““Conflicts and Choices in Biodiversity Conflicts and Choices in Biodiversity Preservation,” by Metrick & WeitzmanPreservation,” by Metrick & Weitzman

IntroductionIntroduction What is biodiversity?What is biodiversity? How is it measured?How is it measured? What are we optimizing?What are we optimizing? Outline of paper:Outline of paper:

– Constrained optimization problem w/ biodiversity in Constrained optimization problem w/ biodiversity in objective functionobjective function

– Solution: cost-benefit ranking criterionSolution: cost-benefit ranking criterion– Positive “revealed preference” analysis of US. Fish & Positive “revealed preference” analysis of US. Fish &

Wildlife (FWS) use of the Endangered Species Act (ESA)Wildlife (FWS) use of the Endangered Species Act (ESA)

Economics of Diversity Economics of Diversity PreservationPreservation

Conceptualize a species as if it were a library.Conceptualize a species as if it were a library. Books in the library are like genes.Books in the library are like genes. Library is at some risk of burning down and losing some Library is at some risk of burning down and losing some

books. books. 2 classes of benefits:2 classes of benefits:

– Direct utility from each libraryDirect utility from each library– Indirect utility for overall “diversity” of library books, i.e. Indirect utility for overall “diversity” of library books, i.e.

genesgenes How will Noah decide which species to put on the Ark?How will Noah decide which species to put on the Ark? Noah must weigh expected gains against costNoah must weigh expected gains against cost

Economics of Diversity PreservationEconomics of Diversity Preservation

Four concepts:Four concepts:– DDii = distinctiveness of i = how unique or different is i = distinctiveness of i = how unique or different is i– UUii = direct utility of i = how much we like or value i per se = direct utility of i = how much we like or value i per se PPii = by how much can the survivability of i actually be = by how much can the survivability of i actually be

improvedimproved– CCii = how much does it cost to improve the survivability of i = how much does it cost to improve the survivability of i

by by PPii

– Use a priority ranking base on the criterion:Use a priority ranking base on the criterion:– RRii = [D = [Dii + U + Uii](](PPi/i/CCii))– It will be difficult to measure these variables, but this give us It will be difficult to measure these variables, but this give us

a starting point for thought.a starting point for thought.

The ESA: What Are We Preserving?The ESA: What Are We Preserving?

Four factors to consider: Four factors to consider: – 1) utility1) utility– 2) distinctiveness2) distinctiveness– 3) survivability3) survivability– 4) cost of enhancing survivability4) cost of enhancing survivability

Which factors actually matter in practice?Which factors actually matter in practice? Find bureaucratic variables as proxies for Noah’s Find bureaucratic variables as proxies for Noah’s

ranking and regress them against proxy variables ranking and regress them against proxy variables for utility, distinctiveness, survivability and cost.for utility, distinctiveness, survivability and cost.

The ESA: What Are We Preserving?The ESA: What Are We Preserving? 11stst proxy variable for Noah’s ranking: log of proxy variable for Noah’s ranking: log of

number of favorable public commentsnumber of favorable public comments 22ndnd proxy variable for Noah’s ranking : listing proxy variable for Noah’s ranking : listing

decision itself . decision itself . – Dummy variable = 1 if listed, 0 otherwise.Dummy variable = 1 if listed, 0 otherwise.

33rdrd proxy variable for Noah’s ranking : public proxy variable for Noah’s ranking : public money spent from 1989 to 1993 on recovery of money spent from 1989 to 1993 on recovery of that species. 4 species have had over $50 million that species. 4 species have had over $50 million spent on each of them: chinook salmon, red-spent on each of them: chinook salmon, red-cockaded woodpecker, northern spotted owl, and cockaded woodpecker, northern spotted owl, and bald eagle. Roughly 1/3 of $914 million spent on bald eagle. Roughly 1/3 of $914 million spent on all species. all species.

Proxies for 4 key decision variables:Proxies for 4 key decision variables:

Utility : charismatic megafauna, i.e., large Utility : charismatic megafauna, i.e., large popular animals.popular animals.– Use log of length of species. Also use dummy Use log of length of species. Also use dummy

variables for each taxonomic class w/in variables for each taxonomic class w/in vertebrates: MAMMAL, BIRD, REPTILE, vertebrates: MAMMAL, BIRD, REPTILE, AMPHIBIAN, & FISH.AMPHIBIAN, & FISH.

