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July 24, 1997

GSPIA professor one of few to study economics of world environment

It is the mid-1980s. Graduate School of Public and International Affairs economist Stephen Farber is a faculty member at Louisiana State. He has just returned to Baton Rouge, La., from a backpacking trip to Colorado. Feeling great about his recent vacation, the next day Farber decides to go for a long run. He comes back tried, but still feeling good about the world. Then two days later it hits him. The pain in his chest and other body parts is incredible.

Fortunately, the pain is not a heart attack. It is a reaction to air pollution. Farber had unknowingly picked a day to run when there was an ozone alert. Those were the days before weather reports carried ozone warnings.

"I was so angry that I would have a wonderful experience in one place, and then come back to another place feeling good only to be sort of hit in the head with the realities of environmental problems," Farber recalls. "That sort of made me want to enter into this area." The area into which Farber entered is environmental economics, a new field of study that seeks to balance claims by industry and politicians that preserving the environment is too expensive and costs too many jobs by finding tangible, monetary value in untrammeled nature.

"As an economist," Farber says, "I thought I had some abilities to understand the arguments that were being given by industry groups, for example, about things being far too costly to do and the benefits too minimal." One of very few environmental economists in the world, Farber is among the authors of a recent groundbreaking study entitled "The Value of the World's Ecosystem Services and Natural Capital," published in the May 15 issue of the international science magazine Nature. Heavy on facts and figures meant for the professional, the study gained wider attention when The New York Times on May 20 used it in a story headlined "How Much Is Nature Worth? For You, $33 Trillion." Actually, $33 trillion is an average — for a single year. Farber estimates the value of services provided by the Earth's ecosystems to be $16 trillion-$54 trillion annually. The world's gross national product is about $18 trillion annually.

To reach those figures, Farber and his colleagues examined the benefits of healthy ecosystems in 17 areas: food production, erosion control, soil formation, gas, climate and water regulation, storm protection, water supplies, nutrient recycling, waste treatment, pollination, control of prey species, wildlife refuge, raw materials, recreation, culture and genetic resources, such as medicines. Despite providing such valuable services, the Nature article notes, ecosystems often are given little weight in policy decisions because it is not as easy to quantify their value in terms comparable to economic services and manufactured goods.

"This neglect may ultimately compromise the sustainability of humans in the biosphere," the article warns. "The economies of the Earth would grind to a halt without the services of ecological life-support systems, so in one sense their total value to the economy is infinite." Among the examples of nature's economic value cited in the Times story is the purification of New York City's water supply by micro-organisms in the Catskill Mountains. The city plans to spend $660 million to keep the watershed in good health. The alternative is constructing a water treatment plant for $4 billion. Such facts and figures are what legislators and the courts want to see in cases involving the environment.

"The heartfelt, warm, touchy-feely people are very good and very important," Farber says. "But when it gets down to fighting fires, you need to almost fight fire with fire. I've always really had this feeling that nature could speak for itself if you get a translator. That's how I look at myself, a translator of natural systems." Chest pains may have been the catalyst that led Farber into environmental economics, but his interest in nature goes back to his childhood Iowa. Days spent hiking, swimming and working on farms instilled in him a love of nature that he continues to indulge through hiking, mountain biking and backpacking.

After his ozone scare in the mid-1980s, Farber teamed up with ecologists in Louisiana to examine the economic value of coastal wetlands. Through development, drainage, agriculture, canals and the leveeing of the Mississippi, Louisiana has lost 60 percent of its wetlands.

The work Farber and his colleagues undertook in was some of the first in which an attempt was made to place a monetary value on an ecosystem. The figures they developed helped to slow and even reverse the loss of coastal wetlands in Louisiana.

Since only about 2 percent of Pennsylvania is covered by wetlands, Farber shifted his focus after he came to Pitt in 1993. When he learned the state contains more rivers and streams than any state except Alaska, he began studying watersheds.

Farber has been working in two main areas, the value of water quality and the development of ecological economic models of watersheds. His latest project, with Stephen Tonsor, director of Pitt's Pymatuning Lab of Ecology, and other researchers, is an economic model of the Pymatuning watershed.

A recently completed project, undertaken with graduate student Brian Griner, involved Loyalhanna Creek and Monastery Run at St. Vincent College in Latrobe.

Monastery Run is the main source of acid mine drainage in the Loyalhanna. When St. Vincent and other groups began looking into cleaning up Monastery Run, they sought funds from the Heinz Foundation. Among the questions asked on the grant application was: "What would be the benefits of this project to the region?" Pressed for time, the grant writing group used some standard economic measurements in its proposal based on the number of anglers who would use Loyalhanna Creek if it were cleaned up. The American Fisheries Society estimates that anglers spend an average of $46 on each trout fishing trip and $36 on each fishing trip for warm-water species such as bass.

Farber and Griner did not think such a valuation did justice to the project because the cleanup of Loyalhanna Creek also would improve other outdoor activities. Armed with $8,000 from Pitt, St. Vincent, Rolling Rock and the McKenna Foundation, Farber and Griner designed an economic model for Monastery Run and the Loyalhanna, a model they believe can be applied to other streams in Pennsylvania.

For the Monastery Run project, Farber and Griner conducted a mail survey of about 3,000 residents of the region. Through the survey, they found that users of Loyalhanna Creek would be willing to pay about $50 each annually over the next five years to clean up Monastery Run and thus Loyalhanna Creek.

Since material from the survey is still being analyzed, Farber does not know the number of users by which to multiple the $250 that would be collected over the five years. But he believes it will be substantial. Farber and Griner also need to factor in the number of non-users in the survey who said they would be willing to pay $5 per year over the next five years for a cleaner Loyalhanna.

"That's only $25 per household," Farber notes. "But there are an awful lot of non-users. When you begin to figure out the class of people who would be willing to spend $25, it is a large class. You multiply a small number by a huge number of people and you get a pretty high value." Farber feels that the willingness of non-users to pay a small amount of money to improve a waterway is important, but gets very little public attention.

"We look at the users and count them down to the last foot," Farber says. "We count the jobs and we count the spending and we count things that are really just very narrowly and directly associated with an ecosystem, but we don't look much further than that.

"People are increasingly interested in preserving natural systems for either their own sake or a sense of stewardship to the future, or for what economists call 'option values,' sort of like insurance," he continues. "You might not be using it now, but who knows, maybe some day you might want to pick up a fishing pole." According to Farber, studies have shown that people are willing to pay to preserve ecosystems even if they never expect to use them. One study found people in Georgia willing to pay to preserve shore birds in Alaska. Farber said people may be willing to pay for such projects because they enjoy nature watching shows or seeing nature photography, but also because they simply like knowing that such places exist.

In addition to his work on Monastery Run and Pymatuning Lake, Farber has been working to inventory Pennsylvania's "brownfields," former industrial sites that might be used by new industries. He also recently completed a project for the U.S. Forest Service that could change the way forests are managed.

But the project Farber is proudest of is the study that resulted in the Nature magazine article. He thinks it is one of his most important efforts because it establishes a basis for a general economic model that could have far-reaching effects. "That's sort of my cosmic project," he says, "sort of the opposite end from valuing Loyalhanna Creek." –Mike Sajna

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