Final Flashcards

1
Q

Bay’s value

A

$678 billion in 1989

equivalent to ~ $1.15 trillion today

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2
Q

Value of cleaning the Bay and it’s rivers and streams

A

create $22 billion/year in net benefits

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3
Q

The “invisible hand”

A
Adam Smith (The wealth of nations, 1776)
-a competitive market (with many buyers and sellers and no government interference) made up of individuals acting in their own self interest will result in an outcome that is most beneficial to society and the public good as a whole
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4
Q

Economic value

A

must be valued either directly or indirectly by humans

  • measured in terms of tradeoffs - what is the maximum one would be willing to give up (willingness-to-pay) : money; time; other goods
  • Net value
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5
Q

Net value

A

total value less what is foregone to obtain it

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6
Q

Willingness-to-pay

A

the maximum one would be willing to give up

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7
Q

Willingness-to-pay

A
maximum
Trade-off:
barter 
time
Money
-constrained by income or wealth: can't be willing-to-pay more than you have available
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8
Q

Willingness-to-accept

A

the minimum amount you would be willing-to-accept to forego or sell something

  • not constrained by income or wealth
  • in many cases, can use willingness-to-accept to approximate willingness-to-pay
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9
Q

Net value

A

total value or maximum willingness-to-pay (minus) what one actually has to pay

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10
Q

Supply currve

A

slopes upward
: on the margin (the next additional unit), is more expensive to produce more
-everyone is already producing at their lowest cost (economies of scale have already been attained)
-to produce more, need to bring more costly inputs into production
-this is true at the individual farm level as well as the industry as a whole

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11
Q

Total revenue

A

price times quantity

: adding up the marginal revenues

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12
Q

Marginal costs

A

the total cost of production (under the curve)

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13
Q

Producer surplus

A

the area above the curve

: money measure of the Net Economic Benefit to producers from a given level of production taking all costs into account

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14
Q

market supply

A

producer A’s supply + producer B’s supply = market supply

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15
Q

Shifts in the supply curve

A

due to changes in technology, number of producers, input prices etc.

  • decrease in supply shifts curve left
  • increase in supply shifts curve right
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16
Q

Consumer curve

A

downward sloping

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17
Q

Consumer surplus

A

total willingness to pay - cost

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18
Q

Total willingness to pay

A

add up the marginal willingness-to pay

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19
Q

Total cost

A

add up the marginal costs to consumers

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20
Q

Consumer surplus

A

total willingness to pay - cost

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21
Q

Shifts in demand curve

A

due to changes in income, tastes, number of buyers, prices of related goods, etc.

  • increase in demand shifts curve to right
  • decrease in demand shifts curve to left
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22
Q

How do we know this market outcome is the best

A

competitive equilibrium maximizes consumer and producer surpluses

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23
Q

Pareto Efficient

A

no way to make any person better off without hurting anybody else

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24
Q

Pareto efficient amount of output

A

Q* the price that someone is willing to pay to buy an extra unit of the good is equal to the price somebody must be paid to sell an extra unit of the good

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25
Q

Calculating producer surplus

A

1/2 b h

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26
Q

Externality

A

the impact of one person’s actions on the well-being of a bystander

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27
Q

result of externality

A

including some of the harm from the pollution externality into the market resulted in

  • less being produced
  • at a higher cost
  • consumers are always worse off
  • producers are usually worse off unless price goes up a ton
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28
Q

Economic definition of value

A

Willingness-to-pay

Producer and consumer surplus

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29
Q

Pareto improvement

A

a change in conditions (policy, allocation of resources, etc.) that leaves some individuals or groups better off and all other individual or groups at least as well off as they were before the change
-win-win

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30
Q

Pareto efficient

A

no additional change can be made that is a Pareto improvement

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31
Q

Kaldor-hicks Compensation principle

A

some groups (individuals) are made worse off (losers) and some are made better off (winners)
-but the amount that the winners gain is more than the amount the losers lose. The winners could compensate the losers
: the decision on whether or not to actually use gains to compensate the losers is a political decision, not an economic decision

