Topic 17: Coastal Economics

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Topic 17 Coastal Economics
David Letson Marine Affairs/Economics University
of Miami/RSMAS
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Roadmap

• Behavior matters when thinking about coastal
  resources.
• Coastal resources create lots of economic value.
• Incentive problems lead to hazards.
• We need to document the hidden costs.

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We Love Our Florida Beaches

• 825 miles of sandy beaches
• 17M residents, 70M visitors.
• Tourism construction.
• Economy quality of life.
• How to balance growth coastal environmental
  quality?

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Saltwater beach recreation

• Study Bell and Leeworthy (1990).
• Airport intercept survey of FL tourists
• Inelastic demand
• Avg tourist spent 4.7 days on beach at
  expense/day of 85
• Recreational benefit of 2.37B/year.

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How Do We Use the Coasts?

• Let us count the ways
• Storm Protection
• Amenity
• Fisheries
• Waste Disposal
• Wildlife Habitat
• Navigation
• Recreation and Tourism
• Conflicts hazards happen!

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Why do we need to know all the economic values?

• Current decisions.
• Wisdom of past decisions.
• What should be priorities?
• Implied values may be ignored.

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Humans as Part of System

• More People More Wealth More Risk
• Three Systems Physical, Social Constructed
• Hidden Costs
• Business interruptions
• Social and family disruptions and health costs
  and
• Damages to natural resources and ecosystem
  services.
• How can we best prepare for the increasing risks
  we face?

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Coastal Erosion
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A Big Problem

• During the next 60 years, coastal erosion may
  claim 1500 homes per year, costing 500M per
  year.
• Under current enrollment rates, federal flood
  insurance would cover 80M of the 500M.
• FEMA estimates 3600 people a day move to the
  coast thats 27M new people in the next 15
  years.
• Solutions? Shoreline stabilization benefits the
  individual property owner, but community property
  values may suffer.

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Should We Protect the Coast?

• Kriesel Friedman 2002 Evaluation of Erosion
  Hazards for Heinz Center.
• Strong relationship between beach quality and the
  price of inland and waterfront properties.
• Shoreline stabilization benefits property owner,
  but community may suffer.
• If beach conditions deteriorate--by armoring the
  shoreline or otherwise--inland property values
  decrease by as much as 20.

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Beach Nourishment

• Barrier islands vulnerable to erosion.
• Who should pay?
• Moral hazard.
• Flood control recreation benefits.
• Increases price of property.

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The Value of Sand

• Pompe and Rinehart 1999 study of Seabrook Island,
  SC.
• Value of wider beach for an increase in beach
  width from 322 feet to 472 feet.Location Develo
  ped VacantOceanfront 23,000. 36,000.Oceanvi
  ew 13,000. 33,000.Inland 8,000. 6,000.

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Hurricanes
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Good New and Bad News
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Ten Most Costly Hurricanes

• 1992 Andrew 35B
• 1989 Hugo 9.7B
• 2004 Charley 14B
• 2004 Ivan 13B
• 2004 Frances 8.8B
• 1972 Agnes 8.6B
• 1965 Betsy 8.5B
• 2004 Jeanne 6.5B
• 1969 Camille 7B
• 1955 Diane 5.5B

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Increasing Vulnerability

• Pielke and Landsea (1998)
• Social vulnerability better focus than storm
  risk.
• Coastal migration, inflation, affluence.
• Andrew (37B) was 2nd most costly storm
• 1st was the 1926 unnamed hurricane (81B).
• Greater mortality in less developed nations.
• Waiting for the 50B storm.

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Normalized Damages
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A Hidden Cost Evacuation

• What you give up, not what you pay.
• Hurricane Bonnie in August 1998.
• Whitehead (2003) cost depends on storm
  intensity, behavior and population.
• Travel costs, evacuation orders, pets.
• Million a mile too few evacuation orders.

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In Conclusion

• Behavior matters when thinking about coastal
  resources.
• Coastal resources create lots of economic value.
• Incentive problems lead to hazards.
• We need to document the hidden costs.

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To Learn More

• Florida Coastal Environmental Resources A Guide
  to Economic Valuation and Impact Analysis,
  (Florida Sea Grant), 2002. Online at
  http//nsgl.gso.uri.edu/flsgp/flsgph02002/flsgph02
  002index.html
• The Hidden Costs of Coastal Hazards. 2000. Heinz
  Center/Island Press.
• NOAA's Coastal and Ocean Resource Economics
  http//www.marineeconomics.noaa.gov/
• Pew Oceans Commission http//www.pewoceans.org/
• Coastal Environmental Economics Extension
  Network http//www.mdsg.umd.edu/Extension/valuati
  on/

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Additional References

• Alan Hodges and David Mulkey. 2001. Terrorist
  Attacks in New York City and Washington, D.C.
  Implications for the Florida Tourism Industry.
  EDIS document FE 316, Dept of Food and Resource
  Economics, IFAS, Univ. Florida, Gainesville. EDIS
  website at http//edis.ifas.ufl.edu.
• Roger Pielke Jr. and Christopher Landsea 1998.
  Normalized Hurricane Damages in the United
  States 1925-95 Weather and Forecasting 13
  621-31.
• John Whitehead. 2003. One Million Dollars a
  Mile? The Opportunity Costs of Hurricane
  Evacuation Ocean and Coastal Management, 46
  1069-89.