Economics of Ocean Observing Systems

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Economics of Ocean Observing Systems

• Hauke Kite-Powell
• Woods Hole Oceanographic Institution
• 1 April 2003

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Economic Questions

• Do the benefits exceed the costs?
• Among those elements where the benefits exceed
  the costs, which should be have highest priority?
• What investments have the greatest net economic
  benefit
• Benefits - Costs
• Timeliness

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Costs
New Data
Current Data
Incremental Costs
Value Added
Raw Data
New Products/Processing -gt Higher Costs
Economic Users
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Source of Benefits

• The product is information
• Information has value because it is used in
  economic decisions
• Value of information better decisions lead to
  improved physical and economic outcomes

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Information Decisions
Nature of Benefits
Short Run Outputs (Operational Decisions)
Long Run Outputs (Planning and Investment
Decisions)
Increases in Scientific and Technical
Knowledge Technical Change Outputs
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How to measure benefits?

• Impact measures
• Jobs, wages, tax revenue
• Output (sales, revenue)
• Problem these can be misleading as indicator of
  real benefit to the nation

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Benefit change in value added

• Changes in social surplus
• Producer surplus
• What producers receive less what it costs to
  produce
• Consumer surplus
• What consumers would be willing to pay less what
  they actually pay
• Net change in economy (welfare)
• Often hard to measure in practice
• Proxies
• Increased goods and services
• Lower cost goods and services

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NOPP Project

• Objective to estimate potential benefits from
  ocean observing systems at the regional and
  national level
• Regions
• Gulf of Maine/New England
• Mid-Atlantic
• Southeast
• Florida
• Gulf of Mexico

• California
• Pacific Northwest
• Alaska
• Great Lakes

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NOPP Project

• Phase I regional inventories (2002/03)
• Phase II focal sectors (2003/04)
• tentative candidates
• Search rescue (GoMaine/NE, Alaska)
• Commercial fishing (mid-Atlantic)
• OOG (Gulf of Mexico)
• Recreational boating/fishing (Florida)
• Recreational beach use (California)
• Shipping/oil spill response (Pacific Northwest)
• Shipping (Great Lakes)

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NOPP Project Gulf of Maine example

• Estimated potential annual benefits in excess of
  30 million
• Search rescue 24 million
• Recreation order of 4 million
• Commercial fisheries order of 4 million
• Pollution mitigation order of 1 million
• Maritime transport order of 1 million

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NOPP Project

• Project website
• http//www.whoi.edu/science/MPC/dept/research/NOP
  P20project.html
• Interim results are posted as they become
  available
• Phase I (inventory) results due summer 2003
• Phase II results in early 2004

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Some Guiding Principles

• Produce products with high net economic benefit
  first
• Net benefits are likely to be highest when
• Multiple sources of benefits
• Information gets to decision makers sooner rather
  than later
• Build towards products that provide lower or less
  certain economic benefits
• Economic screening adds to, but does not replace
  or supercede, screening based on
• Scientific/technical feasibility
• Policy imperatives