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April 30, 2014April 30, 2014

GEOG 370GEOG 370

Assessing the value of the negative effects of Assessing the value of the negative effects of closing the trestle bridge: Method 1-closing the trestle bridge: Method 1-””the worththe worth”” of of

having the bridge.having the bridge.

Assume steel alloy is only way of having uninterrupted service.Assume steel alloy is only way of having uninterrupted service.P = $191,524 is thus minimum PV of having 50 years of uninterrupted service.P = $191,524 is thus minimum PV of having 50 years of uninterrupted service.

P = R(USPW)P = R(USPW)PPabab = $191,524 = R (USPW = $191,524 = R (USPW ii=0.06, =0.06, nn=50)=50)

= $191,524 =R(15.762)= $191,524 =R(15.762) $191,524/15.762 =$12,150 = annual value of having a bridge, so monthly$191,524/15.762 =$12,150 = annual value of having a bridge, so monthlyvalue of having bridge = $12,150/12 = $1013value of having bridge = $12,150/12 = $1013

P = $1013 (SPPW P = $1013 (SPPW ii=0.06, =0.06, nn=25)=25) = $1013 (0.233) = $236= $1013 (0.233) = $236

Hence, the negative effect of being without a bridge for one bridge for 1 month Hence, the negative effect of being without a bridge for one bridge for 1 month 25 years from now would have present value of at least $23625 years from now would have present value of at least $236

Assessing the value of the negative effects of Assessing the value of the negative effects of closing the trestle bridge: Method 2- the closing the trestle bridge: Method 2- the ““opportunity opportunity costcost”” of not having the bridge for 1 month 25 years of not having the bridge for 1 month 25 years

from now.from now.

Assume 1000 necessary crossings per day, and about 500 unnecessary Assume 1000 necessary crossings per day, and about 500 unnecessary crossing per day. Without bridge the closest route requires alternative with crossing per day. Without bridge the closest route requires alternative with extra driving of 30 miles/trip.extra driving of 30 miles/trip. Therefore, daily cost = 1000 trips x 30 mi/trip x $0.15/mi = $4500.Therefore, daily cost = 1000 trips x 30 mi/trip x $0.15/mi = $4500.If necessary crossings are assumed to be undertaken 20 days/month, the If necessary crossings are assumed to be undertaken 20 days/month, the monthly cost would be $4500 x 20 = $90,000.monthly cost would be $4500 x 20 = $90,000.

P = $90,000 (SPPW P = $90,000 (SPPW ii=0.06, =0.06, nn=25)=25) = $90,000 (0.233)= $90,000 (0.233) = $20,970 = negative effect= $20,970 = negative effect

Still not enough to offset the cost difference, but the inconvenience, an Still not enough to offset the cost difference, but the inconvenience, an intangible negative impact of not having the bridge for a month, might be more intangible negative impact of not having the bridge for a month, might be more than enough to shift the preference to the steel alloy bridge.than enough to shift the preference to the steel alloy bridge.

Assessing Storm risk costsAssessing Storm risk costs

Assume Assume ““100-year storm100-year storm”” will require trestle bridge to be replaced. will require trestle bridge to be replaced.Such a storm would occur with a probability of 0.01 that in any year the bridge Such a storm would occur with a probability of 0.01 that in any year the bridge will be destroyed. Using binomial probability tables for will be destroyed. Using binomial probability tables for nn = 50 and = 50 and pp = 0.01, = 0.01, we find the probability of having any number of floods during the next 50 yearswe find the probability of having any number of floods during the next 50 years

Probability Number of Probability Number of ““100-year storms100-year storms”” 0.600.60 00 0.310.31 11 0.080.08 22 0.010.01 33

If a storm occurs during next 50 years, the additional cost incurred would be an If a storm occurs during next 50 years, the additional cost incurred would be an extra $80,000 (unless storm occurs happens to occur in the year in which the extra $80,000 (unless storm occurs happens to occur in the year in which the bridge was schedule to be replaced, and an additional negative benefit of bridge was schedule to be replaced, and an additional negative benefit of $90,000 for each month the region is without the bridge.$90,000 for each month the region is without the bridge.

Costs depend on years (time) in which the storm(s) occur(s).Costs depend on years (time) in which the storm(s) occur(s).Estimate the PV of the additional costs by averaging its time of occurrence.Estimate the PV of the additional costs by averaging its time of occurrence.