Diversity: Diversity: – UNIQUE dummy variable =1 if species is sole UNIQUE dummy variable =1 if species is sole

representative of its genus; ) otherwiserepresentative of its genus; ) otherwise– Also use SUBSPECIESAlso use SUBSPECIES

Proxies for 4 key decision variables:Proxies for 4 key decision variables:

Survivability: Nature Conservancy, ranks Survivability: Nature Conservancy, ranks comprehensive list of all U.S vertebrate comprehensive list of all U.S vertebrate species of scale from 1 (most endangered ) species of scale from 1 (most endangered ) to 5 (least endangered); ENDANGERMENTto 5 (least endangered); ENDANGERMENT

Cost: CONFLICT with development Cost: CONFLICT with development variable from FWS (part of PRIORITY variable from FWS (part of PRIORITY variable used by FWS). CONFLICT is a variable used by FWS). CONFLICT is a dummy variable = 1 if the species is in dummy variable = 1 if the species is in conflict with development; 0 otherwise. conflict with development; 0 otherwise. Priority runs from 1 (highest priority) to 18 Priority runs from 1 (highest priority) to 18 (lowest priority). (lowest priority).

Proxies for 4 key decision variables:Proxies for 4 key decision variables:

LNCOMMENTS results:LNCOMMENTS results:– Only ENDANGERMENT is statistically Only ENDANGERMENT is statistically

significant, but has wrong sign (positive), significant, but has wrong sign (positive), higher endangerment score (meaning less higher endangerment score (meaning less endangered) receives more comments. endangered) receives more comments. Surprising findingSurprising finding

LISTED results:LISTED results:– MAMMAL & BIRD coefficients are positiveMAMMAL & BIRD coefficients are positive– AMPHIBIAN coefficient is negativeAMPHIBIAN coefficient is negative– UNIQUE positive coefficientUNIQUE positive coefficient– SIZE has positive coefficientSIZE has positive coefficient– ENDANGERMENT has correct negative signENDANGERMENT has correct negative sign

Proxies for 4 key decision variables:Proxies for 4 key decision variables:

LNSPEND 3LNSPEND 3rdrd column results: column results:– SIZE coefficient is large and significant. 0.86 SIZE coefficient is large and significant. 0.86

is an elasticity. Interpretation: a 8.6 percent is an elasticity. Interpretation: a 8.6 percent increase occurs for a 10 percent increase in increase occurs for a 10 percent increase in size. size.

– ENDANGERMENT is statistically significant, ENDANGERMENT is statistically significant, but has wrong sign (positive) again, higher but has wrong sign (positive) again, higher endangerment score (meaning less endangered) endangerment score (meaning less endangered) receives more funding. Surprising findingreceives more funding. Surprising finding

– REPTILE has negative coefficientREPTILE has negative coefficient– SIZE has positive coefficientSIZE has positive coefficient

Proxies for 4 key decision variables:Proxies for 4 key decision variables:

LNSPEND 4LNSPEND 4thth column results: column results:– SIZE coefficient is large and significant. 0.86 is an SIZE coefficient is large and significant. 0.86 is an

elasticity. 8.6 percent increase for a 10 percent increase in elasticity. 8.6 percent increase for a 10 percent increase in size. size.

– ENDANGERMENT is statistically significant, but has ENDANGERMENT is statistically significant, but has wrong sign (positive) again, higher endangerment score wrong sign (positive) again, higher endangerment score (meaning less endangered) receives more funding. (meaning less endangered) receives more funding. Surprising finding.Surprising finding.

– PRIORITY has correct negative sign.PRIORITY has correct negative sign.– CONFLICT has positive sign which is not consistent with CONFLICT has positive sign which is not consistent with

cost-benefit formula. Perhaps the intelligence –gathering cost-benefit formula. Perhaps the intelligence –gathering and policy-making arms of the FWS should be separated. and policy-making arms of the FWS should be separated.

SummarySummary

1) People weigh utility the most heavily.1) People weigh utility the most heavily. 2) Survivability, diversity, and cost do 2) Survivability, diversity, and cost do notnot

seem to play their “expected” role in seem to play their “expected” role in spending decisions. spending decisions.

3) Scientific part of the priority system 3) Scientific part of the priority system seems to be influenced by same subjective seems to be influenced by same subjective factors that influence spending. factors that influence spending.