CHAPTER SIX ECONOMIC ANALYSIS OF WILDERNESS AREAS Introduction and Summary Scope of this study Introduction This chapter will consider the application of economic analysis to wilderness problems. The first section of this chapter consists of an introduction and a summary of results obtained and conclusions reached. The second section develops a theoretical framework for analysis, and the third section reports empirical results. There are two appendixes to this chapter. Appendix A discusses competitive and complementary relationships in wilderness problems, and appendix B exhibits data used in developing empirical results. The goal of this work is relatively modest: it is an attempt to explore methods needed for a full-scale economic study of the allocation of wilderness land which, in turn, should aid policy decisions of the agencies involved in such allocation. However, though the present study is exploratory and limited, it has involved applications of some of the proposed methods in a series of case studies (primarily on the basis of data developed for other chapters in this report). Results obtained may have considerable substantive interest, given the present state of knowledge in this area. It goes without saying that these results are subject to revision in the light of further inquiry. Throughout this chapter, the term "wilderness area" will be used as a generic term covering any area over 100,000 acres, including U. S. Forest Service designated wilderness and primitive areas over 100,000 acres and national park back-country areas exceeding 100,000 acres in size. In many cases, the thing referred to is congruent with the "wilderness tract" of preceding chapters; however, in some cases this congruence does not hold, generally because available data were organized in terms of designated areas. Some functions of economic analysis of wilderness use The California Public Outdoor Recreation Plan states: "The aesthetic values of fish and wildlife should be recognized and measured in terms other than economic value. New concepts and evaluation, based on study, are needed." 1/ Again, in describing wilderness values, a Forest Service pamphlet states: "Inspiration such as this cannot be measured in dollars and cents." 2/ There seems implicit in such statements the judgment that economic analysis is inadequate or inapplicable to problems of wilderness. This is an California Public Outdoor Recreation Plan Committee, "California Public Outdoor Recreation Plan," Part II (Sacramento, 1960). p. 57. U.S. Forest Service, "Multiple Use: The National Forests and Your Family," PA No. 432, Washington, 1961, p. 19. overly pessimistic view. Any economic problem involves choice among alternatives to maximize some kind of net return, and the net return can include aesthetic satisfaction. The application of conventional economic analysis— the asking of such questions as what are the possibilities and who has what preferences-can help clarify issues and indicate the direction of a solution of the given problem. It may also have the negative function of indicating why certain questions are irrelevant and why certain problems, given assumed conditions, cannot be solved. An example of this negative function can be set forth here. Thus, a distinction is often made between tangible and intangible values involved in wilderness utilization. Sometimes this distinction is presented as an argument in favor of tangibles or "goods"; thus, it is felt the fish that an angler lands or the game that a hunter bags is in some sense "real" and "measurable," while aesthetic pleasures do not have such characteristics. Again, it is argued that production of the necessities of life is more "essential" than production of recreation. Sometimes this distinction is turned around and presented as an argument in favor of intangibles or "services"; for example, it is argued that the wilderness yields "spiritual" values of much greater importance than "commercial" values. However, the traditional distinction between goods and services is not particularly meaningful or useful. All commodities are purchased (or obtained) for the services they yield. From the point of view of economic analysis, the services obtained from "tangibles" and "intangibles" are quite comparable; both can be measured by what people are willing to give up to obtain them. Direct comparison between wilderness values (including recreational, aesthetic, historical, scientific, and educational values) and commercial or developed recreation alternatives are implicit in any decision about wilderness allocation. This is a consequence of the fact that the proper definition of costs is foregone opportunities. Therefore, it is sensible to make such comparisons explicitly. So far as possible, methods of making such comparisons are discussed in this chapter. Summary The proper evaluation of goods or services furnished by government 3/ is a difficult problem in current economic thought. If the goods involved are thought of as "private" goods (such that an increased amount of the good to individual A reduces the amount received by B), then it would be possible to obtain a 3/Goods can be defined as the sources or services--and are consumption "capital" as it were. In current usage, the terms are sometimes used interchangeably, and such usage will be followed here. market solution to the problem of allocating those goods to their highest uses. That is, if a market exists, or if a representation of a market were developed, a determinate solution is conceptually possible. However, if services furnished by government are collective goods, in that each individual's enjoyment of those goods does not subtract from others' enjoyment of them, then there is some doubt that a determinate solution is conceptually possible. 