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King, Dennis M., and Marisa Mazzotta. Ecosystem Valuation. USDA-NRCS and NOAA. http://www.ecosystemvaluation.org

RELEVANT TO

ALL FOREST MANAGEMENT

DESCRIPTION

The goal of this multiple federal agency website is to help agency staff find answers about program benefits that are practical, useful, and as precise as possible. It explains basic economic theory, and describes how economists estimate values for the ways ecosystems benefit people. It is designed for non-economists who need answers to questions about the benefits of ecosystem conservation, preservation, or restoration, and provides a clear, non-technical explanation of ecosystem valuation concepts, methods, and applications.

The website starts out with "The Big Picture," which explains why ecosystem values and estimates of benefits are important. It then describes relative indicators of Ecosystem Value, types of indicators and steps in developing them. All descriptions include lists of pros and cons each approach uses. The web site concludes with a description of work in progress and an extensive list of related websites.

MAJOR FINDINGS

Reviewer's note: Ecosystem Valuation is a subset of Economic Analysis. Ecosystem Valuation matters because Economic Analysis of forest management plans and actions is hard to understand and difficult to perform. All too often forest managers perform simple financial analysis, add interest group claims of induced benefits, and call it Economic Analysis. For clarification, in this review the three terms, financial analysis, economic analysis, and ecosystem valuation are defined as follows:

• Financial Analysis: examines costs and benefits as measured by market price; it is the viewpoint of private industry; its primary concern is measurement of profit and loss.
• Economic Analysis: accounts for nonpriced benefits and costs as well as those measured by market prices. Such analysis is conducted from the viewpoint of society.
• Ecosystem Valuation: the subset of economic analysis that measures or ranks values attributed to ecosystem services, such as habitat, biodiversity, recreation, hunting, clean air and water, scenic viewsheds.

In spite of the ecological gains inherent in wise choices, real Economic Analysis rarely is part of the decision making process. Inclusion of Ecosystem Valuation is even more rare. Instead, in most cases simple financial analysis of costs and returns from market sales is all that gets done. Potential returns from timber sales, for example, and the jobs and income derived from harvest and sales can be readily estimated. That accounts for private transactions, but not for impacts on public resources that are not bought and sold.

Ecosystem Valuation ishighly dependent on assumptions about statistical relationships and human behavior. The following only describes methods and applications. Readers are urged to access the Ecosystem Valuation web site for detailed explanations and illustrations of evaluation method applications.

The website is divided into 20 sections. Sections selected for review are indicated by titles preceded by capital letters.

A. The Big Picture: http://www.ecosystemvaluation.org/big_picture.htm

• Why Estimate Ecosystem Values?
• A gencies must make difficult decisions about how to allocate public investments to protect and restore the natural environment, considering many objectives, including environmental quality, threats to ecosystem integrity, and effects on people's quality of life. They are being asked to demonstrate the economic benefits of their investments, preferably in dollar terms. Even if benefits cannot or should not be measured in dollars, agency staff can often provide evidence that their environmental investments are being managed to maximize environmental benefits per dollar spent.
• For some decisions involving endangered species or serious public health or safety concerns, economic considerations will be secondary. However, even in these situations, environmental managers will need to make decisions that involve tradeoffs or allocations of natural resources---decisions that call for economic analysis. 
• Is it appropriate?
• The economic benefits of government spending raise legitimate and important public policy questions, but the answers are often ambiguous and difficult to justify. Agency staff may not always be able to provide acceptable answers -- no matter how much money they spend on analysis.
• However, in the absence of objectively determined estimates of the benefits of environmental programs, spending decisions will be based on other factors.
• Overview
• M easuring the value of something using dollars does not require that it be bought and sold in markets.
• The website provides guidance for estimating the dollar value of ecosystem benefits where this is possible, and guidance for developing non-monetary indicators of economic value where dollar measures are impossible or impractical.
• The maximum amount of one thing a person is willing to give up to get more of something else is considered a fair measure of the relative "value" of the two things to that person.
• Dollars are a universally accepted measure of economic value because the amount that people are "willing to pay" for something reflects how much of all other for-sale goods and services they are willing to give up to get it.
• While dollar-based measures of ecosystem benefits may be necessary to justify spending on conservation programs, non-dollar indicators of expected benefits are more useful for managing spending to achieve the greatest environmental and economic payoff.
• Indicator-based valuation tools may be less expensive and require less time to apply.
• The website offers guidance for developing and using indicators of expected ecosystem benefits that can be used to set priorities by determining the greatest benefits per dollar spent, without resorting to dollar-based valuation.
• Practical Importance of Ecosystem Valuation
• Two things have been learned from recent experience with ecosystem valuation.
• It is easy to spend large amounts of money on economic studies that attempt, against all odds, to assign dollar values to environmental improvements. 
• It is easy for environmental program managers to misuse the results of these studies in ways that can undermine support for their programs.
• On the other hand, t wo other things have been learned from recent experience with shrinking federal budgets.
• It is risky for environmental program managers to ignore demands for more fiscal accountability and more justification for specific spending decisions. 
• "Best professional judgment" and "objective scientific" project ranking criteria that ignore beneficial outcomes to people are extremely unpopular methods of justifying public investments.

