Northeast Fisheries Center Reference Document 89-01 

An Economics Review 

of North Atlantic 

Salmon Restoration: 

U.S. Fair Share Working Papers ..... 

~;- : 

by 

Steven F. Edwards 

NOAA 

National Marine Fisheries Service 

Northeast Fisheries Center 

Economics Investigation Unit 

Woods Hole, MA 

02543 

January 1989 
Northeast Fisheries Center Reference Document 89-01 

An Economic Review of 

North Atlantic Salmon Restoration: 

U.S. Fair Share Working Papers 

by."," 

Steven F. Edwards 

NOAA 

National Marine Fisheries Service 

Northeast Fisheries Center 

Woods Hole, MA 

02543 

January 1989 
Page iii 

Table of Contents 

U.S. Fair Share Working Paper No. 3(3) 

Total Economic Costs and Benefits of North Atlantic Salmon restoration in the United 

States, Years 1960-2012 

I. Introd uction............................................................................................ 1 

II. The Conceptual Framework.......... ............................. ............ ...... ......... 2 

l)efinitions ............................................................................................... 2 

A Graphical Presentation ...................................................................... ~ 3 

III. Opportunity Costs of North Atlantic 

Salmon Restoration ................................... 0 .................... 0 ............... 0........ 4 

Cost Categories ........................................................................................ 4 

Conclusions ...................................................... :.~ ............... ~.~................... 7 

IV. Benefits of Salmon Restoration .............................................................. 8 

Benefit Categor~es.......... ...... .......................................... ...... .... ............... 8 

Past Research ........................................................................................... 11 

Conclusions ............................................................................................. 15 

V. Summary ................................................................................................. 15 

References ............................................................................................... 16 

Appendix 3(3).1 ...................................................................................... 17 

U.S. Fair Share Working Paper No. 3(4) 

Value of Restored Adult Salmon Returning to Home Waters 

I. Introduction .......................................... ~ ................................................ 18 

II. Results and Discussion ......................................................................... 18 

Costs ....................................................................................................... 18 

Adult Returns ........................................................................................ 19 

Average Costs ........................................................................................ 20 

References .............................................................................................. 20 

Appendix 3(4).1 ..................................................................................... 21 
!I 

Pageiv 

Further Socioeconomic Considerations of North Atlantic 

Salmon Restoration in the United States 

I. Introduction ................................................................................................ 22 

II. Additional Socioeconomic Factors Related to 

Salmon Restoration .................................................................................... 22 

Additional Opportunity Costs and Benefits ............................................ 22 

Economic Efficiency of Public Investment into 

Salmon Restoration .................................................................................... 22 

Economic Impacts ...................................................................................... 23 

References ................................................................................................... 24 

List of Tables and Figures 

Table 3(3).1 Public opportunity costs of North Atlantic salmon restoration .................................... 6 

Table 3(3).2 Private opportunity costs of North Atlantic salmon restoration ................................... 7 

Table 3(3).3 Opportunity cost of reduced hydroelectric power......................................................... 8 

Table 3(3).4 Present value of opportunity costs of salmon restoration .............................................. 9 

Table 3(3).5 Net benefits of recreational salmon fishing .................................................................... 12 

Table 3(3).6 Net annual benefits of observation and existence values .............................................. 13 

Table 3(3).7 Present value of total benefits of salmon restoration, 1967-2012 .................................. 14 

Table 3(4).1 Opportunity costs of salmon restoration ........................................................................ 19 

Table 3(4).2 Returns of adult stocked salmon ..................................................................................... 19 

Table 3(4).3 Total average costs of adult stocked salmon returning to rivers 

in New England ............................................................................................................... 20 

Figure 3(3).1 An aggregate demand curve traces society's maximum willingness 

to pay for each additional return of adult salmon. An average cost 

curve traces the average opportunity cost of achieving the given 

number of returns............................................................................................................. 4 

Figure 3(3).2 A demand curve traces an individual's maximum willingness-to-pay 

for each additional user day when stock size is initially low and then 

high dues to restoration ................................................................................................. 10 
Page 1 

December 29, 1988 

Preface 

The three economics working papers collected in this report were prepared for presentation and discussion by the informal group that met in Copenhagen on January 20-

22, 1988 to discuss fair sharing of Atlantic salmon. The papers address three terms of 

reference which the delegations from Canada, Greenland, Denmark, and the United 

States previously agreed upon. 

U.S. Fair Share Working Paper No. 3(3) covers total costs and benefits of the restoration programs in the United States between the years 1960 and 2012, or 25 years from 

what was then the current year (i.e., from 1987). The delegations decided that rivers 

shared by Canada and the United States should be excluded from the analysis. U.S. Fair 

Share Working Paper No. 3(4) discusses investment in salmon restoration in terms of 

costs per adult returning to New England rivers. Finally, U.S. Fair Share Working 

Paper No. 3(5) identifies and briefly expands on additional socioeconomic topics 

including net national benefits and economic impacts from salm9n restoration. 

u.s. Fair Share Working Paper Number 3(3) 

Total Economic Costs and Benefits of North Atlantic Salmon Restoration 

in the United States, 1960-2012 

Introduction 

This paper presents an economic assessment of total costs and benefits of North 

Atlantic salmon restoration in rivers in the 

northeastern United States. Although restoration of salmon in New England began before 1960 and will, if completed, benefit many 

generations of recreationists and preservationists, the assessments are limited to the 

years 1960 to 2012, or 25 years after the current year, 1987. Also, the analysis is limited 

to . direct costs and benefits associated with 

recreational fishing for salmon and with the 

diversion of water from hydroelectric plants 

to fish passages. Indirect economic impacts 

related to multiplier effects are highlighted 

in U.S. Fair Share Working Paper No. 3(5). 

Finally, separate assessments are reported to 

the extent possible for each river system. As 

directed, the international rivers, St. Croix, 

Aroostock, Med uxnekeag, and Prestile are 

excluded. 

This paper uses the economic perspective 

on costs and benefits. In the words of economist Kenneth Arrow (1972) when discussing 

criteria for Federal investment in water resources: 

"Investment is the alloaztion of current resourc;es, 

which have alternative productive uses, to an 

activity whose benefits will accrue over the future. 

The benefits take the form of productive goods and 

services. The cost of an investment is the benefit 

that could have been derived by using the resources in some other activity." (p. 410) 
Page 2 

In our case, the United States government, 

along with other public agencies and private 

companies, is "producing" North Atlantic 

salmon for the direct, long term benefit of 

recreationists and other citizens of the United 

States. The direct cost of this investment is 

comprised of the benefits forgone by not 

using the same resources to produce other 

valued commodities, including the value of 

forgone electricity. However, it should be 

understood that this paper is not a cost-benefit analysis of North Atlantic salmon restoration in the United States--the allocative efficiency of salmon restoration is not at issue 

here. Instead, we concern ourselves with 

only the potential total economic benefit of 

salmon restoration which is threatened by 

interception. 

The paper is arranged as follows. For the 

benefit of II non-economists," Section II describes the conceptual framework used in the 

assessments. The cost assessment is reported 

in Section ITI followed by the benefit assessment in Section IV. Section V summarizes the 

results. 

II. The Conceptual Framework 

Definitions 

This section is written to convey a basic 

understanding of the economic concepts used 

in this paper. Since this paper is not the place 

to II teach" economics, the reader is asked to 

see Gittinger (1982) or another.book on project evaluation for a more detailed explication. 

It is important to distinguish between financial and economic costs. In ordinary 

usage, II cos t" usua 11 y means monetary expenditure, or the financial outlay of currency. Thus, to an accountant or budget 

manager, cost is synonymous with expenditure. In contrast, economists focus on the 

opportunities that are forgone when productive resources such as labor, capital, and natural resources are used to produce a good or 

service. For example, the labor, concrete, 

steel, and land used to construct. a fish passage obviously cannot be used to construct, 

say, a bridge or highway. The value of the 

foregone opportunity-that is, the value to 

society of what these resources would otherwise have been used to produce-is an 

economic, or opportunity cost of fish passage construction. Thus, the opportunity 

cost of these resources is the value ot production and consumption that is foregone. Only 

opportunity costs should enter an economic 

analysiS of public investments. 

