How to value the environment?

Tim and I were recently graced with the presence of the new Socio-Economic Analyst at Ontario Parks, Will Wistowsky. During a lecture to our class and a subsequent lunch thereafter, Will, an economist, explained to us some of the methods, challenges and benefits of placing measurable values on different parts of the environment, particularly those of National Parks.

With regards to National Parks, Will argued that we (more directly, the government) do not properly value National Parks, despite some of the world's greatest natural settings and a societal recognition of the worth of these natural areas. The federal government only puts in approximately $250 million into the park system annually, 1/100th of the funding put towards national defence.

According to Will, the problem is that we don't measure the economic value of parks properly by only looking at the direct use benefits, i.e. recreation, tourism etc. However, a variety of other benefits should also be taken into consideration, such as the benefits accrued from research of the parks and property values near the park (try finding a cheap condo in Canmore, AB), but also the non-use values, such as the value of the ecosystem, the value of leaving the park to future and generations and even something as holistic as the value of a view. Taking into account all of these values produce what is called the Total Economic Value, which in some park cases, was 50% higher than the value given my government measurements.

The non-use values are tougher to figure out. How do you put an economic value on something like a plant or a view? It's difficult and perhaps unethical, but economists are willing to try. Economists use the concept known as Willing to Pay (WTP), whereby one can measure the value of something based on what people are willing to pay for it. Any total amount of WTP over the current price or value is known as the Net Benefit. For example, Will measured the value of a canoe trip. While Ontario Parks charged on average $2/day for canoe trips, the WTP was much higher, usually around $50-60/day, although the WTP would gradually fall over the number of days. Using WTP, one can infer a Total Economic Value of a certain environmental service, which when combined with other services, can give you the value of something as large as a park.

But why is this important? For one, parks don't receive enough funding. If the Total Economic Value was considered, park funding should increase to reflect that value. Often, parks are not completed, created or expanded because of the potential value of resources located on that land. However, if we were to properly value parks, we may find that the Total Economic Value of parks may actually be more than that of resource development.

True, the WTP concept and many other economic analyses of the environment are full of holes (are they truthful? how accurate is it? doesn't everyone have different values?), but Will made one very good point that should be remembered. Without placing some kind of comparable value on the environment, it gets a very low economic value, with which we subsequently use to treat it like crap.

At least with WTP and other value-based analyses, we can place a comparable value on the environment. It is merely a step in the right direction, but a very important step.