248
economic impact assessments, and hence ecological assessments, provide valuable information, but
almost always are incomplete and likely to miss
part of the resource and ecosystem picture.
17.2 Microeconomic Approach
versus Regional
Economic Approach
There are many techniques for evaluating effects
on environmental quality of a proposed project in
a site-specific context (e.g., production efficiency
models and models of market processes). Methods
for environmental quality valuation from both the
benefit and cost sides are available and described
in detail in Hufschmidt et al. (1983).
Microeconomic approaches have traditionally
been desirable from the perspective of most professional economists. These approaches center on
consumers, individual firms, and industries and focus on supply-demand analyses and benefit-cost
analysis, for which determination of product prices
and factor shares play essential roles. In contrast,
macroeconomic approaches focus on the national
economy and use national aggregates. These types
of analyses tend to emphasize aggregate productivity, money supply, and interest rates. However,
neither the microeconomic or macroeconomic approaches are most appropriate to broad-scale ecological assessments.
The ultimate type of microeconomic analysis
would be full economic equilibrium analysis, by
which quantity supplied and demanded, input and
output prices, and location of all firms and inputs
and outputs are determined. This type of analysis
exceeds what can be achieved with either existing
and foreseeable data resources. The regional analysis approach uses aggregation of space, time, and
economic activities to simplify the analysis to the
point that is practicable. However, when working
on a regional scale, rather than in a site-specific
context, general equilibrium approaches are needed. In the remainder of this chapter we will restrict
coverage to the regional approach, which is discussed in greater detail in Hufschmidt et al. (1983).
17.3 Aggregation for Regional
Economic Analysis
Regionalization involves determining boundaries
of the subject region. In the case of ecological assessment, usually this is defined on ecological
grounds and is a given for the entire assessment.
Economic Linkages to Natural Resources
However, the assessment team still must contend
with how to aggregate space within the defined assessment region (i.e., boundaries of subregions).
Usually, the assessment region will logically contain numerous ecological regions and perhaps even
many economic regions. Given that an economic
region usually will contain a number of ecological
regions, the assessment team must decide on appropriate boundaries of the spatial entities considered in the analysis. Normally, boundaries are
based on the concept of homogeneity in terms of
appropriate variables (i.e., ecological and economic
variables). Ecological regions have often been defined as watersheds and, more recently, as ecosystems.
Periodization is the aggregation oftime in analysis. Most likely, this is also specified in the charter for the ecological assessment. Note, however,
that the economic analysis methods likely will be
of the static type (i.e., relate to a specific year).
Generally, this scheme will conflict with some parts
of the assessment, for which perhaps seasons within
a year must be recognized. This can be readily handled, but requires planning. Of course, all data of
every type must be for the same time period.
Sectorization is the process of aggregating activity or objects into a group that will be recognized
as an entity in the analysis. In economic analysis it
generally refers to aggregating establishments producing similar output mixes, as in the Standard Industrial Classification (SIC) of the federal government. There is no reason that the same idea cannot
be applied to biological organisms, pollutants, or
other issues in different sections of the assessment
(e.g., see Isard et aI., 1972; Roberts and Rettig,
1975). Ideally, ecological processes would be integrated into one model with the economic and social sectors, as will be shown below. Although this
has not been accomplished in past assessments, it
is a worthwhile goal.
17.4 Regional Economic
Impact Analysis
Economic analysis involves carrying out studies to
quantify economic impacts in a region. Economic
assessment takes results of economic impact analysis and applies them to a specific context. The approach generally used in quantifying prospective
economic impacts in ecological assessment is input-output (1-0) modeling. The function of the 1-0
model is to provide an estimate of direct, indirect,
and induced effects. Direct effects are values of inputs used in the production of the next dollar of
economic impact assessments, and hence ecological assessments, provide valuable information, but
almost always are incomplete and likely to miss
part of the resource and ecosystem picture.
17.2 Microeconomic Approach
versus Regional
Economic Approach
There are many techniques for evaluating effects
on environmental quality of a proposed project in
a site-specific context (e.g., production efficiency
models and models of market processes). Methods
for environmental quality valuation from both the
benefit and cost sides are available and described
in detail in Hufschmidt et al. (1983).
Microeconomic approaches have traditionally
been desirable from the perspective of most professional economists. These approaches center on
consumers, individual firms, and industries and focus on supply-demand analyses and benefit-cost
analysis, for which determination of product prices
and factor shares play essential roles. In contrast,
macroeconomic approaches focus on the national
economy and use national aggregates. These types
of analyses tend to emphasize aggregate productivity, money supply, and interest rates. However,
neither the microeconomic or macroeconomic approaches are most appropriate to broad-scale ecological assessments.
The ultimate type of microeconomic analysis
would be full economic equilibrium analysis, by
which quantity supplied and demanded, input and
output prices, and location of all firms and inputs
and outputs are determined. This type of analysis
exceeds what can be achieved with either existing
and foreseeable data resources. The regional analysis approach uses aggregation of space, time, and
economic activities to simplify the analysis to the
point that is practicable. However, when working
on a regional scale, rather than in a site-specific
context, general equilibrium approaches are needed. In the remainder of this chapter we will restrict
coverage to the regional approach, which is discussed in greater detail in Hufschmidt et al. (1983).
17.3 Aggregation for Regional
Economic Analysis
Regionalization involves determining boundaries
of the subject region. In the case of ecological assessment, usually this is defined on ecological
grounds and is a given for the entire assessment.
Economic Linkages to Natural Resources
However, the assessment team still must contend
with how to aggregate space within the defined assessment region (i.e., boundaries of subregions).
Usually, the assessment region will logically contain numerous ecological regions and perhaps even
many economic regions. Given that an economic
region usually will contain a number of ecological
regions, the assessment team must decide on appropriate boundaries of the spatial entities considered in the analysis. Normally, boundaries are
based on the concept of homogeneity in terms of
appropriate variables (i.e., ecological and economic
variables). Ecological regions have often been defined as watersheds and, more recently, as ecosystems.
Periodization is the aggregation oftime in analysis. Most likely, this is also specified in the charter for the ecological assessment. Note, however,
that the economic analysis methods likely will be
of the static type (i.e., relate to a specific year).
Generally, this scheme will conflict with some parts
of the assessment, for which perhaps seasons within
a year must be recognized. This can be readily handled, but requires planning. Of course, all data of
every type must be for the same time period.
Sectorization is the process of aggregating activity or objects into a group that will be recognized
as an entity in the analysis. In economic analysis it
generally refers to aggregating establishments producing similar output mixes, as in the Standard Industrial Classification (SIC) of the federal government. There is no reason that the same idea cannot
be applied to biological organisms, pollutants, or
other issues in different sections of the assessment
(e.g., see Isard et aI., 1972; Roberts and Rettig,
1975). Ideally, ecological processes would be integrated into one model with the economic and social sectors, as will be shown below. Although this
has not been accomplished in past assessments, it
is a worthwhile goal.
17.4 Regional Economic
Impact Analysis
Economic analysis involves carrying out studies to
quantify economic impacts in a region. Economic
assessment takes results of economic impact analysis and applies them to a specific context. The approach generally used in quantifying prospective
economic impacts in ecological assessment is input-output (1-0) modeling. The function of the 1-0
model is to provide an estimate of direct, indirect,
and induced effects. Direct effects are values of inputs used in the production of the next dollar of