1. On the Value of Valuing Recreational Fishing B. Kriström Department of Forest Economics SLU-Umeå, Sweden

2. Starting points Fishing is a significant recreational activity in the Nordic countries Fishing is a significant recreational activity in the Nordic countries There is a need for information about the benefits and costs of improving fishing conditions There is a need for information about the benefits and costs of improving fishing conditions 1. Shed light on the trade-offs between competing uses of the resource 1. Shed light on the trade-offs between competing uses of the resource 2. Shed light on the efficiency/equity dimensions (who wins? Who loses?) 2. Shed light on the efficiency/equity dimensions (who wins? Who loses?) 3. Shed light on desirability of management options within an existing fishing area 3. Shed light on desirability of management options within an existing fishing area

3. Outline Preliminaries Preliminaries What is it that we want to measure? What is it that we want to measure? What is it that we can measure? What is it that we can measure? What is it that we have measured? What is it that we have measured? Decision-making Decision-making Speculations about the future Speculations about the future

4. Valuation is difficult.. ”It may be true that it is often very difficult for the individual to judge to what extent a proposed expansion of a certain state operation…would provide him …with benefits corresponding to the sacrifice of having to pay a given amount of new taxes… ”It may be true that it is often very difficult for the individual to judge to what extent a proposed expansion of a certain state operation…would provide him …with benefits corresponding to the sacrifice of having to pay a given amount of new taxes… …This much is certain: If the individual is unable to form an even approximately definite judgment on this point, it is a fortiori impossible for anyone, even if he be a statesman of genius, to weigh the whole community's utility and sacrifice against each other.” (Knut Wicksell (1896) …This much is certain: If the individual is unable to form an even approximately definite judgment on this point, it is a fortiori impossible for anyone, even if he be a statesman of genius, to weigh the whole community's utility and sacrifice against each other.” (Knut Wicksell (1896)

5. Preliminaries Valuation: One of the largest activities in environmental economics Valuation: One of the largest activities in environmental economics 650+ studies in Europe, 5000+(?) worldwide 650+ studies in Europe, 5000+(?) worldwide Mostly academic studies, but taking off: Mostly academic studies, but taking off: Organizations EIB, EU, EPA Organizations EIB, EU, EPA Research (co-operation) Research (co-operation) Damage assessment (USA) Damage assessment (USA)

6. Valuation Valuation: a web of science Valuation: a web of science Exercise in integrating disciplines like economics, psychology, survey research, statistics… Exercise in integrating disciplines like economics, psychology, survey research, statistics… Strong links between the subjects Strong links between the subjects

7. Valuation methods Direct methods -- CVM -- CE Direct methods -- CVM -- CE Indirect methods -- Hedonics -- Travel cost -- Avoidance cost __... Indirect methods -- Hedonics -- Travel cost -- Avoidance cost __...

8. What is it that we want to measure? Money Measures of Welfare Change Money Measures of Welfare Change Money: Money: – A convenient unit, but can use other units. Welfare: – different connotations, but clearly defined in welfare economics Welfare: – different connotations, but clearly defined in welfare economics Change: – resources cannot have value in the abstract Change: – resources cannot have value in the abstract

9. Why do we want to measure this? Welfare economic perspective: if sum(WTP) > cost, a project is welfare improving (Kaldor- Hicks) Welfare economic perspective: if sum(WTP) > cost, a project is welfare improving (Kaldor- Hicks) Assumes: -- underlying instrument elicits consistent WTP. Theory provides restrictions here. -- income distribution is socially optimal in the status quo Assumes: -- underlying instrument elicits consistent WTP. Theory provides restrictions here. -- income distribution is socially optimal in the status quo Conclusion: Any valuation study must be based on a sound theoretical base Conclusion: Any valuation study must be based on a sound theoretical base

10. Implications for valuing recreational fishing We must answer the ”what do we want value” question first We must answer the ”what do we want value” question first Example: Cost of license/Kg Example: Cost of license/Kg Marginal versus average value Marginal versus average value Often interested in small perturbations -- what is the value of a ”small” improvement? Often interested in small perturbations -- what is the value of a ”small” improvement? Large perturbations are much more difficult to value (e.g. moratorium) Large perturbations are much more difficult to value (e.g. moratorium)