Next consider how one measures opportunity costs. One awkvyard possibility is to 

count the number of man-hours, the weight 

of . materials, and the area of land that are 

used in production. Alternatively, market 

prices often serve as an appropriate standardized measure of resource values, particularly when the markets for the productive 

resources are competitive. Consequently, 

opportunity costs and financial costs may be 

mathematically equal. However, there are 

many cases when these separate types of 

costs differ. For example, financial cost of 

hiring unemployed workers for a public 

project is simply equal to expenditures on 

salaries and benefits. In contrast, the economic, or opportunity cost of using unemployed labor is zero since the workers were 

not producing goods or services anyway. A· 

more pertinent example concerns the argument that the diversion of water from hydroelectric power plants to fish passages may 

increase the price of electricity to some households in New England, and that this is an 

additional cost of salmon restoration. Certainly, the households will view the price 

increase as a higher financial cost, but from a 

larger, societal point of view, the exchange of 

income between households and utility 
companies is merely a transfer payment--a 

zero sum effect, if you will.l Finally, interest 

paid by the federal gove~ent and uti~ity 

companies on loans for capItal construction 

(for example, hatcheries and fish passages) 

are transfers of income from taxpayers and 

utility companies to lending agencies. Interest on debt is not an economic cost, however, 

since it does not result directly in a change in 

the production or quality of goods and services. 

We have been discussing opportunity 

costs in terms of foregone benefits. That is, 

economic value, whether benefits in the case 

of gains or opportunity costs in the case of 

losses, is determined by the satisfaction of 

human wants. In economics, this satisfaction 

is measured by an individual's maximum 

willingness-to-pay for a commodity. THE 

AGGREGATE BENEFIT, THEN, OF A P ARTICULAR PUBLIC INVESTMENT IS THE 

SUM OF EACH INDIVIDUAL'S MAXIMUMWILLINGNESS-TO-PAY. Asforopportunity costs, market prices often reveal 

these benefits. However, common property 

and public goods aspects of a North Atlantic 

salmon resource necessitate the use of other 

methods to elucidate benefits. These benefits, addressed in part in a previous U.S. 

working paper written by Kay et ale (1987) 

and provided at the Edinburgh meeting on 

fair sharing, include recreational fishing, 

aesthetic values such as observing salmon 

runs, and 1/ existence" values related to the 

preservation of salmon in New England rivers and to bequesting North Atlantic salmon 

stocks to future generations. 2 

There you have it. Economic costs are 

opportunity costs measured in terms of the 

benefits of forgone production and consumption, and economic benefits are best measured in terms of maximum willingness-toPage 3 

pay. This perspective on the use of productive resources correctly ignores mere transfers of income between parties and avoids 

counting costs and benefits more than once. 

A Graphical Presentation 

Several methods can be used to measure 

the economic value of natural resources such 

as North Atlantic salmon. Two approaches-

-replacement cost and willingness-to-pay--

are described here with the aid of a graph. 

The basic assumption of the replacement 

cost approach is that the economic benefits of 

a natural resource are at least as great as the 

minimum opportunity cost of restoration. In 

our case, the opportunity costs of restoring 

North Atlantic salmon include capital costs 

(for example, hatcheries, fish passages, vehicles), operations and maintenance costs (such 

as personnel, smolts, repair, enforcement, 

trapping, and trucking), administrative costs, 

and research costs. In Figure 3(3).1, the average costs of salmon restoration are portrayed 

in stylized fashion by line AC. 

In contrast, maximum willingness-to-pay 

is the ideal measure of restoration benefits. It 

is represented in Figure 3(3).1 by the well 

known relationship, a demand curve Oine 

D). In principle, an aggregate demand curve 

is a locus of the maximum that society is 

willing to pay for each additional adult salmon 

returning to New England rivers. Therefore, 

the area beneath a demand curve and between stock sizes 0 and, say, S* is a cumulative measure of maximum willingness-topay. This area--abS*O--is clearly greater than 

the total minimum opportunity cost of restoration which is portrayed in Figure 3(3).1 by 

area fcS*O. The residual, net benefit--area 

abcf--is called consumer surplus. 

1 In a:mtrast, water diverted from power plants to fish passages will reduce the production of electricity. The opportunity cost of the diverted water is the value to households of the forgone power. This economic cost is included in the 

follOwing cost assessment. 

i 2 These benefits are discussed in more detail in Section IV. 

h 
Page 4 

$ 

f 

o s· 

Figure 3(3).1. An aggregate demand curve (0) traces society's maximum willingness-to-pay for each additional return of 

adult salmon. An average cost curve (AC) traces the average opportunity cost of achieving the given number of returns. 

The following sections report approximations of these two measures of the total economic value of salmon restoration in New 

England rivers. Costs are examined in Section ill. Several measures of maximum willingness-to-pay are reported in Section IV .. 

The latter measures are drawn from the environmental economics literature. The best 

available information was used to derive these 

measures. 

III. Opportunity Costs of North 

Atlantic Salmon Restoration 

Cost Categories 

It bears repeating that the economic costs 

of salmon restoration are measured by the 

opportunity costs of the productive resources 

used to restore the North Atlantic salmon 

stocks. Accordingly, we avoid exaggerating 

total costs by excluding transfer payments 

from the analysis. Unless otherwise stated, 

the information for this assessment was generously provided by Dan Kimball of the U.S. 

Fish and Wildlife Service in Newton Comer, 

Massachusetts. As is usually the case for this 

type of analysis, market prices are used as 

measures of opportunity costs. 

Opportunity costs can be classified in a 

number of ways. In terms of time, there are 

past, current, and future opportunity costs. 

Opportunity costs can also be classified as 

pri vate costs related to fish passages arc und 

hydroelectric dams, and public, or government costs associated with gathering information (such as research and mOnitoring), 

enforcement (such as enforcing catch quotas), and administration. Finally, costs are 
often broken down into capital, operations 

and maintenance, research, and administration categories. We use a combination of 

these three classifications. 

Tables 3(3).1 and 3(3).2 list the simple 

sums of past, current, and future opportunity 

costs of salmon restoration in New England. 

Government costs include hatchery construction, habitat enhancement, fish production, 

research, and law enforcement by the Fish 

and Wildlife Service, the Forest Service, the 

National Marine Fisheries Service, and the 

states of Connecticut, Massachusetts, and 

Maine. Private costs incurred by utility 

companies are for constructing, operating, 

and maintaining fish passages around hydroelectric dams. These opportunity costs, 

which are reported separately .for river basins, are grouped into capital and all" other" 

costs. (The latter category includes all opportunity costs other than capital costs.) Table 

3(3).3 lists past, current, and future opportunity costs due to reduced hydroelectric power 

for each river basin.3 

The simple sum of all opportunity costs 

reported in Tables 3(3).1, 3(3).2, and 3(3).3 

between the years 1960 and 1986 is approxiInately$101.5million. (All opportunity costs 

and benefits in this paper are reported in 

constant 1986 $US.) In addition, opportunity 

costs between the years 1987 and 2012 are 

expected to be about $162.3 million if one 

simply adds the time series. However, it is ' 

routine for economists to use the present 

value criterion when aggregating current 

and future opportunity costs. The present 

value criterion, which" discounts" future opportunity costs to their current, or present 

value, incorporates the fact that future reSource costs are valued less today. That is, 

resources invested today could yield a time 

Page 5 

series of benefits in another use. The rate at 

which these forgone benefits would accumulate is the discount rate. Mathematically, the 

present value in year 1987 (PV 1987) of a future 

opportunity cost incurred in year t (OCt) is 

3(3).la PV1987 = OCt / (1 + r)l 

where r is the discount rate in decimal form 

(for example, 4% is 0.04). By extension, the 

total present value of a time series of future 

opportunity costs ending in time period T 

(for example, 25 years, or 2012-~ 987=25) is: 

t=T 

3(3).lb PV1987= l: OC/ (1 + r)t. 

t=O 

(Notice that the value of t in the year 1987 is 

zero.) ,..,. 