Assessing additional costs for 3 Assessing additional costs for 3 ““100-year storm100-year storm””For three stormsFor three stormsCostCost = $80,000 + $80,000 (SPPW = $80,000 + $80,000 (SPPW ii=0.06, =0.06, nn=13) + $80,000 (SPPW =13) + $80,000 (SPPW ii=0.06, =0.06, nn=25) + $80,000 (SPPW =25) + $80,000 (SPPW ii=0.06, =0.06, nn=37) + $4000(USPW =37) + $4000(USPW ii=0.06, =0.06, nn=50) =50) = $80,000 + $80,000(0.4688) + $80,000(0.233) + $80,000(0.1158)+= $80,000 + $80,000(0.4688) + $80,000(0.233) + $80,000(0.1158)+

$4000(15.762)$4000(15.762) = $80,000 + $37,504 + $18,640 + $9,264 + $63,048= $80,000 + $37,504 + $18,640 + $9,264 + $63,048 = $208,488= $208,488

negative effectsnegative effects = $90,000(SPPW = $90,000(SPPW ii=0.06, =0.06, nn=13) + $90,000(SPPW =13) + $90,000(SPPW ii=0.06, =0.06, nn=25)=25)+ $90,000(SPPW + $90,000(SPPW ii=0.06, =0.06, nn=37) =37)

= $90,000(0.4688) + $90,000(0.233) + $90,000(0.1158)= $90,000(0.4688) + $90,000(0.233) + $90,000(0.1158) = $42,192 + $20,970 +$10,422= $42,192 + $20,970 +$10,422

= $73,584= $73,584 = $208,488 + $73,584= $208,488 + $73,584

PPtb3stormtb3storm = $282,072 = $282,072

Table. Present value of estimated costs & negative Table. Present value of estimated costs & negative effectseffects

AlternativesAlternativesState of natureState of nature ProbabilityProbability Steel alloySteel alloy Trestle bridgeTrestle bridge Bridge w/riskBridge w/risk0 storm0 storm 0.600.60 $191,524 $182,658$191,524 $182,658 $109,595 $109,595 1 storm1 storm 0.310.31 $191,524 $222,268$191,524 $222,268 $68,903 $68,9032 storms2 storms 0.080.08 $191,524 $222,268$191,524 $222,268 $17,781$17,7813 storms3 storms 0.010.01 $191,524 $282,072 $191,524 $282,072 $2,821 $2,821Expected valueExpected value(costs +negative effects $191,524 (costs +negative effects $191,524 $199,100 $199,100

Questions relating to the performance of public undertakingsQuestions relating to the performance of public undertakings

5) Is the scope of the undertaking 5) Is the scope of the undertaking adequateadequate? Are objectives ? Are objectives and results commensurate with the need? (Addressed and results commensurate with the need? (Addressed by by program analysisprogram analysis and and program evaluationprogram evaluation.).)

1)1) Are the programAre the program’’s objectives s objectives appropriateappropriate? Are they ? Are they desirable for a social welfare standpoint? (Addressed in desirable for a social welfare standpoint? (Addressed in policy analysispolicy analysis.).)

2)2) Is the program Is the program economically efficienteconomically efficient? Are the intended? Are the intended effects worth the costs? (Addressed in effects worth the costs? (Addressed in cost-benefit cost-benefit

analysisanalysis.).)

3) Is the program 3) Is the program effectiveeffective? Are the objectives being? Are the objectives being achieved? (Addressed in achieved? (Addressed in program evaluationprogram evaluation.).)

4) Is the operation 4) Is the operation technologically efficienttechnologically efficient? Are? Are

resources being used to get the maximum result? resources being used to get the maximum result?

(Addressed in (Addressed in cost-effectiveness analysiscost-effectiveness analysis.).)

