Annotated bibliography of economic literature on wetlands

Abstract

This bibliography is intended for the use of wetlands scientists, policy analysts, and natural resource professionals who have little acquaintance with natural resource economics, and natural resource professionals who have some background in economic analysis and wish to sharpen their appreciation of the specialized methods used to value the nonmarket uses of wetland resources. It is not intended to serve as a first primer of natural resource economics. The purpose of including this discussion is to introduce the reader to the fact that specialized language and analytic techniques are used in this field, and that summary discussion of these techniques are not available in introductory or intermediate level economics textbooks. A key difficulty in economic analysis lies in the need that economists have to express common-sense terms such as "demand" or "supply" in a precise way; this facilitates the interpretation of data and is a powerful aid in making internally consistent, policy analysis. Natural resource economists would like to find a consistent, intuitively plausible measure of the social benefits conferred by some good or service. The most common fallacy noneconomists make in this field is to use expenditures as a measure of well-being or benefits. This measure is defective; expenditures may rise, while benefits fall. The following simple example should clarify the issue. Suppose that a certain population center, in the 1940's, is located 5 miles from a riverine recreation site. Suppose that a factory opens up 15 miles away from the site during the 1950's, and closes at the end of the 1960's; and that during this 20-year period, the bulk of this region's populace resides 15 miles from the site, close to the factory. In the 1970's, the populace of the region returns to the old population center, 5 miles from the recreation site. The benefits conferred by the site diminished during the 1950's and 1960's, even though travel (and even total) expenditures associated with the use of the site may have risen during this period. Both intuition and formal analysis suggest that accurate estimates of benefits conferred by a good or service provide quantitative indices of the availability of good substitutes for the good or service in question., The fewer low-priced substitutes, the greater the benefits conferred by the good. The prices (quantities) of available substitutes may be needed to specify empirically estimated demand (supply) curves. If so, omission of these variables will produce biased estimates of net benefits conferred if the approach used to estimate social benefits is based on the shape and position of an empirically estimated demand (supply) curve. In general, a good grasp of the meaning of both demand and supply (curves) is needed to produce sound estimates of benefits conferred by some commodity. Demand and supply curves are discussed in the following section that deals with various techniques for estimating benefits conferred by outdoor recreation sites. With wetlands functions and resources, the divergence between large total values and very low (zero) marginal values lies behind much of the controversy as to the appropriate procedure for imputing values to wetlands preservation benefits. If some type of wetland habitat is not a limiting factor in the production of some target wildlife species, the marginal value product of that habitat type is zero. The total social marginal product of the wetlands habitat type or complex may be very large, but if the removal of the last unit does not diminish total output, reallocating the land to more valuable economic activities increases social welfare.