In contrast, past opportunity costs must be 

grown to their present value in order to account for the time series of foregone benefits. 

Accordingly, the present value in the year 

1987 of a past opportunity cost is 

3(3).2a 

and the present value of a series of past 

opportunity costs is the summation: 

t=T 

3(3).2b PV1987 = l: OCt(1 + r)t 

t=O 

where T is the most distant year in this exercise (that is, 1987-1960=27). 

The present values of past and current/ 

future opportunity costs are reported in Table 

3(3).4. Inflationary expectations were not 

built into the calculations since inflation is a 

) 

3 All past, current, and future capital costs were spread evenly across years within the appropriate time periods. 

Accordingly, future "other" costs and the opportunity costs of forgone hydroelectric power were increased incrementally 

at a constant rate to reflect the gradual addition of capital stock. In contrast, "unknown" other costs and forgone hydroelectric 

power for the past (that is, for the years 1 %0-1986) were indexed to past capital costs by multiplying past capital expenditures 

(derived as just explained) by the observed ratios of variable costs to future capital costs. We used Kay et al.'s (1987) value 

of 12 cents per kilowatt hour as the opportunity cost of forgone hydroelectrc power. 
Page 6 

Table 3(3).1. Public opportunity costs of North Atlantic salmon restoration ($US million in 1986) 

Past Current/Future 

27 yeatS 26yea.rs 

(1960 to 1966) (1967 to 2012) 

State River Basin Capital Other & Capital Other & 

ME Androscoggin 0 0 0.11 2.12 

(2.4) 

Kennebec 0 0 0.55 10.69 

(12.3) 

Penobscot 19.40 13.94 1.15 22.45 

(40.1) (25.8) 

Royal 0 0 0.06 0.12 

(0.1) 

Saco 0.44 0.35 0.19 3.64 

(1.0) (4.2) 

St. George 0 0 0.01 0.24 ..... (0.3) 

Union 1.52 1.06 0.10 2.00 

(3.1) (2.3) 

NH,MA Merrimack 1.22 5.93 2.01 17.94 

(17.2) (20.6) 

NH,MA, 

VT,CT Connecticut 2.56 12.55 1.38 27.03 

(36.4) (31.0) 

RI Pawcatuck 0.12 0.70 0,11 0.94 

(2.2) (1.0) 

SUB-TOTALS $25.3 $34.5 $5.7 $87.2 

$59.8 $92.9 

TOTAL $152.7 

aOther costs refer to operations and maintenance, research, and administrative costs. Percentages of total "other" costs 

are shown parenthetically. 

proportional increase in all prices and, therefore, does not reflect a change in the relative 

scarcity value of a single productive resource. 

A social discount rate of 4% was used to grow 

past opportunity costs and to discount current and expected future opportunity costs. 

Although no single rate of social discounting 

exists, 4% is a convenient, round number that 

is within the range of values recommended 

by Lind (2 to 4.6%; 1982) for Federal projects. 

A sensitivity analysis is not presented since 

this review is an exploration of restoration 

benefits and not an effiCiency analysis of restoration. 
Page 7 

Table 3(3).2. Private opportunity costs of North Atlantic salmon restoration ($US million in 1986) 

Past Current/Future 

27 years 26 years 

(1960 to 1986) (1987 to 2012) 

State River Basin Capital Other I Capital Other I 

ME Androscoggin 2.0 0.08 6.1 0.34 

Kennebec 0 0 10.7 1.70 

Penobscot 1.3 0.50 8.0 3.57 

Royal 0 0 0 0.02 

Saco 0 0 4.0 0.58 

St. George 0 0 02 0.04 

Union 0 0 0.4 0.32 

NH,MA Merrimack 5.6 0.98 9.9 2.71 

NH, MA, .""'1-

...... ~ 

VT,CT Connecticut 29.8 0.015 11.7 4.29 

RI Pawcatuck 0.1 0 0.9 0.15 

SUB-TOTALS $38.8 $1.6 $51.9 $13.7 

$40.4 $65.6 

TOTAL $106.0 

aOther oosts refer to operations and maintenance, research, and administrative costs. 

The present value of opportunity costs for 

the total expected investment (past, current, 

and proposed, but excluding the boundary 

rivers) is approximately $299.6 million. This 

opportunity cost represents a very large 

commitment by the United States to North 

Atlantic salmon restoration. Past and current/future present values from Table 3(3).4 

can be roughly prorated to river basins using 

the percentages listed in Table 3(3).1 for" other" 

costs. 

Conclusions 

The $299.6 million apprOximation probably underestimates the true present value of 

opportunity costs of the U.S. North Atlantic 

salmon .restoration project. First, opportunity costs prior to the year 1960 and those 

now planned for after the year 2012 were 

excluded. In addition, it was not possible to 

consider contingencies for changes in the 

relative value of resources used in salmon 

restoration. In particular, the opportunity 

cost of forgone hydroelectric power is likely 

to increase relative to that for other productive resources in the U.S. economy, but the 

size of the relative price change during the 

next 25 years would be conjectural. These 

calculations also exclude the significant 

commitment of time and resources made by 

over 50 fishing organizations in New Eng-
Page 8 

Table 3(3).3. Opportunity cost of reduced hydroelectric power ($US million in 1986) 

Past 

27years 

State River Basin (1960 to 1986) 

ME Androscoggin 0.02 

Kennebec 0 

Penobscot 0.14 

Royal 0 

Saco 0 

St. George 0 

Union 0 

NH,MA Merrimack 0.27 

NH, MA, 

VT, CT Connecticut 0.85 

RI Pawcatuck 0.004 

SUB-TOTAL $1.3 

TOTAL 

land, including the Atlantic Salmon Federation, Restoration of Atlantic Salmon in America, Penobscot Salmon Club, and Connecticut 

River Salmon Association. Finally, the exclusion of costs associated with salmon restoration in the boundary rivers is a significant 

omission. From a strict economic perspective, investment in these rivers is a further 

economic cost that should be included. When 

included, the present value of salmon restoration costs increases by $41.7 million to $341.3 

million [Table 3(3).4]. 

IV. Benefits of Salmon Restoration 

As stated in Section II, economic benefits 

are most appropriately measured by maximum willingness-to-pay. Nevertheless (and 

contrary to popular belief), a market is not 

necessary for the existence of economic beneCurrent/Future 

26 years 

(1987-2012) 

0.09 

0.47 

0.99 

0.01 

0.16 

0.01 

0.09 

0.75 

1.19 

. ....,. 0.04 

$3.8 

$5.1 

fits. Indeed, markets (and prices) emerge 

from economic behavior when demand exists, costs of supply are low relative to demand, commodities are divisible into manageable units, and ownership by buyers and 

sellers is exclusive. In these cases, benefits 

are revealed by price. In other cases, maximum willingness-to-pay must be elucidated 

by other demand revealing methods such as 

the willingness-to-pay study reported by Kay 

et al. (1987). 

Benefit Categories 

The impetus for restoration of North Atlantic salmon to rivers in New England was 

to restore opportunities for recreational salmon 

fishing. Among the factors which are likely 

to affect recreational benefits there are the 

expected catch rate, the size of individual 
Page 9 

Table 3(3).4. Present value of opportunity costs of salmon restoration ($U5 million in 1986)a 

Area Past 

27 years 

(1960 to 1986) 

Current/Future 

26 years 

(1987 to 2012) 

Total 

53 years 

(1960 to 2012) 

Excluding 

boundary rivers 

Including 

boundary rivers 

$189.7 

$191.6 

$109.9 $299.6 

$149.7 $341.3 

aThe interested reader can roughly prorate these costs to individual river basins with the percentages reported in Table 3(3).1 

for future "other" costs. 

fish, and, of course, the consumption of salmon. 

However, economic valuation is not limited 

to harvesting and consumption alone. Indeed, aesthetic or, non-consumptive use values are enjoyed by those who either visit 

hatcheries and / or observe salmon runs from 

river banks and observation areas at darns. 

