Geoscience Reference
In-Depth Information
tive (such as pollution), this is an example of a positive externality value.
The classic example of a positive externality is lighthouses. They save
lives and cargoes by warning ships of lurking dangers. But lighthouse
keepers cannot reach out to collect fees from ships. Even if they could,
it would serve no social purpose for them to exact an economic penalty
on ships that use their services. The light can be provided most effi -
ciently free of charge, for it costs no more to warn 100 ships than to
warn a single ship of the nearby rocks.
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Species and ecosystems are biological analogies to lighthouses. The
value of the Arctic fox or the Great Barrier Reef cannot be captured by
charging people to visit and observe them. The gain from preserving
these endangered systems is primarily the nonuse pleasure of having
such a beautiful animal or place on earth. Polar bears might have some
monetary touristic value to Arctic communities, but that is likely to be
miniscule relative to their externality values.
The diffi culty comes in attempting to estimate the externality value
of endangered species and ecosystems. Perhaps in some fantastic world,
there would be a market for the ability to see an Arctic fox or visit the
Great Barrier Reef. I have done neither, but I might pay $100 to be as-
sured that they would be available in the future. Because nothing re-
motely like such a market exists, however, we have no reliable scale to
measure the gain from protecting these things for the future.
In the absence of markets, environmental economists have de-
vised methods to simulate missing markets. The most important tech-
nique is known as contingent valuation methodology (CVM), which
estimates the value of nonmarket activities and resources. CVM uses
surveys of a representative sample of the relevant population to ask
what people would be willing to pay for a given good or service. These
are essentially highly structured surveys in which people are asked,
in effect, “What would you pay to protect or preserve the Arctic fox?”
or “What is it worth to you to be able to visit the Great Barrier Reef in
the future?”
We have seen that climate change may affect the health of ecosys-
tems. Here is a specifi c example of how a CVM might be used to deter-