Comparison of B/C and Cost EffectivenessComparison of B/C and Cost Effectiveness

Benefit-CostBenefit-Cost Cost-effectivenessCost-effectiveness

Geared to Geared to Economic efficiencyEconomic efficiency Technological efficiencyTechnological efficiency

Measurement unitsMeasurement units $ dollars$ dollars Various measuresVarious measures

Variable componentsVariable components Benefits & CostsBenefits & Costs a) Minimize Costs, with a) Minimize Costs, with benefits fixedbenefits fixed

b) Maximize benefits with b) Maximize benefits with costs fixedcosts fixed

Main questionMain question WhetherWhether the program is the program is justifiedjustified

HowHow resources should resources should be used in a programbe used in a program

ScopeScope Global, comprehensiveGlobal, comprehensive Narrow, focusedNarrow, focused

Usual applicationUsual application Capital projectsCapital projects Ongoing, operating Ongoing, operating programsprograms

Time frameTime frame Long-termLong-term Short-termShort-term

Ecosystem Functions and ServicesEcosystem Functions and Services

Ecosystem functionsEcosystem functions are the physical, chemical, and biological processes or are the physical, chemical, and biological processes or attributes that contribute to the self-maintenance of an ecosystem; in other words, attributes that contribute to the self-maintenance of an ecosystem; in other words, what the ecosystem does. Some examples of ecosystem functions are provision of what the ecosystem does. Some examples of ecosystem functions are provision of wildlife habitat, carbon cycling, or the trapping of nutrients.  Thus, ecosystems, wildlife habitat, carbon cycling, or the trapping of nutrients.  Thus, ecosystems, such as wetlands, forests, or estuaries, can be characterized by the processes, or such as wetlands, forests, or estuaries, can be characterized by the processes, or functions, that occur within them.  functions, that occur within them. 

Ecosystem servicesEcosystem services are the are the beneficial outcomesbeneficial outcomes, for the natural environment or , for the natural environment or people, that result from ecosystem functions. Some examples of ecosystem services people, that result from ecosystem functions. Some examples of ecosystem services are support of the food chain, harvesting of animals or plants, and the provision of are support of the food chain, harvesting of animals or plants, and the provision of clean water or scenic views.  In order for an ecosystem to provide services to clean water or scenic views.  In order for an ecosystem to provide services to humans, some interaction with, or at least some appreciation by, humans is humans, some interaction with, or at least some appreciation by, humans is required. Thus, functions of ecosystems are value-neutral, while their services have required. Thus, functions of ecosystems are value-neutral, while their services have value to society. BUT ecosystems have value regardless of human interaction!value to society. BUT ecosystems have value regardless of human interaction!

Introduction to Ecosystem Functions & ServicesIntroduction to Ecosystem Functions & Services

Difficulties with Environmental ValuationDifficulties with Environmental Valuation

Non-Market Goods Most environmental goods, such as clean air and water, and healthy fish and wildlife populations, are not traded in markets. Their economic value - how much people would be willing to pay for them in dollars is not revealed in market prices. The only option for assigning dollar values to them is to rely on non-market valuation methods.

Non-Rival Goods One person's consumption of most goods (apples or housing) reduces the amount available for everyone else. Environmental goods are different. Clean water and air, beautiful views, and to some extent outdoor recreation, can be enjoyed by everyone in the same way as radio and television. The economic value of non-rival or public goods is the sum of all people's willingness to pay.

Non-exclusive Goods People cannot be excluded from enjoying most environmental goods and the cost of trying to exclude them is prohibitive. Other than increases in onsite hunting and fishing opportunities, which may be a source of economic benefit to farmers, the environmental benefits of most conservation practices are non-exclusive. The free rider problem makes it impractical for farmers to recoup the cost of on-farm conservation investments from those who benefit from off-farm environmental improvements. 

Inseparable Goods Conservation practices at a given site contribute in many roundabout ways to environmental goods and result in environmental and economic benefits that accrue over great distances in time and space. It may be impossible to separate the economic benefits that result from one conservation practice undertaken at one site from another undertaken at another site. Worse, it may be impossible to separate the aggregate benefits of those practices from those of other environmental investments.

Ecosystem Services GlossaryEcosystem Services GlossaryBenefit-Cost analysisBenefit-Cost analysis – a comparison of economic benefits and costs to – a comparison of economic benefits and costs to society of a policy, program, or action.  society of a policy, program, or action. 

Bequest Value (option demand)Bequest Value (option demand)– the value that people place on knowing – the value that people place on knowing that future generations will have the option to enjoy something. that future generations will have the option to enjoy something.

Consumer surplusConsumer surplus –the difference between the price actually paid for a –the difference between the price actually paid for a good, and the maximum amount that an individual is willing to pay for good, and the maximum amount that an individual is willing to pay for it. Thus, if a person is willing to pay up to $3 for something, but the it. Thus, if a person is willing to pay up to $3 for something, but the market price is $1, then the consumer surplus for that item is $2.  This market price is $1, then the consumer surplus for that item is $2.  This measure approximates, and is bounded by, the more technically precise measure approximates, and is bounded by, the more technically precise measures of economic benefit: measures of economic benefit: compensating  variationcompensating  variation or or equivalent equivalent variationvariation. .

