Economics of the Endangered Species Act

I’m reading the article by Gardner M. Brown Jr. and Jason F. Shogren (Journal of Economic Perspectives, Vol 12, No 3). Here is some of what I highlighted:

The Endangered Species Act of 1973 addresses the market failure associated with the unpriced social benefits of such species. […] Although the benefits of protecting endangered species accrue to the entire nation, a significant fraction of the costs imposed by the Act are borne by private landowners [p. 3].

Many natural scientists and ecologists view the methods and mindset of economists with grave suspicion. […] [E]conomists can help to raise the chances that when society imposes and bears costs for protecting endangered species, it is more likely to succeed [p. 4].

The intention of the Endangered Species Act is to save all species. There is no explicit recognition of relative costs and benefits in the 1973 Act. […] Recovery plans are typically designed with little regard for total or marginal economic benefits relative to costs, nor with much regard for ecological-economic interactions, including the relative value of information that allows policymakers to discriminate among alternative recovery plans [p. 6].

Since owning land which is hospitable to an endangered species can dramatically circumscribe any development plans for that land, owners have an incentive to destroy the habitat before listing occurs, sometimes known as the “shoot, shovel and shut-up” strategy. [p. 7].

Preferences are not an ingredient of science [p. 8].

[O]nly one with modest expectations would give the Endangered Species Act a high performance rating. Since the inception of the Act in 1973, 11 species of more than 1,000 listed [as threatened or endangered] have recovered and have been removed from the list […] [L]ess than 10 percent of the listed species have exhibited an improved status and the status of four times that amount is declining. […] The ratio of declining species to improving species is 1.5 to 1 on federal lands, and 9 to 1 on private lands [p. 10].

Most of the services provided by the endangered species, including their corresponding levels of biological diversity, are not priced by the market. […] Essentially, the approach of the Act that prohibits any activity that harms a listed species puts a very large or infinite value on avoiding extinction. This view places endangered species beyond the reach of economic tradeoffs, and the economist is relegated to helping find the least cost solution to achieve a biological-based standard [p. 10].

A recent survey found that over 70 percent of Scottish citizens were completely unfamiliar with the meaning of biodiversity [see article for reference], and there is little reason to expect substantially more knowledge in the United States [reference, see article; pp. 12-13].

The opportunity costs of the Endangered Species Act include the foregone opportunities due to restrictions on the use of property due to listings, designation of critical habitat, and recovery plans.  Opportunity costs also include the reduced economic rents from restricted or altered development projects, agriculture production, timber harvesting, minerals extraction, recreation activities, wages lost by displaced workers who remain unemployed or who are re-employed at lower wages, lower consumer surplus due to higher prices, and lower captial asset value [p. 13].

[E]conomists can frame the endangered species debate in benefit-cost terms. Such calculations are bound to be uncomfortable and controversial, especially since the overwhelming fraction of benefits from the preservation of endangered species are likey to be in the nature of public goods whose benefits are received in the future. […] Economists naturally seek criteria and conduct analysis which permit a discrimination among species in recognition of the existence of budget constraints. Of course, anyone who offers analysis which leads to increased risk of a species becoming extinct will suffer attacks, but the present system is assuredly allowing many such actions, without the meliorating grace of admitting or examining them openly [pp. 15-16].

[W]heather and which species are or soon will be endangered are not purely ecological questions, but are in part economic questions too. After all, economic variables influences the likelihood of extinction  and even evolution [see article for reference; p.16].

At present, the Endangered Species Act sets a lofty rhetorical goal of saving every species, while making no distinctions among species except those governed by “science,” a term left largely undefined. It is driven by the belief that risk of extinction is a question best left to the natural sciences; if economics is allowed in the door at all, it is relegated to task of managing the risk levels determined by others [see article for reference]. The Act largely ignores the importance of the incentives facing private landowners. These are shortcoming that economists are well-suited to address [pp.17-18].

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Tags: Endangered Species Act, Gardner Brown, Jason Shogren, Journal of Economic Perspectives