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32
Q

policy outcomes

A

every pareto improvement is a Kaldor-hicks improvement
-most kaldor-hicks improvements are not pareto improvements

Under KH criterion a more efficient outcome can in fact leave some people worse off

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33
Q

Corollary

A

there may be some level of restoration below the ideal restored Bay, that might be worth it from an individual or societal perspective

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34
Q

The problem of applying benefit-cost analysis to chesapeake bay issues

A

many of the economic benefits related to the environment are difficult to measure
-recreation
-aesthetics
-preserving an ecosystem
: if they are difficult to measure, and thus, not included in the benefit-cost analysis, the results of the analysis will be flawed and biased against environmental improvements

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35
Q

what do we value about the Chesapeake Bay?

A
seafood
-commercial fishing
-processing industry
-Seafood restaurants, retail
-consumers
Recreation
-fishing, crabbing
-boating 
-swimming
-beach use
other
-waterfront/waterview: home, restaurant, hotel, park
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36
Q

Use value

A

can observe behavior or choices made under different scenarios

  • market value
  • non-market value
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37
Q

Market value

A

price and quantity data available to measure demand curve

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38
Q

non-market value

A

can observe choice behavior, but not prices

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39
Q

Non-use or passive use value

A

nothing to observe directly related to what is being valued

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40
Q

Passive use values

A

existence value
altruistic value
bequest value
option value

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41
Q

Existence value

A

Person’s willingness to pay to preserve a resource for which he has no current or future plans for personal use

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42
Q

Altruistic value

A

willingness-to-pay to preserve someone else’s use value

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43
Q

Bequest value

A

willingness-to-pay for use value for future gnerations

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44
Q

Option value

A

willingness-to-pay opportunity to use resource in the future

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45
Q

Governance

A

structure and principles which constitute the framework for which policies are set and within which individual management decisions are made

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46
Q

Renewable resource

A

fish are renewable
: the amount of fish by weight or number - replaces itself
-smaller fish get bigger
-reproduction

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47
Q

Rate of replacement

A

depends on the stock size (weight or numbers of fish) at any given time

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48
Q

why are fish renewable resource

A

energy is being added to the system: solar energy –> algae –> fish

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49
Q

carrying capacity

A

on average, the maximum amount of a species that can be supported on a continuing basis under current ecosystem conditions (habitat, food, predators)

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50
Q

Sustainable harvest

A

harvest only the amount that the fish stock was growing that year will keep the fish stock at the same level year after year

  • harvesting less that the annual growth allows the fish stock to get bigger in the next period
  • harvesting more than the annual growth makes the fish stock smaller the next period
  • harvesting exactly the amount of annual growth keeps the fish tock at the same level year after year (sustainable)

low and high stock sizes can support the same level of sustainable harvests, but at very different costs

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51
Q

Maximum sustainable yield

A

maximum sustainable harvest

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52
Q

Biological Overfishing

A

a rate or level of fishing mortality that jeopardizes the capacity of a fishery to produce the maximum sustainable yield on a continuing basis

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53
Q

Magnuson-Stevens Fishery Conservation and management Act prohibits overfishing

A
federal law (doesn't apply to most Chesapeake bay fisheries- managed by the states)
\: state fisheries are managed to prevent overfishing
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54
Q

resource rent

A

the difference between the price of the resource (marginal value) and the cost to harvest (marginal cost)

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55
Q

Open access fishery

A

the fishery is capable of producing positive economic rent: however, under open-access, the resource produces zero rent because excessive level of fishing effort is being utilized

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56
Q

open access

A

if EEOA total costs of fishing would exceed the total revenues, some fishermen would lose money and withdraw from the fishery, reducing the level of effort E

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57
Q

The Strange Case of the Fishery Supply Curve

A

regular supply curve slopes upward, the more produced the greater the cost of production for the next unit (increasing marginal costs)

  • more inputs used = greater cost = more produced
  • beyond the maximum, costs keep going up and harvest (production) starts going down
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58
Q

Why do fishermen keep fishing if the catch is going down?