4/ It will be argued here that many of the values obtained from wilderness use are of the private good form; thus, increased congestion (and "overuse") reduces the satisfaction obtained by wilderness recreationists. However, there do appear to be some benefits of the collective form. (A large number of people appear to get vicarious pleasure from knowing that wilderness exists.) It is doubtful, then, that a completely determinate solution to wilderness allocation is possible. 5/ Nevertheless, it is argued here that economic analysis of wilderness areas can aid decision making. It can do this by developing information on which decisions can be based, given some assumptions as to the importance of the collective good component. Thus, the cost of wilderness use is the value of foregone opportunities. Say that a given area is investigated and it turns out that $100,000 worth of benefits are being foregone. If 100,000 man-days of wilderness recreation are obtained in this area, the cost per man-day is $1 if it is decided to ascribe all of the costs to the wilderness recreationists. However, if there are only 1,000 man-days of wilderness recreation, opportunity cost is $100 per man-day under this procedure. Of course, costs per man-day can be reduced if other wilderness benefits are allowed. Hypothetically, it might be possible to estimate scientific, wildlife, and watershed benefits associated with wilderness use. Say this reduces cost per wilderness recreation man-day to $60. Questions: (1) Is this giving up too much to obtain a man-day of recreation? (2) What is the value of vicarious benefits? (3) If some "guesstimate" of vicarious benefits is possible and is accounted for, how much should be given up to obtain a man-day of recreation? (4) Who should give this up, that is, pay for the value foregone? The agency involved will have to develop rules to handle these questions (or rather, if it so desires, explicitly develop the rules it operates under now). No simple answers to these questions appear possible. Nevertheless, if the agency is given information to the effect that in wilderness area A a man-day "costs" $1, while in area B a man-day "costs" $60, it is felt here that such information can be useful in allocation decisions. The discussion so far has been presented in simplified form. An additional factor to be considered is the time distribution of benefits and costs. It is argued here that estimated future levels of benefits and costs should be accounted for in allocative deci 4/Evidently, "approximate" solutions must then be obtained through the political process. 5/But J. Margolis has noted that people who obtain vicarious benefits can support wilderness use by voluntary contributions. This argument, if accepted, implies a further reduction of indeterminacy. sions. This can be done by discounting future levels of costs and benefits to the present, using the market rate of interest. A number of empirical case studies were carried out to illustrate methods, to gain insights as to revisions and extensions of initial hypotheses, and, hopefully, to gather some useful substantive results. The following results stand out: 1. It appears likely that at present the minimum average value of California wilderness land is $15 to $20 per acre. On the basis of this estimate, opportunity cost per man-day of use was estimated for California wilderness areas. Estimates for 1959 ranged from approximately $1.40 for the High Sierra to $23 for Yolla BollyMiddle-Eel. For the four wilderness areas in the state, the average was $2.80. 2. Major allocative decisions to be made by the agencies involved include: a. Road construction and use limitation in the back country of national parks. b. The use of de facto wilderness areas, i.e., unclassified roadless areas. c. Forest Service revision of boundaries of primitive areas when the decision is made to consider their reclassification as designated wilderness areas. At the present time, the total acreage of Forest Service designated wilderness and primitive areas over 100,000 acres equals approximately 11.85 million acres, of which 47 percent is in the wilderness designation and 53 percent is in the primitive designation. 