The Economics of Natural Environments

Studies in the Valuation of Commodity and Amenity Resources, revised edition

John V. Krutilla, Anthony C. Fisher

• Publisher: RFF Press
• Year: 2022
• Print ISBN: 9781138834293
• eBook ISBN: 9781135886974
• Topic: Economics
• Subtopic: Environmental Economics
• Index: Economics

In this pioneering study, Krutilla and Fisher put the amenity resources of natural environments into an analytical framework comparable to that for the extractive resources. The models and theoretical background of their techniques are illustrated by case studies which include the controversial Hells Canyon dam, the Mineral King ski resort, and the Trans-Alaska pipeline.

The authors point out that resource development activities undertaken on public lands often receive financial advantages---preferential tax treatment, subsidized capital, and access to public resources---that are not taken into account in the costs of the project. True evaluation of the costs and benefits of a development project often tips the balance in favor of preserving an area in a natural state.

PART I

INSTITUTIONAL AND THEORETICAL CONSIDERATIONS

CHAPTER 1

MANAGING NATURAL ENVIRONMENTS

1. INTRODUCTION

There are many dimensions to environmental quality and, thus, many dimensions to the threats to this quality. These may range from minor local disturbances causing physical or psychic discomfort, to largescale ecological upsets that may affect the length of time man can occupy the earth (Brubaker, 1972). In this study we address issues that cover the entire range of environmental threats.

The theoretical portions of this book are devoted to an abstract, and therefore widely applicable, treatment of the side effects, or extemalities, associated with human economic behavior. These range from minor spillovers that impinge on the amenities of life, to major results of irreversible decisions. The problems taken up in the applied studies, while specific, are important in the models they offer for dealing with environmental considerations that have mostly been neglected in the decision-making process. That is, our empirical work is concerned with the valuation of the opportunity costs of economic activities that can be expressed as loss of amenities otherwise available from a natural environment. It consists of explorations in the relative valuation of amenity and commodity resources.

While the empirical portion of the study does not deal with the gravest environmental threats, it should not be inferred that the problems addressed are of minor significance or little economic consequence. Indeed, the aesthetic dimensions of the environment have been of such profound and persevering concern to the American people that they have occupied an important position in conservation and environmental legislation and policy. It is interesting to note, for example, that the Wild and Scenic Rivers Act preceded the National Environmental Policy Act (NEPA) by a year and the Wilderness Act by several years. In a decade that witnessed the commissioning of a national outdoor recreation resources review, we also saw passage of the Classification and Multiple Use Act of 1964, which required the Department of the Interior to recognize the amenity aspects of the environment in its management of the public domain. In addition, there was the Multiple Use and Sustained Yield Act of 1960, which required that the amenity services of the national forests be recognized equally with more conventional forest products as valuable and deserving of managerial attention.

The passage of this legislation, which expresses the importance of amenities in the public mind, does not mean that there is no concern for the graver environmental insults. The Federal Water Pollution Control Act and the Clean Air Act obviously reflect a concern about health as well as the aesthetic dimensions of the environment. But it may not be amiss to note that public action taken to preserve the amenities of Yellowstone National Park, for example, predates the establishment of the Food and Drug Administration. America’s pioneering role in establishing national parks, a wilderness preservation system, and wildlife refuges, and similar evidences of concern for preserving natural environments attest to the status of these values in the American psyche.

Much of the new legislation seeks to achieve amenity-oriented environmental goals through changes in practices and policies in management of the public lands, and regulation of the nation’s use of streams and other bodies of water in which the federal government has a paramount interest. Now, while these policies may be limited largely to actions taken in connection with public lands and waters under federal control, the impact of the new legislation is nonetheless very extensive because of the vast extent of the public lands and the resources represented by them.

In summary, this study seeks to develop and apply some of the theoretical concepts and measurement techniques relevant to the valuation of natural environments. Although the analytical propositions about socially efficient resource use clearly have applications to privately owned natural environments, most of the remaining natural areas of any great extent in the United States appear on the public lands. This chapter is mainly devoted to exploring the association between natural environments and public lands, with particular attention to the problems posed for public land management (and incidentally for research as well).

2. THE PUBLIC LANDS AND COMMODITY AND AMENITY RESOURCES IN THE UNITED STATES

While the United States stands in the forefront among economies that are oriented toward private enterprise and the vestment of property rights in private parties, the federal government simultaneously has vast holdings of public lands and related resources. Indeed, after the Soviet Union, China, and possibly Canada, the U.S. Bureau of Land Management and the U.S. Forest Service administer perhaps the fourth and fifth largest land holdings in the world. The combined holdings of the two agencies amount to about 650 million acres. This is roughly comparable in area to the eastern European socialist states and equal, similarly, to the combined area of the Common Market countries of western Europe, excluding the United Kingdom. In short, these agencies would rank near the top of the world’s largest public enterprises. However, although these lands are publicly owned, their use is often designed to meet the demands of private parties.

A substantial portion of the government-owned land consists of public lands in Alaska, where the settlement of claims in connection with the transition from territorial status to statehood has not yet been completed. Even excepting Alaska, however, the public lands in the coterminous United States represent about a fifth of the total land area, and among some of the western states, where the bulk of the public lands are concentrated, the share is more than half.

While the amount of the land held by the public is relatively large, the share of the total land and land-related resource value may not be proportionate. More precisely, the distribution of resources among these lands differs in character from that among lands in general. Much of the land administered by the Bureau of Land Management is located in the arid West and represents, along with the bulk of the federally owned lands in the Rocky Mountains, Cascades, and Sierra Nevadas, land not suitable for agriculture. Indeed, much of the land remaining in the public domain escaped appropriation by private parties under the Homestead Act and similar land disposal programs because of its unsuitability for agriculture. While National Forest lands are much less the result of neglected private appropriation, having been explicitly reserved under numerous acts of legislation over the years (beginning with the 1891 Act), it is nonetheless true that much if not most of the best timber areas are to be found among the private lands outside the national forests. Many vast areas within the national forests, because of elevation and terrain, in fact do not support stands of merchantable timber. In spite of their immense extent, the public lands thus fall far short of supporting potential silvicultural and agricultural activities at anything approaching the levels that might be obtained from equivalent acreage in private holdings.

The public lands that are the most inhospitable to agriculture and silviculture in many instances are lands valued for their desert or mountain scenery and the wildlife and fish that they support. They may, however, also contain mineral deposits, sites for hydroelectric and other water development, and related extractive industries. It is here that we often find a conflict between exploitation of commodity resources and us...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Resources for the Future
• Table of Contents
• List of Tables
• List of Figures
• Preface
• Preface to the Second Edition
• Acknowledgments
• Part I Institutional and Theoretical Considerations
• Part II Applying the Analysts: Selected Case Studies
• Afterword
• Index