A

In a fishery, the more produced (harvested), the smaller the remaining stock, and thus, the greater the cost of production per additional unit harvested.
-the additional cost from reducing the stock is external to the individual fishermen’s fishing decision, it is shared by all the other fishermen (EXTERNALITY)

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59
Q

Property rights

A

the fish are “common property”, no one owns them. No one charges the fishermen to use them. The market fails

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60
Q

Why don’t the fishermen stop fishing at a level with Positive rents?

A

More fishermen enter the fishery, increasing everyone’s harvest cost

  • Existing fishermen get in a race to catch as much of the quota as possible : buy bigger boats, burn more fuel, hire more crew, fish on bad weather days (risk lives)
  • costs increase until at the margin they equal price
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61
Q

Total allowable catch: setting a quota

A

TAC defines the yearly aggregate harvest for the fishery
-most fisheries in developed countries are limited-entry not open-access (i.e. a license or permit is required in order to harvest the resource)
-many limited-entry fisheries are managed through a combination of input (limits on effort) and output controls (TAC)
-However, usually fishermen find ways to invest in the unregulated inputs in order to outcompete other harvesters
RESULT: overinvestment, disspation of rents, and risky fishing under weather conditions

62
Q

Individual Transferable Quotas (ITQs)

A

define an annual TAC for fishery

  • allocate participants in the fishery a share of the TAC
  • shares do not depend on the TAC, but the actual harvest allocation each year does
  • Quota shares are permanently allocated to fishermen (property rights)
63
Q

ITQs

A

transferable: can be leased or sold
as a result, the most efficient fishermen end up with the quota, while the least efficient leave the fishery (since there are gains from trade)

64
Q

ITQs cont.

A

ITQ implementation tends to be controversial, primarily because of the initial allocation of shares
-individuals have incentives to try to influence the allocation formula in their benefit (more quota means less quota for everybody else)

65
Q

How do we make the adoption of ITQs more likely?

A

give agents the option to self-select into the ITQ program or stay in the status quo (the MD striped bass experience)

  • a choice reduces the influence of interest groups (everybody has a voice, not only the individuals that are part of work groups and advisory commissions)
  • reduces costs of participation in the process (you receive a form on the mail that have to file out and return to DNR)
66
Q

Management

A

process of decision making on fishery issues, problems and challenges as they arise

67
Q

Revealed preference

A

observe actions of individuals or groups under varying conditions, collected data and analyze
-purchase data: price and quantity for demand
-any other behavior or action from which a value can be inferred
: can only be used to measure Use Values

68
Q

Stated preference

A

if difficult or not possible to observe behavior

  • use a well-designed survey questionnaire, and determine value from responses to hypothetical situations
  • can be used to measure the value of anything Use (market), Use (nonmarket)
  • the only method to value Passive use
69
Q

Commercial fish landings patterns

A

total landings have trended up slightly in the last 60 years

-highly variable from year to year

70
Q

Nominal dollars

A

the observed amount paid at the time of transaction

71
Q

real dollars

A

the amount paid adjusted for the overall inflation rate

72
Q

Consumer Price Index (CPI)

A

used to adjust

  • most fishermen in chesapeake bay are individual businesses
  • earnings are their income
  • buying power of their income is measured by CPI
  • need to know what the baseline year is
73
Q

Top five commercial species by weight

A
menhaden
blue crab
croaker
striped bass
catfish
74
Q

Top five commercial species by dockside value

A
blue crab
menhaden
striped bass
Croaker 
oyster
75
Q

average real price for chesapeake bay

A

has been declining

76
Q

ratio of seafood prices to consumer price index

A

used to be below other goods now prices are higher

77
Q

Why has demand fallen for chesapeake seafood products

A

increase in substitute products - the more close substitutes a product has, the lower its demand