This value should not be underestimated 

given the historical evidence that in 1879 

"hundreds" of people from Bristol, New 

Hampshire came to observe eight adult salmon 

laying in a pool in the Pemigewassett River 

(The Bristol Enterprise, August 9 and 16, 

1879). Nowadays, tens of thousands of people 

visit salmon hatcheries and viewing centers 

at fish ladders annually. Finally, each year 

Americans demonstrate a great willingnessto-pay to restore severely depleted wildlife 

populations. Contributions to conservation 

organizations are usually made without 

expectation of personal use benefits. Concerning salmon restoration, many peop Ie will 

undoubtedly derive personal satisfaction 

Inerely from knowing that salmon have been 

restored to their native rivers (preservation 

value) and / or that the restored stocks are 

available for use by others, particularly future generations (bequest value). Together, 

these values are referred to as existence values. ALTHOUGHECONOMICRESEARCH 

INTO EXISTENCE VALUES, AND TO AN 

EXTENT NON-CONSUMPTIVE USE V ALDES, IS A RELATIVELY NEW APPLICATION OF ECONOMIC THEORY, RECENT 

STUDIES SHOW THAT EXISTENCE BENEFITS OFTEN RIVAL USE VALUE. 

Recall that the opportunity costs of North 

Atlantic salmon restoration are for increasing 

the stock size of salmon returning to rivers in 

New Eng!and. In turn, stock size affects a 

number of factors which determine demand 

and, therefore, benefits. Typically, economists use the number of recreation days as 

the quantity variable in demand models. The 

value of a recreation day depends on a number of factors including catch rate for anglers 

and observation rate for wildlife observers, 

both of which are determined in part by stock 

size. Similarly, aesthetic benefits depend on 

the number of salmon actually observed in 

their environment. Other factors likely to 

affect the economic value of a recreation day 

include income, salmon consumption, travel 

costs, uncertainty about future supply, and 

uncertainty about future demand. 

As for catch rate, the last four factors are 

affected either directly or indirectly by interception. That is, salmon consumption is affected by stock size; travel costs (part of the 

"price" of fishing) is determined by distance 

to the nearest recreation site which has a 

suitable salmon popuhition; supply uncertainty depends directly on the unknown extent of future interception and its effect on 

stock sizes; and demand uncertainty is affected by the future year that salmon stocks 

reach a suitable size for fishing. 
Page 10 $ 

a area ~ • total UUtdIG 

in berefita 

araa ab::d • UCl\3tWIG in 

N!t ben!fita 

area ~ • ilcrawe in 

expt!idi t:umB 

d 

rfJ 

/JC,. - -- -

o 

~YS OF REX:REATlOO 

Figure 3(3).2. A demand curve traces an individual's maximum willingness-to-pay for each additional user-day when stock 

size is intially low (Do ) and then high due to restoration (D+). AC is the average cost to recreationists for fishing or for 

observing salmon. 

Figure 3(3).2 portrays the total use benefi ts of the proposed North Atlantic salmon 

restoration project (fishing and observation). 

DOrepresents a demand curve for recreation 

days prior to the successful completion of 

restoration. Given the average cost of recreation (AC), total benefits are area dcRoO. In 

contrast, salmon restoration, through its effect on stock size and catch, increases demand to, say, D+. Total benefits in this case 

are area abR+O. Thus, the increase in total 

benefits is area abR+Rocd. (Although not 

drawn, average cost may also decrease and 

lead to a further increase in total benefits.) 

Part of this area--area cbR+Ro -is costs incurred by recreationists in their pursuit of 

salmon (such as the opportunity cost of gasoline for travel). The remaining benefit--area 

abcd--is the net benefit, surplus. Although 

surplus is II free" to individuals, it is a significant and real component of total benefits and, 

therefore, must never be overlooked in an 

economic analysis. Surplus is analogous to 

profit for producers. Whereas efficiency 

analyses evaluate only changes in surplus 

(and profit), we remain focused on changes 

in total benefits as required. 

Figure 3(3).2 is appropriate for recreational fishing and for simply observing salmon. 

The total benefits associated with existence 

values could also be drawn, but the quantity 

axis most likely would be stock size. In this 

case, total user costs are zero by definition 

since no personal use is involved. 

Regrettably, there has not been a sufficient 

amount of economic research done on the 

potential benefits of the North A tlantic salmon 

restoration project to provide project-specific 

r 
estimates of total benefits. Instead, we draw 

on Kay et ale 's (1987) pilot study of net benefits and other, secondary sources of information on salmon fishing already reported in 

the environmental economics literature. The 

next subsection summarizes these studies. 

Past Research 

Kay et ale (1987) applied a survey technique called the contingent valuation method 

to elucidate New Englander's maximum 

willingness-to-pay for salmon restoration. On 

average, households who were interested in 

fishing for salmon (about 27% of the population, or about 1.21 million households) were 

willing to pay an average of $25.83 for salmon 

restoration, and households who were generally interested in preserving salmon for 

personal observation and for use by future 

generations (about 58% of the population, or 

about 2.23 million households) were willing 

to pay $22.43 on average. 

Several comments are in order regarding 

Kay et al. 's (1987) study. First, it is not possible to transform the use benefits for fishing 

and observing salmon into benefits per recreation day. This is not a serious problem, 

though, since we are currently interested in 

an approximation of only total benefits and 

not in the shape and position of the demand 

curve per see Second, their study elicits only 

estimates of changes in net benefits (that is, 

surplus) from respondents such as area abcd 

in Figure 3(3).2. Therefore, total use benefits 

are underestimated since travel-related costs 

associated with recreation are not included. 

Finally, Kay et ale 's (1987) study probably 

underestimates the net present value of the 

salmon restoration project, assuming that 

future returns of adult salmon can be predicted with a high degree of certainty. First, 

they followed a conservative procedure when 

accounting for non-respondents to the survey. In addition, their vehicle of payment 

(for example, increased license fees) could 

Page 11 

have biased valuations downward. Furthermore, households were asked for annual valuations over only a one to five year payment 

period even though benefits would be received over a life time. This reduces the 

operational income constraint since total income during one to five years is less than life 

time income. On the other hand, their study 

was not designed to assess the negative effect 

of supply uncertainty on maximum willingness-to-pay. Also, there is evidence that respondents were confused by the way the 

valuation questions were framed. Finally, 

Kay et al. (1987) did not use a time series of 

annual willingness-to-pay when calculating 

the present value of net benefits. 

A second regional study of salmon recreation was conducted in Maine during 1980. 

This study; which use,d the travel cost method, 

reports that recreational fishing surplus is 

$118 per day, or approximately twenty times 

greater than the Kay et al. (1987) figure even 

if we assume conservatively that anglers fish 

for salmon an average of only five times a 

year. Whereas the Kay et ale (1987) study 

probably underestimates the net benefits of 

certain salmon restoration for reasons given 

above, this travel cost study most certainly 

overestimates surplus since distant and nonrespondents are underepresented in zonal 

travel cost studies. 

Other economic studies of salmon recreation were conducted in the northwestern and 

Great Lakes regions of the United States. 

With one exception (Brown and Mendelsohn, 

1984), these studies report surplus values for 

trips, fishing days, or fish [vis-a-vis the entire 

year; Table 3(3).5] and, therefore, can not be 

compared directly to Kay et al.' s (1987) results. Furthermore, respondents to Kay et 

ale 's (1987) survey valued future changes in 

salmon stocks while most of the studies 

summarized in Table 3(3).5 evaluate existing 

stocks. Nevertheless, a casual review of Table 

3(3).5 suggests that values reported for salmon 
Page 12 

Table 3(3).5. Net benefits of recreational salmon fishing 

Surplus per (constant 1986 $US): 

Trip Day Fish 

18 - 57 17 - 30 

DAD - 23 

19 

118 

122 - 163 

157 -164 

fishing are substantially greater than in Kay 

et ala (1987). 

We are not aware of any studies of the net· 

benefits associated with observing salmon or 

of existence values for salmon other than 

what Kay et ala (1987) report. However, Table 

3(3).6 summarizes observation and existence 

benefits for four other wildlife species, three 

of which (bald eagles, grizzlies, big horn 

sheep) are, like salmon, spectacular to view 

in the wild. The mean value reported by Kay 

et ala (1987) for observing and preserving 

salmon in New England rivers falls within 

the range of these values. 