Compensating variationCompensating variation - the amount of money that leaves a person as - the amount of money that leaves a person as well off as they were before a change.  Thus, it measures the amount of well off as they were before a change.  Thus, it measures the amount of money required to maintain a personmoney required to maintain a person’’s satisfaction, or economic welfare, s satisfaction, or economic welfare, at the level it was at before the change.  at the level it was at before the change. 

GlossaryGlossary

Complementary goodsComplementary goods – goods that are often purchased together, such as bread – goods that are often purchased together, such as bread and butter. and butter.

Demand curveDemand curve – the graphical representation of the demand function. The demand – the graphical representation of the demand function. The demand function relates price and quantity demanded. It tells how many units of a good function relates price and quantity demanded. It tells how many units of a good will be purchased at different prices. In general, at higher prices, less will be will be purchased at different prices. In general, at higher prices, less will be purchased, so demand curves slope downward.  The market demand function is purchased, so demand curves slope downward.  The market demand function is calculated by adding up all of the individual consumerscalculated by adding up all of the individual consumers’’ demand functions. demand functions.

Demand functionDemand function – the mathematical function that relates price and quantity – the mathematical function that relates price and quantity demanded for goods or services.  It tells how many units of a good will be demanded for goods or services.  It tells how many units of a good will be purchased at different prices.  The market demand function is calculated by adding purchased at different prices.  The market demand function is calculated by adding together all of the individual consumerstogether all of the individual consumers’’ demand functions. demand functions.

Discount rateDiscount rate – the rate used to reduce future benefits and costs to their present – the rate used to reduce future benefits and costs to their present time equivalent. time equivalent.

Economic efficiencyEconomic efficiency – the allocation of goods to their highest relative economic – the allocation of goods to their highest relative economic value. value.

GlossaryGlossaryEcosystem functionsEcosystem functions – the physical, chemical, and biological processes or attributes – the physical, chemical, and biological processes or attributes that contribute to the self-maintenance of the ecosystem; in other words, what the that contribute to the self-maintenance of the ecosystem; in other words, what the ecosystem does. Some examples of ecosystem functions are wildlife habitat, carbon ecosystem does. Some examples of ecosystem functions are wildlife habitat, carbon cycling, or trapping nutrients. cycling, or trapping nutrients.

Ecosystem servicesEcosystem services – the beneficial outcomes, for the natural environment, or for – the beneficial outcomes, for the natural environment, or for people, that result from ecosystem functions. Some examples of ecosystem services people, that result from ecosystem functions. Some examples of ecosystem services are support of the food chain, harvesting of animals or plants, clean water, or scenic are support of the food chain, harvesting of animals or plants, clean water, or scenic views.  In order for an ecosystem to provide services to humans, some interaction views.  In order for an ecosystem to provide services to humans, some interaction with, or at least some appreciation by, humans is required. with, or at least some appreciation by, humans is required.

Equivalent variationEquivalent variation - the amount of money that leaves a person as well off as they - the amount of money that leaves a person as well off as they would be after a change.  Thus, it measures the amount of money required to maintain would be after a change.  Thus, it measures the amount of money required to maintain a persona person’’s satisfaction, or economic welfare, at the level it would be at after a change. s satisfaction, or economic welfare, at the level it would be at after a change.

Existence valueExistence value – the value that people place on simply knowing that something – the value that people place on simply knowing that something exists, even if they will never see it or use it. exists, even if they will never see it or use it.

ExternalitiesExternalities - uncompensated side effects of human actions.  For example, if a - uncompensated side effects of human actions.  For example, if a stream is polluted by runoff from agricultural land, the people downstream experience stream is polluted by runoff from agricultural land, the people downstream experience a negative externality. a negative externality.

GlossaryGlossary

Fixed costsFixed costs – production costs that are not related to the level of production; – production costs that are not related to the level of production; also referred to as overhead costs. also referred to as overhead costs.

Geographical Information System (GIS)Geographical Information System (GIS) – a computer mapping system that – a computer mapping system that links databases of geographically-based information to maps that display the links databases of geographically-based information to maps that display the information.  For more information, see information.  For more information, see www.esri.com. .