Globalization

  • imports: playing greater role
  • aquaculture: meeting requirements

tastes or preferences change over time

78
Q

consumer surplus measurement: chesapeake oyster

A

two diseases, MSX and Dermo, helped push oyster populations to 1% of historical levels
-MSX disease results from infection by the protozoan haplsporidiumnelsoni. Dermo caused by perkinsus marinus

79
Q

demand of oysters

A

declining
: oyster production in other places and imports
: people are eating less oysters than they used to

80
Q

biological overfishing

A

associated with decreasing growth in size and recruitment

81
Q

Economic overfishing

A

occurs when redundant inputs are used, leading to depletion of any rents which could be produced

82
Q

marginal decision

A

an individual fisherman stops fishing when the cost of another fishing trip is greater or equal to the expected revenue

83
Q

Production (or technical) externality

A

one fisherman’s activity effects the other

-fishermen make decisions based on their own private marginal costs and revenues

84
Q

everyone is fishing the same stock of fish

A

as the stock gets smaller, fewer fish are removed with the same amount of effort (increasing cost per unit of fish removed)

  • each fisherman’s costs are a function of what other fishermen do (externality)
  • fishermen invest in more expensive ways of catching fish to get a greater share of the resource
  • all the other fishermen respond, driving up the cost of harvesting the same amount of fish (economic overfishing)
  • each fisherman acts rationally to maximize his/her profits, but collective action leads to an inefficient (pareto inefficient) outcome
85
Q

TMDL

A

if achieving the TMDL leads to improved fish stocks:
-economic rents may be dissipated by increasing inefficient fishing effort
:EPA is calculating commercial fishing benefits under two scenarios regarding how fisheries are managed
-no property rights
-rights-based management (Catch shares or similar)

86
Q

Stripped bass

A
#4 in weight and #3 in value for commercial fishing
-most important recreational species, caught primarily with Hook and Line gear

Mature striped bass move into tidal freshwater in early spring to spawn (anadromous fish)

  • after spawning, migratory fish return to the coast
  • most spend the summer and early fall months in middle New England
  • during late fall and early winter, coastal striped bass migrate south to winter off the North carolina/virginia capes
87
Q

Striped bass cont.

A

managed directly by the state jurisdictions in maryland (Maryland Department of Natural Resources, Virginia Marine Resource Commission, Potomac River Fisheries Commission), through the Atlantic States Marine Fisheries Commission

88
Q

Striped Bass Period 1

A

Large catches, large variability
-large variation seen as natural
-striped bass are anadromous like salmon (live in the ocean, return to freshwater to spawn)
-return to different river systems within the Bay to spawn
-subject to a lot of environmental variation from ocean condition to freshwater
: lots of fish

89
Q

Theories of why striped bass population declined

A
Pollution
-dissolved oxygen
-chemical contaminants 
Habitat loss
Overfishing 
Combination of the above
90
Q

Striped bass Period 3

A

Moratorium: illegal to possess striped bass in any form, regardless of where it was caught
Maryland 1985-1989
Virginia 1989 only

decision rule - moratorium would be removed when the average number of young striped bass counted in the river systems over a 3 year period exceeded a threshold

91
Q

Striped bass Period 4

A

Recovery
experimental results on why striped bass population declined
-overfishing

92
Q

Striped bass Period 5

A

Stability

93
Q

Overfishing (MSY)

A

quota management - set a level of total catch that cannot be exceeded. Once the quota is reached, the fishery is shut down

94
Q

Growth overfishing

A

minimum size limits

fishing gear restrictions

95
Q

Recruitment overfishing

A

minimum size limits (allow fish to reach spawning age/size)
maximum size limits (larger fish may have more reproductive potential)
limit on female harvest
-closed area for spawning fish or nursery area

96
Q

Background on blue crab

A

large year to year variability in abundance due to unique life history

  • crabs grow my molting
  • females mates following “terminal” molting periods (and stores sperm) at which point she no longer molts and grows
  • female broods eggs in a “sponge” under her abdomen using stored sperm to fertilize eggs
  • one brood can contain up to 3 million eggs, one femal can prodce multiple broods totaling 14 million eggs
97
Q