Three approaches are used to estimate the 

future net benefits of the proposed salmon 

restoration project. The first approach uses 

Kay et al.' 5 (1987) estimate of $25.83 as the 

annual net benefit of salmon fishing for a 

fishing household. Although low compared 

to other studies, it serves here as an approximation of the net value of a salmon resource 

currently characterized by a low standing 

Season 

120 

Reference 

Sorg and Loomis (1986) 

Sample and Bishop (1982) 

Gordon ~~. (1973; 

modified by Sorg and Loomis 

[19&6]) 

Kimball, D. (USF&WS; 

personal communication) 

Crutchfield and Schelle 

(1979; adjusted by Meyer, 

Brown and Hsaio [1983]) 

Loomis and Brown (1984) 

J3rown and Mendelsohn 

~ 1984) 

stock and by future supply uncertainty. Hence, 

we assume that $25.83 is the mean option 

price which is composed of the expected 

value of future net benefits plus option value, 

or the "insurance premium" for avoiding 

future supply uncertainty (see Freeman [1985] 

for a discussion of option price and option 

value). Accordingly, total annual net benefits for fishing are $25.83 times about 1.21 

million households, or $31.3 million. Thus 

beginning with a small annual bet benefit of 

only $25.83, one may suspect that the economic benefits of salmon fishing aggregated 

across households and the 25 year time horizon will be quite large. 

The second approach uses Brown and 

Mendelsohn's (1984) surplus estimate of $120 

as the net annual benefit of salmon fishing. 

Total annual net benefits in this case are 

calculated as $120 x 1.21 million households, 

or $145.2 million. This amount serves as an 

upper bound for annual net benefits since it is 

based on an existing, viable recreational 

salmon fishery in their study. 
Page 13 

Table 3(3).6. Net annual benefits of observation and existence values 

Species Observation & 

Existence Values 

Only Existence 

Values 

Reference 

Bald eagles $13 - 43 

Striped shiner 

Crizzl y bear 25 - 26 

Bighorn sheep 22 - 28 

The final approach multiplies the mean 

values from Table 3(3).5 for surplus per fish 

(approximately $152) and per day-fished 

(approximately $20 excluding the suspiciously 

high estimate of $118) by the increase in catch 

and fishing effort projected by the U.S. Fish 

and Wildlife Service. [Appendix 3(3).1 contains the projections for catch and effort provided by Dan Kimball of the U.S. Fish and 

Wildlife Service.] However, the reader should 

note that the method used to project future 

catch and effort is conservative since adjustments for how increased returns of adult 

salmon will increase both individual and 

aggregate demands for salmon fishing could 

not be made. Therefore, this final approach 

provides a lower bound for net benefits for 

discussion purposes. 

Net benefits associated with observation 

and existe_nce values will be calculated the 

same way in each approach whereby total 

annual surplus is assumed to be $22.43 times 

about 2.23 households (Kay et al., 1987), or 

$50 million. 

As for opportunity costs, future net benefits must be discounted to a present value in 

order to account for the rate of return on the 

investment and because of time preferences. 

That is, we take as datum that a future benefit 

of, say, $1 million is valued less than a current 

benefit of $1 million. Equation 3(3).lb is 

modified to be 

$ 11-47 

5 -14 

18 - 29 

8-9 

3(3).3 

Boyle and Bishop (1985) 

Boyle and Bishop (1985) 

Brookshire et aI. (1983) 

Brookshire et aI. (1983) 

t=T 

PVo= L SBJ(l + r) t 

t=O 

where SBt is surplus benefits in year t. Depending on the approach taken, SBtis either: 

(1) the Kay et al. est~mate for fishing ($31.3 

million); (2) the Brown and Mendelsohnbased (1984) calculation for fishing ($145.2 

million); (3) $152 times increased catch in 

year t projected by the U.S. Fish and Wildlife 

Service; (4) $20 times the increased number of 

fishing days in year t projected by the U.s. 

Fish and Wildlife Service; or (5) the Kay et al. 

(1987) estimate for observation and existence 

value ($50.0 million). The present values of 

net benefits determined by each approach 

range from $851 million to $3,245 million 

[Table 3(3).7]. 

Next, we must addlo the surplus measure 

the present value of opportunity costs associated with recreation days (fishing and observation). Data from the U.S. Fish and Wildlife 

Service's 1980 National Survey of Fishing, 

Hunting, and Wildlife-Associated Recreation 

(1982) were used to derive an annual average 

opportunity cost of $113 per fisherman for 

transportation, fees, equipment, licenses, and 

food and lodging. This amount is quite similar to opportunity costs reported by Sorg and 

Loomis (1986) for salmon fishing in Idaho. 

Direct information was not available to de-
Page 14 

Table 3(3).7. Present value of total benefits of salmon restoration, 1967-2012a,b($US million in 1986) 

Approach 3 

Benefit Category Approach 1 Approach 2 (catch-basis) (effort-basis) 

A. Net benefits 

fishing 520 2,414 20 30 

observation/ 

existence 831 831 831 831 

Total net benefits 1,351 3,245 851 861 

B. Costs 

fishing 1,598 1,598 1,598 1,598 

observation 1,062 1,062 1,062 1,062 

Total costs 2,660 2,660 2,660 2,660 

C. Total (A + B) 4,011 5,905 3,511 3,521 

D. Total future benefits for 

non-boundary rivers 

(C - 0.266·C) 2,944 4,334 2,577 2,584 

-.' 

aSee text for explanation of the approaches. 

hThe interested reader can roughly prorate these costs to individual river basins with the percentages reported in Table 

3(3).1 for future "other" costs. 

rive estimates of opportunity costs for ob- restoration project is successfully completed 

serving salmon, although these costs are likely' ($113 x 1.21 million). Unfortunately, Kayet 

to be considerably less than for fishing since ale (1987) did not report the number of people 

opportunity costs for equipment, licenses, interested in observing wildlife (they report 

and food and lodging are unlikely. How - the number of households interested in obever, fishermen's costs for transportation and serving salmon and in bequest value). 

user fees--36% of total costs in the National However, it is probably safe to assume that 

Survey--can serve as a rough gauge of the people who fish and those with a bequest 

opportunity costs for observers. Accordingly,(::~ _ value also have an interest in observing salmon 

opportunity costs per salmon observer are in the wild. Accordingly, total opportunity 

estimated to be $41 annually (that is, $113 x costs associated with observing salmon are 

0.36). calculated to be $91.4 million annually (2.23 

The opportunity costs are aggregated across 

recreationists as follows. Recall Kay et al. ' s 

(1987) estimate that approximately 1.21 million households are likely to participate in 

salmon fishing. Assuming conservatively 

that opportunity costs per capita and per 

household are about equal (that is, there is 

one salmon fisherman in each fishing household), we calculate annual opportunity costs 

to be $136.7 million by the time the salmon 

million households times $41). Combining 

the two cost categories yields $228.3 million 

annually. 

Unlike for the surplus calculations where 

households were asked for equal annual statements of willingness-to-pay beginning with 

the current year, actual opportunity costs 

will increase proportionally with increases in 

stock sizes. Consequently, U.S. Fish and 

Wildlife projections for the relative increase 
in salmon stocks returning to New England 

rivers were used to prorate costs between the 

years 1987 and 2012. Importantly, costs attributable to returns of native salmon were 

excluded from the calculations so as not to 

exaggerate the total benefits of the restoration project. In this case, equation 3(3).3 

becomes 

t=T 

3(3).4 PVo= I (ptE)/(l + r)t 

t=O 

where E is total annual opportunity costs 

upon completion of the restoration project 

(Le., $228.3 million) and p t is the percent 

completion by year t. For example, the U.S. 

