OMB as Audience

1
OMB as Audience

• What I expected to find
• Naïve adherence to monetization of benefits
  (naïve because of costs, practical difficulties)
• Opposing theories of OMB motivations predict this
• OMB scientific gatekeeper
• monetization is gold-standard of B/C analysis
• OMB anti-regulation
• monetization as impediment to rule development

2
The Circular

• Pragmatic, limits of monetization accepted and
  articulated
• About principles (e.g., marginal analysis)
• Not draconian
• Caveat
• The Circular is the constitution
• How is the constitution interpreted?
• OIRA return letters

3
Examples

• You cannot conduct a good regulatory analysis
  according to a formula
• Revealed preference methods Although these
  methods are well grounded in economic theory,
  they are sometimes difficult to implement given
  the complexity of market transactions and the
  paucity of relevant data.

4
Examples

• If monetization is impossible, explain why and
  present all available quantitative information.
• If you are not able to quantify the effects, you
  should present any relevant quantitative
  information along with a description of the
  unquantified effects, such as ecological gains,
  improvements in quality of life, and aesthetic
  beauty.

5
Rule Assessments Hypotheses

• EPA should
• Do much more quantification of things relating
  to benefits
• Do a better job in its qualitative discussions
• Better defend the difficulty and limits of
  monetary assessment

6
The Status Quo A Caricature

• Economists have studied the value of an ecosystem
  service related to our rule.
• Here is what they found.
• Here is how we adjusted that answer to fit our
  issue.
• There are many other benefits, but they cannot be
  monetarily assessed

7
Problems

• A guess vast share of resources goes to
  monetization exercise (deep not wide)
• Missed opportunity to benchmark and quantify
• Missed opportunity to communicate
• Sources of ecological value
• Things that limit enhance that value
• The economic principles involved

8
Ideas

• Get economists to help you better argue the
  difficulties of monetization
• An under-served argument
• Improve the qualitative analysis of ecological
  benefits and tradeoffs
• Teach

9
Quantification

• The Circular
• If you can quantify but cannot monetize
  increases in water quality and fish populations
  resulting from water quality regulation, you can
  describe benefits in terms of stream miles of
  improved water quality for boaters and increases
  in game fish populations for anglers.
• Earlier SAB recommendations
• We strongly encourage EPA to develop
  quantitative indicators of ecosystem service
  benefits. Quantitative landscape analysis, using
  GIS tools, can be used to derive indicators of
  preserved ecosystem service benefits.

10
Shameless Plug

• James Boyd and Lisa Wainger, Measuring Ecosystem
  Service Benefits The Use of Landscape Analysis
  to Evaluate Environmental Trades and
  Compensation, Resources for the Future
  Discussion Paper 02-63, April 2003.
• James Boyd and Lisa Wainger, Landscape
  Indicators of Ecosystem Service Benefits, 84
  American Journal of Agricultural Economics, 2002.
• Lisa Wainger, Dennis King, James Boyd, and James
  Salzman. Wetland Value Indicators for Scoring
  Mitigation Trades, 20 Stanford Environmental Law
  Journal, 2001.

11

• Sharon Hayes (Office of Water)
• She noted the need for tools and approaches
  that are flexible "cheap and fast" sound,
  credible, and scientifically supportable and
  sufficient for the policy or decision purpose
  intended.
• Benefit monetization should not be the only way
  economists respond to this need