Zoea

A

upon hatching, larval crabs, zoeae, look more like shrimp. They are planktonic and employ currents to bein moving back in and up the chesapeake Bay

98
Q

megalopes

A

after 8 zoeal stages, larvae morph into lobster-like megalopae. settlement begins at this

99
Q

1st crab

A

the very small 1st crab stage comes after the megalopae stage. They travel long distances up the Bay and into marshy tributaries where they will spend the majority of their lives

100
Q

juvenile

A

juveniles metamorph to adults through approximately 18-21 step-wise increments or molts

101
Q

mating pair

A

immediately following a terminal molt, mature females have a single opportunity to copulate with an adult male. she will store his sperm in receptacles that allow her to produce multiple broods in the future

102
Q

females with eggs

A

inseminated, mature females migrate down the chesapeake bay to higher salinity waters at the mouth where they produce a dense organce mass of eggs (a sponge) females may produce as many as 14 million eggs

103
Q

embryos

A

eggs remain closely attached to the females abdomen for approximately 2 weeks. The initially orange sponge becomes progressively darker as the growing embryos develop eyes

104
Q

Blue crab mating times

A

may-oct

105
Q

blue crab spawning peak

A

july-aug

106
Q

Blue crab life history effects management

A

Callinectes sapidus ranges from as far north as Nova Scotia, down the Atlantic coast, into the Gulf of Mexico as far south as northern Argentina
-Chesapeake population is one “stock”, there is little genetic exchange even with neighboring populations such as Albemarle sound, Delaware Bay, etc.

Managed only by Maryland and Virginia

107
Q

Bi-state blue crab advisory committee

A

created in 1966 and coordinated by Chesapeake Bay Commission

  • devise ways by which Maryland and Virginia jointly can better manage and sustain the fishery
  • ceased to function in 2003 due to lack of funding
  • Since then, a bay-wide team of scientists and technical experts (the Blue Crab Technical Advisory Committee) continues to advise the chesapeake bay commission
108
Q

Getting to the Population goal

A

licenses numbers are capped at historical highs so it has no effect on fishing effort

  • increased size limits
  • limit on female harvest
  • other input controls: amount of gear, type of gear
  • amount of time, number of days and/or hours to go fishing are restricted
  • closed areas
109
Q

Success? of blue crabs

A

fishing effort has been reduced in recent years
-more crabs were available to spawn at the same time that seasonal climatic and other conditions were favorable to blue crab survival
-other contributions
: high fuel prices
: recession, decreased demand for crabs

110
Q

Latent

A

inactive or dormant

111
Q

Why is latent fishing effort a proble

A
  1. when crab stocks are high (low cost) and the market is strong (high prices) it attracts lots of watermen
  2. when the regulatory agency sees signs of trouble, it freezes the total number of licenses at current level
  3. when the fish stock collapses or declines, or market demand decreases lowering revenues, higher cost fisherman (with higher opportunity costs of employment) leave for other employment, but they keep their licenses to give them the option to fish again in the future
  4. if the stock improves, increasing profitability of current fisherman, there is an incentive for the latent effort to become active, enter the fishery and drive down the size of the crab stock and thus, drive out any profit. This leads to a continuing cycle of boom and bust
112
Q

Reducing latency

A

licence buybacks

  • Virginia and Maryland wanted to use part of federal disaster relief money ($30 million) to offer to buy back licenses from current license holders to reduce latent effort
  • not punitive
  • voluntary
113
Q

How much to pay per license

A

too high
-buy too few licenses, windfall for sellers
too low
-also buy fewer licenses, money left over

114
Q

Reverse Auction

A

license holders submitted sealed bids on the amount of money they would accept to permanently retire their license

  • state’s accepted lowest bids until the money allotted was used up
  • Maryland eventually cancelled their auction and offered a single amount of $2,300 per license
  • Virginia followed through on auction
115
Q

What happened

A

people who bid lower than $2300 did not take offer

  • those who bid higher accepted the offer
  • low participation
  • uncertain of the price
116
Q

Menhaden

A

range from Nova Scotia, Canada to central Florida

  • the Atlantic menhaden is a member of the herring family, but unlike shad and river herring, they spawn in the ocean and their young develop and grow in the less saline waters of estuaries during their first year
  • bay is important for nursery because it is rich in plankton
117
Q

Menhaden cont.