Fish and Wildlife Service projects that roughly 

51 % of the long term annual harvest rate will 

be achieved by the year 1990. Hence, P3 

(where t = 1990 - 1987 = 3) is 0.51 and ptE is 

(0.51 x $228.3 million), or $116.4 million in 

1990 and about $104 million in present value 

(r=0.04). Following this procedure, the present value of future costs is calculated to be 

$2,660 million. (Again, the reader is reminded 

that this "large number" is derived from 

plausible, "small" numbers for annual opporturuty costs incurred by individuals.) 

Finally, the present values of total future 

benefits are reduced by 26.6% in order to 

adjust for the exclusion of boundary rivers 

from the assessment. With this adjustment, 

the present value of total future benefits is 

calculated to be between $2,577 and $4,334 

million. These values can be roughly prorated to river basins using the percentages 

listed in Table 3(3).1 for future II other" costs. 

Conclusions 

The calculations of economic value measured in terms of total maximum willingnessto-pay exceeds value estimated in terms of 

replacement cost (recall the previous discussion of Figure 3(3).1 in Section IT). The presPage 15 

ent value calculations of total future benefits 

of salmon restoration range from about $2.6 

to $4.3 billion (constant $US in 1986). However, there are several important omissions 

that must be mentioned--omissions necessitated by a lack of necessary information and 

by constraints on the assessment. First, past 

benefits were not included because catch and 

effort data for the years 1960-1986 were not 

readily available. Second, contingencies 

associated with increased future scarcity of 

outdoor recreation relative to market commodities could not be included since relative 

values could not possibly be quantified. Third, 

incidental benefits derived from other fish 

populations which benefit from fish passages 

are unknown but could be sizeable [see 

McConnell and Strand (1981) for an example 

involving shad]. Similarly, the value of enhanced wiid-funs WqS not included. Fourth, 

population growth for people in New England during the next 25 years was not accounted for in the benefits calculation. Fifth, 

future benefits enjoyed by tourists from outside New England who partake in salmon 

fishing and observation are expected to be 

large, but are unknown. Sixth, the exclusion 

of boundary rivers results in a systematic 

26.6% underestimate of total benefits (approximately $1 to $1.6 billion depending on 

which approach is used). Finally, the assessment was truncated at 25 years even though 

the benefits of salmon recreation will continue well beyond the year 2012. This constraint omits an additional $2.6 to $4.1 billion 

in total benefits (present value) if the usual 50 . 

year time horizon is used. 

V. Summary 

Based on the best available information 

and with careful attention paid to economic 

theory, this working paper presented calculations of the total economic value of the 

proposed North Atlantic salmon restoration 

project. As mutually agreed upon, the calculations exclude boundary rivers, are prorated 
Page 16 

among the remaining river basins in New England, and are limited to the years 1960-2012. 

Total present and future benefits measured in terms of the present value of maximum 

willingness-to-pay are calculated to be between $2.6 and $4.3 billion (constant 1986 $US). In 

contrast, the present value of past (years 1960-1986) and present/future (years 1987-2012) 

opportunity costs are calculated to be $0.3 billion. As explained in Section IT, maximum 

willingness-to-pay is more appropriate than replacement costs as a measure of total economic 

benefits. 

References 

Arrow, K J. 1972. Criteria for social investment. In Economics oj the environment: Selected readings, eds. R. 

Dorfman and N. S. Dorfman, p.409-421. New York: W.W. Norton & Company. 

Boyle, K.J. and R.C. Bishop. 1985. The total value of wildlife resources: Conceptual and empirical issues. Paper 

presented to the Association of Environmental and Resource Economists Workshop on Recreation Demand 

Modeling, May 17-8, Boulder, Colorado. 

Brookshire, D.S., L.S. Eubanks, and A. Randall. 1983. Estimating option prices and existence values for wildlife 

resources. umd Economics 59: 1-1. 

Brown, G., Jr. and R. Mendelsohn. 1984. The hedonic travel cost approach. Review of Economics and Statistics 

66: 427-433 

Crutchfield, J.A. and K. Schelle. 1979. An economic analysis of Washington ocean recreational salmon fisheries 

with particular emphasis on the role played by the charter vessel industry. Seattle: University of Washington 

Department of Economics. 

Freeman, A.M. III. 1985. Supply uncertainty, option price, and option value. umd Economics 61: 176-181. 

Gittinger, J.P. 1982. Economic analysis of agricultural projects. Baltimore: Johns Hopkins University Press. 

Gordon, D., D.W. Chapman, and T.C. Bjornn. 1973. Economic evaluation of sport fisheries--What do they mean? 

Transactions oj the American Fisheries Society 102: 293-311. 

Kay, D.L., T.L. Brown, and D.J. Allee. 1987. The economic benefits of the restoration of Atlantic salmon to New 

England rivers. Final report to the U.S. Fish and Wildlife Service, Department of Natural Resources, Cornell 

University, Ithaca, NY. 

Lind, R.C. 1982. A primer on the major issues relating to the discount rate for evaluating national energy options. 

In Discounting for time and risk in energy policy, ed. R.C. Lind. Baltimore: Johns Hopkins University. 

Loomis, J.B. and W.G. Brown. 1984. The use of regional travel cost models to estimate the net economic value 

of recreational fishing at new and existing sites. In Proceedings of a workshop on making economic information more 

useful for salmon and steelhead production decisions. Portland, OR: NOAA National Marine Fisheries Service. 

NOAA Technical Memorandum NMFS F /NWR-8. 

McConnell, K.E. and I.E. Strand. 1981. Economic benefits associated with shad restoration on the Susquehanna 

River. Report prepared for the Maryland Power Plant Siting Program,Department of Natural Resources, Tawas 

S~ate Office Building, Anna~.'olis, MD. 

Meyer, P.A" W.G. Brown, and C-K. Hsiao. 1983. An updating of differential sport fish values for Columbia River 

salmon and steelhead. A report submitted to the National Marine Fisheries Service, Portland, OR. 

Samples, KC. and R.C. Bishop. 1982. An economic analysis of integrated fisheries management: the case of the 

Lake Michigan alewife and salmonid fisheries. Journal of Great Lakes Research 8: 593-602. 
2. 

n 

n 

~) 

n 

ic 

t 

T 

d 

e 

s 

s 

Page 17 

Sorg, C.F. and J.B. Loomis. 1986. Economic value of Idaho sport fisheries with an update on valuation 

techniques. North American Journal of Fisheries Management 6: 494-503. 

U.S. Fish and Wildlife Service. 1982. 1980 National survey of fishing, hunting, and wildlife-associated recreation. 

Washington, D.C.: U.S. Department of Interior, U.S. Government Printing Office. 

Appendix 3(3).1 

Projected Catch and Effort for Recreational Salmon Fishinga 

Adjustedb AdjustedC 

Year Catch Catch Effort Effort 

(thous) (thous) ,",,- (thous) (thous) 

1987 1.95 1.77 24.9 23.0 

1988 1.68 1.50 20.4 18.5 

1989 4.52 4.34 55.0 53.1 

1990 4.91 4.73 64.2 62.3 

1991 6.46 6.28 79.6 77.7 

1992 4.63 4.45 54.3 52.4 

1993 3.37 3.19 39.8 37.9 

1994 - 7.75 7.57 85.3 83.4 

1995 11.16 10.98 122.8 120.9 

1996 12.21 12.03 134.3 132.4 

1997 11.56 11.38 127.2 125.3 

1998 9.62 9.44 105.8 103.9 

1999 8.21 8.03 90.3 88.4 

2000 13.00 12.82 143.0 141.1 

2001 12.18 12.00 134.0 132.1 

2002 8.64 8.46 95.0 93.1 

2003 9.99 9.81 109.9 108.0 

2004 8.56 8.38 94.2 92.3 

2005 13.26 13.08 145.9 144.0 

2006 9.60 9.42 105.6 103.7 

2007 12.11 11.93 133.2 131.3 

2008 11.27 11.09 124.0 122.1 

2009 11.80 11.62 130.0 128.1 

2010 11.80 11.62 130.0 128.1 

2011 11.80 11.62 130.0 128.1 

2012 11.80 11.62 130.0 128.1 

aSource: Dan Kimball, U.S. Fish and Wildlife Service, Newton Comer, MA. The USFWS projections end in year 2008. The 

numbers for years 2009 to 2012 were extrapolated from the trends. 

bCatch projections were reduced by 180 fish each year to adjust for catch of wild salmon 

~ffort projections were reduced by 1,900 days each year to adjust for effort on wild salmon. 
Page 18 

U.s. Fair Share Working Paper Number 3(4) 

Value of Restored Adult Salmon Returning to Home Waters 

I. Introduction 

This paper presents calculations of the 

"value" of adult salmon returning to United 

States home waters based on the total costs of 

prod uction. As directed, calculations are 

limited to the years 1960 to 2012, or 25 years 

from the present. Also, the calculations are 

limited to the direct economic, or opportunity costs of salmon restoration (public and 

private costs of capital, operations, maintenance, research, and administration) and the 

value of forgone hydroelectric power. The 

adherence to economic theory avoids double 

counting and excludes mere transfer payments among Americans. [See Sections II 

and III in the previous U.S. Fair Share Working Paper No. 3(3) for a discussion of the 

economics perspective used in cost and benefit analyses and for background information 

on the cost calculations that are used here.] 

