The Official Value of Economic Ignorance

The U.S. Fish and Wildlife Service recently released an economic analysis of the designation of critical habitat for bull trout in the Columbia and Klamath River Basins. That economic analysis estimated the economic cost of protecting the bull trout to be fully $300 million. A number that big is enough to make any fiscally responsible person choke. Clearly, protecting the bull trout is not something that we are likely to be able to afford. We may just have to let that charismatic fish, like many other wild animals, fade into extinction.

But that, as it turns out, was not the conclusion that the Fish and Wildlife Service’s economic analysis actually reached. As has become familiar with this Administration, an ideological filter was applied to the objective information that was provided by the professional analysts, a filter designed to twist things towards a predetermined outcome. Half of the economic analysis, a fifty-five-page report, on which tens of thousands of dollars had been spent, was simply torn out of the economic analysis because it indicated that there were also hundreds of millions of dollars of economic benefits associated with protecting bull trout in addition to the costs.

From a legal point of view, this is not an obscure issue. The amount of bull trout habitat that gets legal protection is determined by whether any particular bull trout habitat offers benefits that exceed the costs. If you politically set the benefits at zero, all habitat has costs that exceed benefits. Presto! You have what polluting industry wants, a justification for not protecting any bull trout habitat. Coincidentally, the Administration is moving in exactly that direction, removing the bull trout from endangered species status.

The Fish and Wildlife Service did attempt to provide an intellectual justification for ignoring the benefits of bull trout protection, benefits such as maintaining higher water quality throughout the region and protecting an exciting sports fishery, both of which make this region a more attractive place to live and help support our recreation economy. The Administration argument was that the costs were easy to estimate since they were commercial costs imposed on certain types of businesses such as timber and agricultural interests. The benefits, in contrast, were largely non-commercial, non-market, in character, and, therefore, more difficult to estimate.

That is not entirely true. The commercial burdens of environmental regulations are regularly grossly overestimated. Every time it is proposed to protect our air or water or wildlife from being poisoned, we are told that such misguided efforts will shut our economy down. When those measures are adopted, our economy hardly blinks, businesses productively adapt, as one would expect real entrepreneurs to do, and we proceed to improve our overall well being. That is the positive history of environmental protection in this country.

But it is true that environmental benefits tend to be non-commercial, non-market in character, which makes them harder to estimate. But that is entirely the point of environmental economics: to make sure that the very real costs that commercial businesses would otherwise impose on unwilling citizens are taken into account. If we do not seek to estimate those non-commercial costs, then all of our social decisions will be solely guided by large corporations’ bottom lines. If pollution does not poison corporate leaders personally, they will be free to ignore it.

This is not a trivial concern. The WR Grace Corporation, with the support of federal officials operating with the same know-nothing frame of mind shown by the US Fish and Wildlife Service, proceeded to poison to death a significant part of the population of Libby, Montana, and untold thousands around the nation. The logic was the same: The cost to WR Grace in terms of lost profits was clear. The non-commercial, non-market benefits such as not having to slowly die of strangulation and suffocation, were, in the official federal jargon, “difficult to monetize.” So federal officials only focused on WR Grace’s profits and ignored those “qualitative” and “subjective” aspects such as lingering sickness and early death.

Obviously, this is an obscene approach that has nothing to do with science or the accuracy of studies and a lot to do with an ideological predisposition to favor certain citizens over others.

Just because something is hard to quantify exactly does not mean that the appropriate solution is to put a zero value on it. Zero is very precise quantitative value. We know with scientific certainty that zero is an absolutely false value to put on the benefits of bull trout habitat and protection. Any careful effort to quantify those benefits is likely to be more accurate than the zero that this Administration has placed on the value of one of the indicator species of the environmental health of Western Montana and the Pacific Northwest.