Market failureMarket failure – the inability of markets to reflect the full social costs or – the inability of markets to reflect the full social costs or benefits of a good, service, or state of the world.  Therefore, markets will not benefits of a good, service, or state of the world.  Therefore, markets will not result in the most efficient or beneficial allocation of resources. result in the most efficient or beneficial allocation of resources.

Net economic benefitNet economic benefit – the net economic benefit is the total economic – the net economic benefit is the total economic benefit received from a change in the state of a good or service, measured by benefit received from a change in the state of a good or service, measured by the sum of consumer surplus plus producer surplus, less any costs associated the sum of consumer surplus plus producer surplus, less any costs associated with the change. with the change.

Net Present valueNet Present value – the current value of net benefits (benefits minus costs) – the current value of net benefits (benefits minus costs) that occur over time.  A discount rate is used to reduce future benefits and that occur over time.  A discount rate is used to reduce future benefits and costs to their present time equivalent. costs to their present time equivalent.

GlossaryGlossary

Non-use values, also referred to as Non-use values, also referred to as ““passive usepassive use”” values values – values that are – values that are not associated with actual use, or even the option to use a good or service. not associated with actual use, or even the option to use a good or service.

Opportunity CostOpportunity Cost – The value of the best alternative to a given choice, or – The value of the best alternative to a given choice, or the value of resources in their next best use.  In regard to time, the the value of resources in their next best use.  In regard to time, the opportunity cost of time spent on one activity is the value of the best opportunity cost of time spent on one activity is the value of the best alternative activity that the person might engage in at that time. alternative activity that the person might engage in at that time.

Option valueOption value – the value that people place on having the option to enjoy – the value that people place on having the option to enjoy something in the future, although they may not currently use it. something in the future, although they may not currently use it.

Producer surplusProducer surplus – the difference between the total amount earned from a – the difference between the total amount earned from a good (price times quantity sold) and the production costs. good (price times quantity sold) and the production costs.

Public goodsPublic goods – goods that may be enjoyed by any number of people – goods that may be enjoyed by any number of people without affecting other peopleswithout affecting other peoples’’ enjoyment.  For example, an aesthetic enjoyment.  For example, an aesthetic view is a pure public good.  No matter how many people enjoy the view, view is a pure public good.  No matter how many people enjoy the view, others can also enjoy it. others can also enjoy it.

GlossaryGlossary

Substitute goodsSubstitute goods – goods that you might purchase instead of a particular good. – goods that you might purchase instead of a particular good. For example, different types of bread are substitutes for each other. For example, different types of bread are substitutes for each other.

Supply FunctionSupply Function – the mathematical function that relates price and quantity – the mathematical function that relates price and quantity supplied for goods or services.  The supply function tells how many units of a supplied for goods or services.  The supply function tells how many units of a good that producers are willing to produce and sell at a given price.  good that producers are willing to produce and sell at a given price. 

Supply CurveSupply Curve - the graphical representation of the supply function.  Because - the graphical representation of the supply function.  Because producers would like to sell more at higher prices, the supply function slopes producers would like to sell more at higher prices, the supply function slopes upward. upward.

Total economic valueTotal economic value – the sum of all types of use and non-use values for a – the sum of all types of use and non-use values for a good or service. good or service.

Use valueUse value – value derived from actual use of a good or service.  Uses may – value derived from actual use of a good or service.  Uses may include indirect uses.  For example, enjoying a television show about whales include indirect uses.  For example, enjoying a television show about whales provides an indirect use value for the whales. provides an indirect use value for the whales.

Variable costsVariable costs – production costs that change when the level of production – production costs that change when the level of production changes, so that when more is produced the costs increase; as opposed tochanges, so that when more is produced the costs increase; as opposed to fixed fixed costscosts. .

Willingness to PayWillingness to Pay – the amount—measured in goods, services, or dollars— – the amount—measured in goods, services, or dollars—that a person is willing to give up to get a particular good or service. that a person is willing to give up to get a particular good or service.

Why are estimates of ecosystem benefits needed?Why are estimates of ecosystem benefits needed?

• To justify and decide how to allocate public spending on To justify and decide how to allocate public spending on conservation, preservation, or restoration initiatives.conservation, preservation, or restoration initiatives.

• To consider the publicTo consider the public’’s values, and encourage public s values, and encourage public participation and support for environmental initiatives. participation and support for environmental initiatives. 