Finally, and unlike in Working Paper No. 

3(3), the international rivers, St. Croix, Aroostock, Med uxnekeag, and Prestile were included in these calculations since only average ratios of total costs to adult returns are 

reported (the assumption being that average 

cost per return is approximately equal regardless of river basin). 

II. Results and Discussion 

Costs 

Section III in U.S. Fair Share Working 

Paper No. 3(3) contains calculations of past 

and future opportunity costs of salmon restoration in New England. Public costs are 

comprised of opportunity costs for construction, operations and maintenance, stock assessments, research, enforcement, fish culture, trapping and transportation, and personnel by the Fish and Wildlife Service, the 

Forest Service, the National Marine Fisheries 

Service, and the states of Connecticut, Massachusetts, and Maine. Private costs are incurred by utility companies for construction 

and operations and maintenance of fish passages. Finally, directing water away from 

hydroelectric dams to fish passages results in 

a further oppprtunity cost to society of foregone hydroefectric power. 

The simple sums of total past (years 1960-

1986) and current/future (years 1987-2012) 

opportunity costs of salmon restoration (including boundary rivers) are reported in Table 

3(4).1. However, it is routine and appropriate for economists to use the present value 

criterion when aggregating past and future 

opportunity costs to a present value since this 

approac accounts for temporal aspects of 

opportunity costs [see Section III of U.S. 

Working Paper No. 3(3)]. Accordingly, past 

opportunity costs are grown to their present 

value with the formula: 

t=T 

3(4).la PVl987 = L DC t (1 + r)t; 

t=o 

where. PVl 987 is present value expressed in 

the current year 1987, DC tis the opportunity 

cost in time period t (t = 1987 - year), r is the 

social discount rate in decimal form (for" 

example, 4% is 0.04), and T is the terminal 

time period which in this case is the most 

distant year in the past (for example, 27 for 

the year 1960). Similarly, the present value of 
Page 19 

Table 3(4).1. Opportunity costs of salmon restoration (constant $US million in 1986) 

Aggregation Method Past 

27 years 

(1960 to 1986) 

Simple addition 

across years $104.2 

Present value $191.6 

Table 3(4).2. Returns of adult stocked salmon 

Past 

27 years 

(1960 to 1986) 

31,770 

a series of current and future opportunity 

costs is calculated by 

t=T 

3(4).lb PV1987 = I OCt/(l + r)t; 

t=O 

where T is the terminal future year (that is, 25 

for the year 2012, or 2012-1987). The social 

discount rate excluding inflationary expectations used in this calculation is 4% (for example, r=0.04). Using formulae (la) and (lb), 

the present value of total past and future opportunity costs of restoration are calculated 

to be $191.6 and $149.7 million, respectively 

[Table 3(4).1]. 

Adult returns 

Approximations of adult stocked salmon 

. returning to rivers in New England are listed 

in Table 3(4).2. ICES (1987) estimates the 

Current/Future 

26 years 

(1987 to 2012) 

$204.3 

$149.7 

Current/Future 

26 years 

(1987 to 2012) 

678,571 

Total 

53 years 

(1960 to 2012) 

$308.5 

$341.3 

Total 

53 years 

(1960 to 2012) 

710,341 

number of stocked salmon returning between 

1967 and 1986 to be 46,429.1 For this paper, 

annual returns for the previous seven years 

(1960 to 1966) are assumed to be equal to 

mean returns between 1967 and 1971 (that is, 

733), bringing the total for past returns to 

about 51,560. This figure was reduced by 733 

for each year (by about 19,790) to 31,770 as an 

adjustment for returns of native salmon since 

these salmon can not be attributed to the 

restoration program [Table 3(4).2]. 

In contrast, the U.S. Fish and Wildlife 

Service projects future returns of salmon for 

their proposed restoration project between 

the years 1987 and 2012 at approximately 

697,629 (Dan Kimball, personal communication). This figure was also reduced by about 

733 fish annually in order to adjust for returns of native salmon. [Appendix 3(4).1 

contains the U.S. Fish and Wildlife Service's 

projections for annual adult salmon runs.] 

1 This estimate is of the total United states run size (one sea-winter salmon) including the estimated run in rivers with and without traps 

and corrected for exploitation and non-reporting (Ref: C.M. 1987/ Assess: 12 table 6, p. 60) 
Page 20 

Table 3(4).3. Total average costs of adult stocked sahnon returning to rivers in New England (constant $US in 1986) 

Past 

27 years 

(1960 to 1986 ) 

$6,030 

Accordingly, future returns of stocked salmon 

between the years 1987 and 2012 are projected to be about 678,571 [Table 3(4).2]2. 

Average Costs 

It is difficult to select a single cost index to 

represent the economic value of salmon runs. 

FiJ;st [and as discussed in detail in Sections II 

and IV of U.S. Working Paper No. 3(3)], 

economic benefits are best measured in terms 

of society's maximum willingness-to-pay for-

-not opportunity costs of--restoration. Second, it is always desirable from society's 

point of view to minimize the opportunity 

costs of a public project such as salmon restoration. Hence, low restoration costs should 

not suggest that the project has low value. 

Third, there are numerous ways to prorate 

fixed, capital costs across salmon production 

depending on the time frame and expect~­

tions of uncertain, future salmon runs. Also, 

unit costs of production will vary considerably depending on whether one begins with 

total costs (including fixed, capital costs) or 

total variable costs and on whether average 

or marginal opportunity costs are of interest. 

Selection of a particular type of analysis 

depends on the specific question being asked. 

With these difficulties in mind, the most helpful index of the opportunity cost of production for discussion purposes probably is the 

ratio of total opportunity costs of restoration 

to total returns of adult stocked salmon--

"total average costs of returns." Two ratios 

are reported in Table 3(4).3. Between 1960 

and 1986 "total average cost" was approxiTotal 

53 years 

(1960 to 2012) 

$480 

mately $6,030 [constant 1986 $US; combine 

Tables 3(4).1 and 3(4).2]. In contrast, "total 

average cost" during the entire 53 year period from 1960 to 2012 (inclusive) is about 

$480. The latter index is less because of 

expected increases in returns during the next 

25 years [see Appendix 3(4).1]. 

Any projection of fish population size is 

subject to considerable uncertainty. For example, the pr9jected run of adult salmon for 

the year 1986 '(made in~ 1984) was approximately2.4 times greater than actual estimated 

returns for that year. To illustrate the potential effect of such uncertainty on cost ratios 

consider the possibility that salmon runs will 

be only half the size projected by the U.S. Fish 

and Wildlife Service for their proposed restoration program. In this case, the cost ratio for 

the years 1960 to 2012 increases to $882. 

References 

International Council for the Exploration of the Sea 1987. 

Report of the Working Group on North Atlantic Salmon. 

C.M. 1987/ AsseSs: 12. Copenhagen, 9-20, 1987. 

1 Projected returns of adult stocked salmon are inherently uncertain, particularly projections over25 years. Certainly, part of the uncertainty concerns the unknown outcome of the Fair Sharing talks. 

r 
~-

ls 

(-

~r 

id 

1-

~s 

11 

h 

)-

~r 

7. 

n. 