11. Valuing recreational fishing: some observations Theoretical points -- Renewable resource -- Resource dynamics and ecology -- Valuation methodology much developed Theoretical points -- Renewable resource -- Resource dynamics and ecology -- Valuation methodology much developed Empirical points -- Very suitable, in principle, for valuation -- scenarios ”easy” to explain and understand -- Previous choice experience often makes valuation easier for respondent -- Response rates Empirical points -- Very suitable, in principle, for valuation -- scenarios ”easy” to explain and understand -- Previous choice experience often makes valuation easier for respondent -- Response rates

12. Types of Applications Small scale: -- Cost-benefit analysis ”small project” -- Green Accounting at the firm level Small scale: -- Cost-benefit analysis ”small project” -- Green Accounting at the firm level Large scale: -- Green NNP -- Genuine Savings -- Expanded notions of wealth -- Global Ecosystem Value (Costanza et al) Large scale: -- Green NNP -- Genuine Savings -- Expanded notions of wealth -- Global Ecosystem Value (Costanza et al)

13. What is it that we can measure? Can we put values on just about everything? Can we put values on just about everything? Theory: yes Theory: yes Common sense: no Common sense: no Small-scale: pros and cons relatively well-known Small-scale: pros and cons relatively well-known Large-scale: -- Are standard methods really applicable? -- Need more applications Large-scale: -- Are standard methods really applicable? -- Need more applications

14. Implications for valuing recreational fishing Opinion: 1. focus small-scale projects 2. focus active population (but what about ”existence values?”) 3. Involve broad spectrum of scientists 4. Spend lots of time on planning the study Opinion: 1. focus small-scale projects 2. focus active population (but what about ”existence values?”) 3. Involve broad spectrum of scientists 4. Spend lots of time on planning the study This necessarily limits the scope for valuation studies. Perhaps I have too many scars! This necessarily limits the scope for valuation studies. Perhaps I have too many scars!

15. What is it that we have measured? Mostly: Small-scale focusing benefits -- useful shift now towards ”losers” + ”indifferent” Mostly: Small-scale focusing benefits -- useful shift now towards ”losers” + ”indifferent” Green Accounting Green Accounting Environmental Taxes (UK) Environmental Taxes (UK) Litigation Litigation

17. Decision-making Indirect Influence probably most important Indirect Influence probably most important Direct influence: significant variance across countries Direct influence: significant variance across countries US-Europe US-Europe -- Legal system -- Legal system -- mean/median -- mean/median

18. The Future: Speculations Direct Methods will Dominate (survey of European Experts, + sample of dissertations projects) Direct Methods will Dominate (survey of European Experts, + sample of dissertations projects) Demand Factors -- Preference information -- New Areas of Economics -- Economic Progress Demand Factors -- Preference information -- New Areas of Economics -- Economic Progress Supply Factors Supply Factors

19. Bottom line Obvious need for input from many different subjects Obvious need for input from many different subjects First: ”What is it that we want to measure?” First: ”What is it that we want to measure?” Second ”Relative to what is the project an improvement?” -- Avoid valuing in the abstract -- Useful if project is a part of a CBA Second ”Relative to what is the project an improvement?” -- Avoid valuing in the abstract -- Useful if project is a part of a CBA

20. Example WTP for small-scale project using Contingent valuation WTP for small-scale project using Contingent valuation Project: Project: Cost-benefit rule (Avoid double-counting, etc) -- Extent of the market? [Local, regional, Nordic or global?] -- Aggregation (mean or median?) Cost-benefit rule (Avoid double-counting, etc) -- Extent of the market? [Local, regional, Nordic or global?] -- Aggregation (mean or median?) Scenario development -- Description (mail, video…) -- Credible & plausible scenario? -- Payment vehicle (tax, lump-sum…) -- Type of Valuation question (binary, open-ended…) -- Should the household or individual pay? Scenario development -- Description (mail, video…) -- Credible & plausible scenario? -- Payment vehicle (tax, lump-sum…) -- Type of Valuation question (binary, open-ended…) -- Should the household or individual pay? Delivery modes -- mail, interview, phone or some combination? -- Advantages and disadvantages Delivery modes -- mail, interview, phone or some combination? -- Advantages and disadvantages