Estimating values of “goods” that are never sold is difficult. Take, for example, the new U.S. Forest Service re-estimate of the recreational value of national forests, which dropped to $11 billion from $111 billion, a huge revision.
Critics in conservation organizations charge this is a Bush administration move to cook the books in favor of more logging. Forest Service officials respond that the devaluation results from more accurate information about the numbers of forest visitors and their spending in neighboring communities.
The earlier, higher estimate derived from a 1995 study that assumed 800 million visits to forests per year by 2000. Surveys taken for the newer study indicate the number is closer to 200 million, including 4 million visits to five national forests in Minnesota, of which Superior is the most important.
Stepping back from the particulars, the controversy illustrates the broader challenge of valuing unpriced amenities like a day spent hiking, fishing, hunting or bird-watching in northern Minnesota, or the historically clear skies over the Four Corners area where Colorado, New Mexico, Utah and Arizona meet.
If we throw up our hands and say that estimating such values is impossible, we will inevitably use these resources badly. Our society will be poorer and worse off than if we make a good estimate. The values to society of clean air or of days spent in forests certainly are not zero.
If we fail to assign such things any value when we calculate how much we should reduce pollution or how much timber the Forest Service should sell while fostering recreation, we will pollute and log excessively. The well-being of Americans will suffer.
At the other extreme, the value of such unpriced goods is not infinite. It would not be wise, for example, to ban all logging, with the aim of improving forest recreation, if that quadrupled home construction prices. Nor would we require electrical plants to emit no visible emissions at all if doing so drove electricity prices to a dollar per kilowatt hour instead of 8 cents. That would also reduce our well-being.
If using zero value or infinite value for such things makes us worse off, how do we find the right balance between those extremes?
In practice, resource economists depend on surveys designed to elicit how much the bird-watchers or hunters value their day out in nature north of Cloquet or what the citizens of Farmington, N.M., would pay to ensure their sky remained crystal clear.
For recreational visits, they also consider how much people spent on travel to the forest or lake. If someone spends $80 driving from the city, they obviously value the experience at least that much.
Such survey techniques are at best inexact, but they establish useful reference points. They do not, however, generate information conclusive enough to defuse controversy over actions such as the Forest Service’s astounding downgrade of recreation values.
© 2005 Edward Lotterman
Chanarambie Consulting, Inc.