Year 

1987 

1988 

1989 

1990 

1991 

1992 

1993 

1994 

1995 

1996 

1997 

1998 

1999 

2000 

2001 

2002 

2003 

2004 

2005 

2006 

2007 

2008 

2009 

2010 

2011 

2012 

Appendix 3(4).1 

Run Size Projections for New England Riversa 

Run Size 

6,038 

7,314 

8,846 

9,356 

12,029 

12,815 

13,170 

13,880 

15,074 

23,534 

24,225 

24,380 

24,718 

26,328 

37,038 

37,679 

37,782 

38,047 

40,368 

47,497 . 

47,520 

37,021 

37,442 

38,023 

38,760 

38,745 

Adjusted Run Sizeb 

5,305 

6,581 

8,113 

8,623 

11,2% 

12,082 

12,437 

13,147 

14,341 

22,801 

23,492 

23,647 

23,985 

25,595 

36,305 

36,946 

37,049 

37,314 

39,635 

46,764 

46,787 

36,288 

36,709 

37,290 

38,027 

38,012 

Page 21 

aSource: Dan Kimball, U.S. Fish and Wildlife SeIVice, Newton Comer, MA (personal rommunication). The run size 

numbers were approximated from a graph. Values for the years 2010 to 2012 were approximated from the reported 

trend. 

bAs an adjustment for returns of native salmon, the historical trend of about 733 fish was subtracted from projected run 

sizes. 
Page 22 

u.s. Fair Share Working Paper Number 3(5) 

Further Socioeconomic Considerations of North Atlantic Salmon 

Restoration in the United States 

I. Introduction 

This working paper annotates several 

socioeconomic factors related to North Atlantic salmon restoration in the United States 

which are not covered in U.S. Fair Share 

Working Paper Nos. 3(3) and 3(4). Although, 

most of these factors are interrelated and 

dependent on results contained in U.S. Fair 

Share Working Paper No. 3(3), they are not 

forced into an unnecessarily long and continuous discussion. [U.S. Fair Share Working 

Paper No. 3(3) should be read before this 

paper.] Instead, they are brought to the 

reader's attention in highlighted form. As in 

the two other economics working papers for 

the United States, the best available information is used in this report. 

II. Additional Socioeconomic Factors Related to Salmon Restoration 

(1) Additional Opportunity Costs and 

Benefits 

The cost and benefit analyses in Sections 

III and IV (respectively) of U.S. Fair Share 

Working Paper No. 3(3) exclude the international rivers, St. Croix, Aroostock, Meduxnekeag, and Prestile, and are restricted to 

a 25 year time horizon including year 2012. 

However, from a purely economics perspective, an analysis of a project's benefits (or 

costs) should not be limited artificially in 

space or time. Accordingly, the present value 

of past and future costs for the excluded river 

basins between the years 1960 and 2012 is 

apprOximately $37 million, and the present 

value of the additional total future benefits 

between 1987 and 2012 is calculated to range 

between $3.5 and $5.9 billion [constant $US 

in 1986; see U.S. Fair Share Working Paper 

No. 3(3) for detailed information].· 

Concerning the time horizon, the present 

value of additional future opportunity costs 

(non-capital public and private costs and 

foregone hydroelectric power) of salmon 

restoration b~tween the years 2012 and 2037 

under a 50 year time horizon (typical of water 

resource project evaluations) is $36.3 million 

for all river basins planned for restoration 

($9.7 million prorated to excluded rivers). 

Similarly, the present value of additional ~ture 

benefits under the 50 year time horizon are 

calculated to range from $1.6 to $2.5 billion 

for all river basins ($0.4 to $0.7 billion prorated to excluded rivers). These calculations 

use a 4% rate 'of social discount (which excludes inflationary expectations) and assume 

conservatively that salmon runs will not increase beyond levels projected for the year 

2012 by the U.S. Fish and Wildlife Service 

(Dan Kimball, personal communication). 

(2) Economic Efficiency of Public Investment into Salmon Restoration 

A vital consideration of federal regulatory 

actions and water resources projects is the 

allocative efficiency of public investments. 

In conventional terms, it is important to know 

whether the benefits of a project exceed the 

opportunity costs of resources used in project 

development. This issue is different from a 

separate assessment of the total opportunity 
costs and total (vis-a-vis net) benefits of salmon 

restoration as reported in U.S. Fair Share 

Working Paper No. 3(3). 

The successful completion of the salmon 

restoration project as described and projected 

by the U.S. Fish and Wildlife Service may in 

fact be an efficient use of productive resources. 

Based on calculations already reported in 

Section IV of U.S. Fair Share Working Paper 

No. 3(3), the net present value of salmon 

restoration between the years 1987 and 2012 

is projected to be positive regardless of whether 

boundary rivers are excluded: $0.7 to $3.1 

billion for all river basins and $0.5 to $2.3 

billion when boundary rivers are excluded 

(constant $US in 1986). These calculations 

begin with information on the present value 

of total net benefits reported in Table 3(3).5 in 

U.S. Fair Share Working Paper No. 3(3) and 

subtract the present value of project opportunity costs found in Table 3(3).4 of the same 

working paper. Net present values would be 

greater with the 50 year time horizon because 

capital costs after the year 2010 are expected 

to be zero (Dan Kimball, U.S. Fish and Wildlife Service, personal communication), but 

annual benefits remain at their highest level 

once salmon runs reach and maintain their 

peak size. 

(3) Economic Impacts 

Economic impact analysis, unlike benefitcost analysis, describes how expenditures 

on, say, recreation influence income, production, and employment in related markets. 

Thus, economic impact analysis is more directly related to economic activity than to 

economic value. [See Section II in U.S. Fair 

Share Working Paper No. 3(3) for a brief 

discussion of the distinction between financial and economic/ social benefit analysis.] 

In particular, anglers not only buy fishing 

eqUipment, but they also buy gasoline, food, 

and lodging. Those who travel to observe 

Page 23 

salmon runs also incur significant travel-related costs. From a financial perspective, the 

expenditures have further local and regional 

impacts in markets that supply these recreation service industries. The extent of the 

impacts on regional income and employment 

are approximated with economic multipliers. 

Calculations of potential economic impacts 

related to North Atlantic salmon restoration 

are derived from expenditures already projected for recreationists in Table 3(3).7 in U.S. 

Fair Share Working Paper No. 3(3) and from 

multipliers reported by Radtke (1984) for 

recreational salmon fishing in the state of 

Oregon. Although no economic impact analysis of salmon recreation has been conducted 

for New England, the total output (2.85), 

income (1'33), and ,employment (0.000078) 

coefficients for direct, indirect, and induced 

effects are similar to other recreational fisheries in the United States [compare to Schuler 

(19870]. 

Annual expenditures by recreationists who 

will either fish for salmon or who are likely to 

observe salmon runs were projected in Section IV of U.S. Working Paper No. 3(3) to be 

about $228.3 million (constant $US in 1986) 

by the year 2012. Expenditures before this 

year are likely to be less since the stocks will 

be growing during this time, but expenditures after this year will be greater as the 

stocks increase toward their projected size. 

Hence, $228.3 million is being used as a representative annual figure. 

Finally, the expenditure figure is multiplied by the respective total impact coefficients to calculate potential gross annual 

economic impacts attributable to salmon 

recreation: (1) a $650.7 million output impact; 

(2) a $303.6 million income impact; and (3) 

17,807 jobs. These annual projections can be 

reduced by 26.6% to exclude boundary rivers. 
I 

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References 

Radtke, H. 1984. Estimating eronomic impacts associated with recreational and commercial salmon and steelhead fishing. 

In Proceedings of a workshop on making economic information more useful for salmon and steelhead production decisions. Portland, 

OR: NOAA National Marine Fisheries Service. Technical Memorandum NMFS F /NWR-8. 

Schuler, F.M. 1987. The economics of marine recreational fishing. Rockville, MD: NOAA/OAR. Sea Grant Research 

Advances, Research Note 11.