A

a recreational fishery does not exist for Atlantic menhaden in Maryland
-a small bait fishery for commercial and recreational use still exists
: a reduction industry: single company operates (Omega protein) a fleet that each year harvests up about three-quarters of the entire East Coast catch
: used to produce fish mea, oil, and fertilizer

118
Q

Filter feeder

A

feeds by swimming rapidly to capture water in its open mouth, then filtering out plankton in the water

119
Q

The menhaden issue

A

adult menhaden can filter up to four gallons of water in a minute

120
Q

Positions harden

A

recreational fishermen want industrial menhaden fishery severely curtailed (or shut down)
-many environmental groups feel the same
-others want fishery to continue for local economic impacts it creates such as jobs, a tax base etc.
-menhaden also harvested for bait in crab pots
: science isn’t there to tell us how other fisheries and the health of the Bay would respond if less menhaden were harvested

121
Q

Oyster Policy part I

A

from the 1880’s to after World War II oyster landings and population were in continual decline:

  • failed to manage as a renewable resource
  • mining the resource, rather than sustainable fishing
  • oyster shell is the best habitat for new oysters, the process of harvesting oysters destroyed the habitat as well as the oyster
122
Q

Oyster policy part II

A

after WWII, through the early 1960s oyster harvests were maintained at about 30-35 million pounds per year by the use of aquaculture practices
-some areas were good for seed production
others were better for grow out
-seed oysters are moved to grow out area that may also have oyster shell placed on the bottom to pro vide habitat and keep small oysters from being buried

123
Q

The disease era

A

dermo is naturally occurring in the Chesapeake Bay
-MSX was probably introduced accidentally to the East Coast from Pacific Coast with the introduction of the Japanese oyster
MSX is more virulent in higer salinity

124
Q

Oysters - the water quality factor

A

oysters are very efficient filter feeders: they remove plankton and organic particles from the water column
: a large oyster can filter about 50 gallons of water per day in the warm month
-150 years ago, could filter the volume of water in Chesapeake Bay in 3-4 days

125
Q

Restoration

A

despite hundreds of millions of dollars spent on planting oysters from hatcheries and rehabilitating oyster reefs, little progress has been made

  • program was poorly planned
  • little use of scientific information
  • data rarely collected on what works and what doesnt
126
Q

A potential solution: try another species

A

almost all large scale oyster fisheries around the world are based on a non-native species, a species that was introduced by accident or on purpose when the native species failed

  • interest in Japanese oyster about 15 years ago, but decided it would not grow well in bay
  • recent interest in chinese oyster, which was show to grow extremely rapidly in chesapeake bay and not succumb to the 2 diseases
127
Q

States decide to prepare and Environmental Impact Statement (EIS)

A

restore the chesapeake bay oyster population to a level that will sustain harvests comparable to those in the 1920-1970 time period
-about 4.9 million bushels or 40 million pounds of meats

128
Q

Rejected introduction of non-native oysters either as diploids or triploids

A

determined there were too many unknown risks
-a better planned native oyster restoration could have a greater liklihood of success compared to poorly planned and executed past practices

129
Q

EIS helped shape current policy

A

separate the goals of oyster restoration:
-commercial fishing industry restoration
-restore oysters to improve the health of the Chesapeake Bay
: commercial oyster fishery- rely on private aquaculture (property rights)
: environmental restoration
-strategic about where to place oysters
-large scale (enforceable) sanctuaries
-allow natural selection for disease tolerance
-resist pressure from watermen to open areas to fishing in sanctuaries

