# Presentation: 116805

## Economics and NMFS:Why? And How? 

- James Boyd
- Senior Fellow
- Resources for the Future

## Overview

- Will talk about economics, not as a science, but as a means of persuasion
- Emphasize the importance of budget constraints (how much economics can you really buy?)

## Questions

- Is economics really necessary?
*How* should NMFS do more economics?
- What are the potential pitfalls?
- How much common ground is there between economics and ecology?
- What should NMFS’s economic analysis priorities be?

## Caveats

- NMFS is not alone
- Generic issues arising from the regulation of ecosystems

## Is it really necessary?

- Statutory & rule-based pressures are one driver
- The power of numbers and expertise
- A two-legged stool
- Bio-physical analysis (NMFS is strong here)
- Economic analysis
- It’s about credibility and winning arguments

## Is it really necessary?

- GPRA
- Appropriations
- Litigation
- Rulemaking
- Inter-Agency Consultation
- Internal Analysis and Decision-Making
*The “type” of economics will depend on the decision context*

## Why economics?

- Economics is a proxy for “the social interest”
- Ignoring economics can make it appear you are ignoring social impact
- Economics is not the only way to account for social impact, but is a good way

## Pitfalls?

- Ethical, moral concerns?
- Important issues, but not the battle to fight
- Pragmatic issues are more important
- Scientifically sound, $-based benefit valuation is expensive, time-consuming, & difficult
- And even then, people can pick at it
- The discipline is still maturing
- Integrate economics, don’t isolate it
- That’s hard to do

## So what is NMFS to do?

- It depends on how much money you’ve got
- If a lot ... (*buy as many good economists as you can)*
- If a little ... (*see below*)
- Adopt the attitude of economics
- Be able to argue effectively about the difficulty of economic tradeoff analyses
- Play to your strengths (bio-physical expertise, landscape analysis)

## The attitude

- Economics is what happens when you can’t have it all
- “Everything is valuable” (true but unhelpful)
- The language of economics
- Services, not just functions
- Co-opt the language & basic concepts
- Scarcity
- Economies of scale
- Productivity
- Economics is most powerful when it seems like common sense (don’t get too fancy)

## Imagine you’re in a courtroom ....

- Explain why your opponents have an easier time than you do
- Public goods, not traded, the product of complex underlying biophysical systems
- Highly idiosyncratic to local conditions
- Are there no environmental benefits just because we don’t have a $ figure?
- Obviously ridiculous
- Economic impact analysis can also be attacked
- There is no objective truth or unassailable study

## Principles are cheaper than techniques

- Techniques are dollar based (and expensive)
**	****    ****“**This parcel produces services worth $X”
- A cheaper alternative?
- Principles can be combined with indicators
- 	“This parcel supports 7 threatened species, has 1K visitors annually, is the only such site in a 10 mile radius and is well-situated for recreation given presence of parks, trails, etc.”
- GIS data, married to principles, can yield defensible indicators of ecosystem benefits

## Proposal: Service-rich hot spots

- Map ecosystems on the basis of both bio-physical and socio-economic characteristics
- Build in the notion of priorities
- Build in scarcity, complements, demand, risk
- Feature spatial (landscape) analysis
- Merge ecology and economics

## Morals of the story

- Buy the Cadillac if you can
*Short of that ...*
- Adopt the principles, attitude, and language
- Admit to the difficulty (and embrace it)
- Play to your strengths
- Resist the temptation to have non-economists do “real economics”