3. Data on man-days of use of wilderness areas were analyzed and forecasts of future use were obtained. a. California and Minnesota each account for c. Per capita use was related to per capita 4. Some experimentation was carried out in an attempt to relate man-days of use to other explanatory variables, such as accessibility, distance from population centers, and physical characteristics of the recreation area. Results were generally encouraging. 5. Additional analysis of the survey data developed for chapter 5 was made to derive some additional economic insights. These were: a. Various aspects of use (distance traveled to the wilderness area and days spent in the area) were related to income and vacation length. b. It appears that the attempt to estimate the "demand" for recreation by relating visits (relative to an area's population) to distance omits important variables. Thus, for the High Sierra wilderness tract, number of visitors by county of origin was divided by county population. It turned out that coastal counties had a much higher visitor rate than counties adjoining the wilderness tract. c. Available evidence strongly indicates that wilderness users have above-average incomes, relative to the United States population as a whole. Partly, this reflects a much greater proportion of urban residents. The remaining difference apparently reflects educational differences. 6. An artificial example exhibits a possible allocation decision procedure for wilderness areas. This is a highly simplified, first approximation to a real world procedure. However, it may indicate: a. How such an allocation procedure may operate. b. Where heroic assumptions are needed and where further refinements are called for. On the basis of the evidence gathered, the following recommendations can be made: 1. The need for better data is, perhaps, a general characteristic of research; but this need appears especially pressing here. statistical 2. Additional experimentation with 3. A great many fundamental problems in the 4. Finally, a policy recommendation is set forth b. It will ration use and prevent overuse. d. Part of the money collected can be turned The remainder of this chapter will discuss the topics covered here in some detail. Theoretical Framework General Problem of Government Services Allocation of wilderness land can be looked at as a particular subcase of the general problem of allocating publicly owned resources so as to maximize "social welfare" in some sense. This involves some definition of social benefits and social costs and a variety of assumptions, for example, assuming the distribution of income as given. An economist would tend to approach this problem with the usual marginal analysis of economics; he would argue: having defined benefits and costs, maximize benefits minus costs so that marginal benefits equal marginal costs. Thus, one would expect to arrive at such statements as: allocate the services of public resource A to each use i until the increment of return in use i just equals the price of those services. This sort of rule seems sensible enough for most cases in the private sector of the economy. 6/ But attempting to apply it to publicly produced services is often anything but easy. For example, the set of individuals benefiting from the provision of public services is often not congruent with those bearing the costs. Again, defining and measuring benefits and costs is usually formidable and is sometimes impossible. Some of these difficulties are connected with the basic justifications for public services. Let us look at those justifications explicitly. This involves a relatively simple-minded view of the world. There is a great deal of sophisticated work in welfare economics which questions this simple-minded view. Compare. Francis M. Bator, "The Anatomy of Market Failure," Quarterly Journal of Economics, vol. 72, No. 3, August 1958, p. 351. Here it is nevertheless argued this sort of rule is "good enough" for decision making most of the time. A set of justifications for public services are advanced by Seymour Fiekowsky 7/ who notes the following arguments for the provision of public services: 1. It is impractical to collect fees. 2. Benefits from consuming these goods extend beyond the individual to other members of the society. 3. There is no confidence the individual can know sufficiently well what the consequence of his decision may be on his own welfare. Argument 1 can be applied to the provision of free access to highways to travelers; argument 2 can be used to justify free public education, and argument 3 can be used to justify its being compulsory. All three arguments can be used to justify such expenditures as public sanitation and national defense. Samuelson has developed a theory of government expenditure involving the concept of "collective consumption goods." These are goods, "which all enjoy in common in the sense that each individual's consumption of such a good leads to no subtraction from any other individual's consumption of that good." 8/ Anthony Downs builds on Samuelson's work. 9/ He shows that a perfectly competitive economy moves toward a Paretian optimum, which means that no transactions between private parties can make someone better off without harming someone else. 10/ However, collective goods are an important