130
Q

payment for ecosystem services

A
valuing ecosystem services: 
-fishing income
-recreational fishing value
-coastal protection
-Nutrient cycling
\:sequestration
\:denitrification
131
Q

sequestration

A

nitrogen and phosphorus in meat and shell

132
Q

denitrification

A

biogeochemical conversion to nitrogen gas

133
Q

Paying to restore oyster reefs: current

A

Private development: increasing water pollution
Oyster reefs: degraded, reduced nutrient removal
Payment: declining public funding of reef restoration

134
Q

Market-based offsets & trading under clean water act total maximum daily load

A

Private Development: development halted or must offset entire pollution load
Oyster reefs: restored reefs nutrient removal offsets new development pollution load
Payment: private funding of reef restoration
public benefits from other ecosystem services of oysters

135
Q

Travel cost concept

A

zonal travel costs to and from a recreational site

136
Q

Limitations of simple travel cost model

A

simple choice: fish-no fish; beach- no beach
Real life- multiple choices about where to fish, which beach to go to with different costs depending on location chosen

Fishing quality, beach experience varies among the choices
-doesn’t really help us with value of Bay restoration which may lead to water quality improvements

137
Q

Extending Travel cost: Random Utility Model (RUM)

A

an enhancement of the travel cost model
-imagine if the angler (beach goer) has to choose between different fishing locations (beaches) with different qualities
-we observe (revealed preference) the angler making a choice (a tradeoff) between travel costs and quality
: are they willing to travel further (incur more costs) for better fishing quality? if so, we can induce a value, not just for fishing, but they quality of the fishing experience

care about what they catch
-how much they catch

138
Q

Hedonic method

A

econometrically links the characteristics of a good with its price

  • mainly used in housing markets to price environmental amenities
  • relies on revealed preferences
  • data on real estate sales readily available
  • environmental issue of interest may have only small effect on housing price
139
Q

Revealed preference summary

A

travel cost, random utility models and hedonics

  • all rely on revealed preference, must observe individual behavior that is somehow related to environmental quality
  • complex economic and statistical models are used to infer environmental value from the behavior
140
Q

State preference for environmental valuation

A

measures use and non-use values, market and non-market
contingent valuation
conjoint analysis

141
Q

Contingent valuation

A

a methodology to determine money measures of change in welfare by describing a hypothetical situation to respondents and eliciting how much they would be willing-to-pay (or sometimes willingness-to-accept payment) either to obtain or avoid the situation

142
Q

Conjoint analysis

A

marketing research tol

closely related to CV and hedonics

143
Q

Advantages of stated preference

A

can estimate the value of anything

  • only method to measure existence value
  • relatively easy to perform and understand
144
Q

Disadvantages of stated preference

A

sensitive to survey instrument

  • strategic bias in response
  • easy to perform (quality control)
  • getting expensive to do according to more exacting professional standards
145
Q

Sensitive to survey instrument

A

can get very different results depending on how you ask the payment question and information provided
: mail, on-line, in person

146
Q

Strategic bias in response

A

respondent can answer to try and influence the policy recommendation

147
Q

getting expensive to do according to more exacting professional standards

A

recommend in-person interviews rather than mail survey

-conduct focus groups

148
Q

value of restored bay

-contingent valuation question

A
  1. describe what is being valued
    - The Chesapeake Bay is the largest estuary in North America and is unique and treasured ecosystem. However the health of the Bay is severely degraded due to nutrient and sediment pollution resulting from human activity in the watershed
149
Q

Contingent valuation question cont.

A
  1. describe the change
    - scientists have determined a level of reduction in nutrient and sediment pollution that will allow the Bay to become a healthy well-functioning ecosystem
150
Q

Contingent valuation question cont.

A
  1. what is the payment vehicle
    - the cost of this restoration will be shard by all households in the watershed by an annual amount added to residential water bills
151
Q

The CVM controversy

Pro

A

firmly founded in economic theory, the concept of existence value is well-accepted

  • can lessen response bias with careful survey design and implementation
  • only method for existence value
152
Q

The CVM controversy

Con

A

can’t validate for existence value

  • Hypothetical
  • Can’t overcome response bias