
Similar cases can be cited for other resources.
Economic impact analysis requires the use of
market prices. Use value, not utility value, is measured. Of course, utility values (e.g., from contingent valuation studies) could be used if all linkages
were valued in that way (Chappelle and Webster,
1993). Generally, such an approach would be extremely costly, since primary survey data would be
required for every good and service in every sector of the economy.
The question then is how to value nonpriced
goods and services. A practical approach is to derive impacts on the basis of expenditures made for
the array of products involved. In such cases, impacts of nonpriced goods and services have to be
derived indirectly, because there is no direct expenditure. It is possible to trace spending by users
of natural resources. For example, even if recreationists are not charged entry to a recreational area
or for use of the resources, other costs are incurred.
This method quantifies any spending involved in
making use of the recreational area (e.g., spending
for groceries, gasoline, restaurants, motels) (e.g.,
see Pedersen et al., 1989).
17.1.6 Need for Both Stock and
Flow Information
To conduct ecological assessments, it is necessary
to have both stock and flow information on the regional economy. Flow information is provided by
input-output accounts, but there is a severe lack of
stock information. Data on stocks are not easily collected since the federal government in this country
does not regularly conduct stock accounts. Wealth
accounts, the major type of stock accounts, have
been developed only periodically and none have
been completed recently.
In the natural resource and environment area,
however, there are information sources that, although fragmentary, can provide a useful picture
of the wealth represented by certain natural resources and environmental resources. For example,
the Forest Service, USDA, conducts resource inventories that are essentially wealth accounts in
physical units. For those goods and services priced
by organized markets, these physical inventories
can be multiplied by market prices to develop
wealth in economic terms. Unfortunately, these
data are not comprehensive, and there are always
missing data that only can be overcome with great
effort and cost. It stands to reason, therefore, that