obstacle to attaining this optimum. Downs develops a model of a rational world in which: "A collective good is one which provides indivisible benefits; that is, as soon as it exists, everyone is able to benefit from it regardless of whether he himself has paid for it and regardless of how many others are also benefiting from it. (For example, provision of national defense. . .). Where citizens are numerous, each man finds it advantageous to refuse to pay for such indivisible benefits... Everyone would be better off if some central agency coerced each individual to bear his share of the cost of such goods, since his share of the benefits is larger than the cost he would pay. . . . . Since such coercion makes each citizen better off than he would be in a free market, and since each citizen is rational, everyone will agree to be coerced." 11/ Margolis raises some important questions about collective goods: "Are there collective consumption goods? Are they the typical public services?... Against 7/Memorandum from Seymour Fiekowsky, to L.I. Hewes, Chief, Forecasts and Economic Studies Group, ORRRC, October 23, 1959. 8/Paul A. Samuelson, "The Pure Theory of Public Expenditure," Review of Economics and Statistics, vol. 36, No. 4, November 1954, p. 387. 9 Anthony Downs, "An Economic Theory of Government Decision 10/Vilfredo Pareto, "Manuel D'Economie Politique," 2d. ed., Samuelson are the facts. He claims that collective goods are not rationed-that the use of a good by A does not involve any costs to B. Clearly this is not the case in such common public services as education, hospitals, and highways, where capacity limitations and congestion are topics of the daily press. ... Possibly the only goods which would seem to conform to Samuelson's definition are national defense and the aged lighthouse illustration. The lighthouse shines for all ships when the lanes are not crowded; and everyone receives a full share of protection from the military machine." Margolis further points out that there is no technical reason why services furnished by the government could not be furnished on a private basis. 12/ Enke suggests that Samuelson's theory can handle intermediate categories of goods (between collective consumption and private consumption goods). 13/ Downs makes some reference to such intermediate cases, noting that not all collective goods benefit every member of society. Furthermore, there may be some limit to the number of citizens who can enjoy a collective good at once, for example, "the more people who occupy Central Park at the same time, the less enjoyment each gets." In this case, the good is not perfectly collective; it also contains some element of "private goodness." 14/ Perhaps another way of looking at the source of government services is suggested by assumptions generally made in positive economic analysis. These include (1) perfect knowledge on the part of the consumers, (2) acceptance of the income distribution as given, and (3) acceptance of tastes and preferences as given. In the real world, assumption (1) does not hold exactly, and assumptions (2) and (3) may not be accepted by the majority of citizens. Thus, many decisions may be delegated to government because individuals do not have the information to make sound decisions, and because the problems are such that private firms cannot handle them as efficiently as government. Certain tastes and preferences are not accepted legally, for example, use of narcotics and gambling. Some income equalization may be obtained through provision of education and, perhaps, local parks. Given this discussion of public services, we may ask how it applies to the establishment or protection of wilderness areas. Some use might be made of Fiekowsky's arguments in justifying wilderness areas provided by government. In the case of wilderness areas, it might be argued that it is difficult to collect fees from individual users, that is, that wilderness users are not easily located within a wilderness. (Against this, however, it could be argued that a licensing system, with even mild enforcement, would probably produce a reasonable 12/Julius Margolis, "A Comment on the Pure Theory of Public Expenditure," Review of Economics and Statistics, vol. 37, No. 4, November 1955, pp. 347-348. 13/Stephen Enke, "More on the Misuse of Mathematics in Economics: A Rejoinder," Review of Economics and Statistics, vol. 37, No. 2, May 1955, p. 132. 14/Downs, op. cit., p. 195. degree of compliance.) Again, benefits may extend beyond the direct user to other members of the society. Wilderness proponents often argue there are health benefits to users; in turn, it may be argued (though perhaps with some difficulty) these benefits would indirectly help others. Again, it is often argued there are many “vicarious” users of wilderness who obtain benefits from hearing about wilderness areas, seeing pictures and reading descriptions of them, or from just knowing they exist. The income equalization argument is expressed by Ise when he considers: "... the results that would have followed a policy of grant or sale of our scenic lands to private interests. These areas would have been taken up by individuals and corporations and would largely have been developed as tourist centers or as homesites. In such tourist centers hotels would have been built, as on Mackinac Island, around Bar Harbor, and in many scenic areas of the East . . . where only the rich could afford to stay. One or a few hotel interests might possibly have monopolized such splendid scenic areas as Acadia, Yosemite Valley. . . . Private monopoly of such unique scenic wonders would be repugnant to all sense of justice and propriety." 