• To compare the benefits of different projects or programs.To compare the benefits of different projects or programs.

• To prioritize conservation or restoration projects.To prioritize conservation or restoration projects.

• To maximize the environmental benefits per dollar spent.To maximize the environmental benefits per dollar spent.

• To assess tradeoffs and resource allocations even for To assess tradeoffs and resource allocations even for decisions involving ESA, health and safety issues where decisions involving ESA, health and safety issues where economic considerations are secondary.economic considerations are secondary.

Important questions that various governmental Important questions that various governmental agency staff must answer:agency staff must answer:

• When and how should agency staff attempt to answer ecosystem benefit When and how should agency staff attempt to answer ecosystem benefit questions?questions?

• What criteria and methods are being used to make spending decisions, and what What criteria and methods are being used to make spending decisions, and what is the justification for these criteria and methods?is the justification for these criteria and methods?

• Are the benefits of a project or program greater than the cost to taxpayers?Are the benefits of a project or program greater than the cost to taxpayers?• Is agency spending being managed to maximize environmental benefits?Is agency spending being managed to maximize environmental benefits?• How do different projects compare to each other in terms of ecosystem benefits?How do different projects compare to each other in terms of ecosystem benefits?• When should agency staff provide dollar-based estimates of ecosystem benefits? When should agency staff provide dollar-based estimates of ecosystem benefits? • When should they answer questions about benefits only by demonstrating that When should they answer questions about benefits only by demonstrating that

they are using reasonable benefit-based project ranking criteria?they are using reasonable benefit-based project ranking criteria?

Some overview comments on Ecosystem Some overview comments on Ecosystem ValuationValuation

• Conventional economics –> measures of economic value Conventional economics –> measures of economic value based on what people want (based on what people want (““market economiesmarket economies””), ), individuals, not government, should be the judgeindividuals, not government, should be the judge

• Maximum amount a person is Maximum amount a person is ““willing to give up to get willing to give up to get more of something else is fair measure of relative more of something else is fair measure of relative ““valuevalue”” of the two things to that personof the two things to that person

• Measuring of values of ES in $ does not require they be Measuring of values of ES in $ does not require they be bought & sold in markets – just estimates of bought & sold in markets – just estimates of ““willingness to willingness to give up to getgive up to get””

• Non-$ measures include ranking or prioritizing the Non-$ measures include ranking or prioritizing the expected benefits of environmental benefitsexpected benefits of environmental benefits

• Indicator-based valuation tools are often less expensive & Indicator-based valuation tools are often less expensive & require less time to applyrequire less time to apply

Some practical issues of Ecosystem Some practical issues of Ecosystem ValuationValuation

• Easy to spend lots of $ to assign $ valuesEasy to spend lots of $ to assign $ values• Easy for environmental program managers/decision Easy for environmental program managers/decision

makers to misuse results & undermine even their best makers to misuse results & undermine even their best programsprograms

• Risky for managers to ignore demands for more fiscal Risky for managers to ignore demands for more fiscal accountability (government especially, but also private accountability (government especially, but also private sector)sector)

• ““Best professional judgment,Best professional judgment,”” ““best available sciencebest available science”” and/or and/or ““objective scientificobjective scientific”” project ranking criteria that project ranking criteria that ignore beneficial outcomes to people are prone to being ignore beneficial outcomes to people are prone to being extremely unpopular (CAO???) extremely unpopular (CAO???)

Basic Concepts of Economic ValueBasic Concepts of Economic Value

Consumer SurplusConsumer SurplusPrice

Market Price

QuantityQuantity

Demand CurveDemand Curve

(net) economic benefit(net) economic benefit is often measured by is often measured by consumer surplusconsumer surplus

Supply Curve & Producer SurplusSupply Curve & Producer Surplus

Total net economic benefit = sum of consumer surplus + producer surplus - costsTotal net economic benefit = sum of consumer surplus + producer surplus - costs

Typology of Ecosystem Services Typology of Ecosystem Services ComplicationsComplications

• Natural resources & environment associated with Natural resources & environment associated with market failuremarket failure

• Ecosystem services are often Ecosystem services are often public goodspublic goods• Overuse common if Overuse common if property rightsproperty rights are not clearly are not clearly

defined defined • Ecosystem services often affected by Ecosystem services often affected by externalitiesexternalities