15/ Turning to the Samuelson-Downs-Margolis dialogue, it may be argued that, if Central Park is, at least partly, a collective good, then the High Sierraand other wilderness areas-fit the same category. The matter of vicarious benefits would support this contention. However, Margolis' point is well taken and does apply to wilderness use: the use of wilderness areas by people having a taste for wilderness recreation does involve costs to others, including other wilderness recreationists. Thus, a major fear and complaint of wilderness recreationists is "overuse" of an area. 16/ It appears likely that, so far as wilderness is treated as a collective good, determination of an optimum allocation of wilderness land will be difficult 15/John Ise, "Our National Park Policy,"published for Resour ces for the Future, Johns Hopkins Press, Baltimore, 1961, p. 5. (In a sense, however, park concessionaries do have a monopoly, albeit a regulated monopoly, in national parks.) Compare Kenneth Pomeroy, "Outdoor Recreation--The Public Viewpoint," Proceedings, Society of American Foresters Meeting, Washington, 1960, p. 71. He quotes this response obtained to the question of admission fees: "The parks are for everyone; some people cannot afford to pay." 16 Admittedly, "overuse" involves a judgement on the part of users; it may be argued that this means there is no "objective" criterion by which to specify the occurence of overuse. However, the point of view advanced here is that if people complain about overuse and are willing to pay to reduce use (with "payment" occuring in money or time or effort of some sort), then an overuse problem exists. or impossible. 17/ So far as it is treated as a private good, determination of an optimum allocation can be obtained through the market or some marketlike process. The most intractable case (for purposes of analysis) that appears reasonable is that wilderness is partially a collective good. It is argued here that, even for this case, economic analysis can yield a good deal of information on the proper allocation of resources. Krutilla lends some (small?) support to this view. In an article reviewing the literature of benefit-cost analysis, developed for the study of government expenditures, Krutilla points out many of the formidable difficulties involved. 18/ He concludes with these comments: "Does the array of positions advanced previously provide an adequate rationale for attempts to evaluate the benefits and costs of resource-development alternatives? Or are the comments herein transparent rationalizations which leave little conviction that analysis of benefits and cost and of their distribution can help significantly to improve welfare through public intervention? One's view, of course, will differ depending on the nature of one's experience, one's temperament, and perhaps also one's personal situation. The academic theorist without responsibility for policy can afford to (and probably should) be puritanical without regard to whether or not this is immediately constructive. On the other hand, the practicing economist in government, charged with responsibility to act under constraints of time and information, will often be grateful for perhaps even a perforated rationale to justify recommendations in the public interest! Since the alternative is not to retire to inactivity, but, rather, to reach decisions in the absence of analysis, we may take some comfort from the belief that thinking systematically about problems and basing decisions on such analysis are likely to produce consequences superior to those that would result from purely random behavior. Nonetheless, the utility and welfare effects of benefit-cost analysis are likely to be viewed differently, depending on the end of 17/Samuelson states, "Government supplies products jointly to many people. In ordinary market economics as you increase the number of sellers of a homogeneous product indefinitely, you...can hope to reach a determinate competitive equilibrium in the limit. It is sometimes thought that increasing the number of citizens who are jointly supplied public goods leads to a similar determinate result. This is reasoning from an incorrect analogy...such a process does not lead to a determinate equilibrium....' Samuelson, "Diagrammatic Exposition of a Theory of Public Expenditure," Review of Economics and Statistics, vol. 37, No. 4, November 1955, p. 355. 18/John Krutilla, "Welfare Aspects of Benefit-Cost Analysis," Journal of Political Economy, vol. 69, No. 3, June 1961, p. 226. |