B. Essentials of Ecosystem Valuation: http://www.ecosystemvaluation.org/essentials.htm

• Basic Concepts of Economic Value
• Measures of economic value are based on what people want -- their preferences. Economic value of a particular item, or good is measured by the maximum amount of other things that a person is willing to give up, often referred to as "willingness to pay."
• Valuation of Ecosystem Services 
• Ecosystem functions are the physical, chemical, and biological processes or attributes that contribute to the self-maintenance of an ecosystem; in other words, what the ecosystem does.
• Ecosystem services are the beneficial outcomes, for the natural environment or people, that result from ecosystem functions.
• Decisions about ecosystem management are complicated by the fact that markets do not reflect the full social costs or benefits of a good. This is known as Market Failure. Regarding ecosystems, the market fails because:
• many ecosystems provide services that are public goods, meaning they may be enjoyed by any number of people without affecting other peoples' enjoyment;
• many ecosystem services are affected by externalities, or uncompensated side effects of human actions.
• property rights related to ecosystems and their services are often not clearly defined so property owners have no incentive to conserve ecosystem services that are realized off-property.
• Ecosystem valuation can help resource managers deal with the effects of market failures, by measuring the costs of market failure effects to society in terms of lost economic benefits. 
• It is not necessary for ecosystem services to be bought and sold in markets in order to measure their value in dollars. What is required is a measure of how much purchasing power (dollars) people are willing to give up to get the service of the ecosystem, or how much people would need to be paid in order to give it up, if they were asked to make a choice similar to one they would make in a market.
• Economists classify ecosystem values into several types. The two main categories are use values and non-use, or "passive use" values. 
• Use values derive from both actual and indirect use:
• Actual use
• Indirect use
• Example : enjoying a television show about a protected area and its wildlife.
• Example : The lower organisms on the aquatic food chain provide indirect use values to recreational anglers who catch the fish that eat them.
• Other forms of use value are:
• Option value is the option to use something in the future, if not now.
• Bequest value is the value that people place on knowing that future generations will have the option to directly or indirectly use something.
• Non-use values are values that are not associated with actual use, or even the option to use a good or service.
• Example: Existence value is the non-use value that people place on simply knowing that something exists, even if they will never see it or use it.
• Overview of Methods to Estimate Dollar Values
• Market Prices -- Revealed Willingness to Pay: The values of some ecosystem goods or services can be measured using market prices. Some ecosystem products, such as guided recreation or timber, are traded in markets. 
• Other ecosystem services, such as clean water, are used as inputs in production, and their value may be measured by their contribution to the profits made from the final good. However, this is not the same as a market price because value of a product, such as clean water, used as an input is only a partial measure. It ignores water's in-stream value, for example.
• Some ecosystem or environmental services, like aesthetic views, native biodiversity, or many recreational experiences, may not be directly bought and sold in markets. However, the prices people are willing to pay in markets for related goods can be used to estimate their values. For example, people often pay a higher price for a home with access to wilderness trails, or will take the time to travel to a special spot for fishing or seeing a rare plant or bird. . 
• Circumstantial Evidence -- Imputed Willingness to Pay: The value of some ecosystem services can be measured by estimating what people are willing to pay, or the cost of actions they are willing to take, to avoid the adverse effects that would occur if these services were lost, or to replace the lost services. For example, wetlands often provide protection from floodwaters.
Surveys -- Expressed Willingness to Pay: in the case of ecosystem services not traded in markets, surveys can be used to ask people directly what they are willing
• to pay, based on a hypothetical scenario. Alternatively, people can be asked to make tradeoffs among different alternatives, from which their willingness to pay can be estimated.
• Applying Ecosystem Value Estimates -- Benefit-Cost Analysis
• Benefit-cost analysis measures the net gain or loss to society from a policy or action. It requires enumerating and evaluating all of the measurable benefits and costs and comparing them. 
• A single policy or action may be evaluated to determine whether it provides net economic benefits to society.
• Alternatively, several policies or programs may be compared to determine which provides the greatest net economic benefits.
• Because it focuses only on economic benefits and costs, benefit-cost analysis determines the economically efficient option. This may or may not be the same as the most socially acceptable option, or the most environmentally beneficial option. 
• Economic values are based on peoples' preferences, which may not coincide with what is best, ecologically, for a particular ecosystem. 
• When actual decisions are made, a benefit-cost analysis must be supplemented with other information, such as equity implications (i.e., which sectors of society benefit, which lose) or overriding environmental considerations.

C. Dollar-based Ecosystem Valuation Methods: http://www.ecosystemvaluation.org/dollar_based.htm

• Market Price Method : http://www.ecosystemvaluation.org/market_price.htm
• The market price method estimates the economic value of ecosystem products or services that are bought and sold in markets. It can be used to value changes in either the quantity or quality of a good or service, using standard economic techniques based on the quantity people purchase and the quantity supplied at different prices. 
• Application of the market price method requires data to estimate consumer surplus and producer surplus. Consumer surplus is the difference between the maximum amount an individual would be willing to pay for a good or service and the amount that person actually pays. Producer surplus is the difference between what the producer is willing to sell for and what the market will bear. This requires time series data on the quantity demanded at different prices, plus data on other factors that might affect demand, such as income. 
• Advantages of the Market Price Method:
• The market price method reflects an individual's willingness to pay for costs and benefits of goods that are bought and sold in markets, such as fish, timber, or fuel wood. Thus, these types of values are likely to be well-defined.
• Price, quantity and cost data are relatively easy to obtain for established markets.
• The method uses observed data of actual consumer preferences.
• The method uses standard, accepted economic techniques.
• Issues and Limitations of the Market Price Method
• Market data may only be available for a limited number of goods and services provided by an ecological resource and may not reflect the value of all productive uses of a resource.
• The true economic value of goods or services may not be fully reflected in market transactions, due to market imperfections and/or policy failures. 
• Seasonal variations and other effects on price must be considered.
• The method cannot be easily used to measure the value of larger scale changes that are likely to affect the supply of or demand for a good or service.
• Usually, the market price method does not deduct the market value of other resources used or lost during the process of bringing ecosystem products to market (i.e., externalities) and thus may overstate benefits.
• Productivity Method: http://www.ecosystemvaluation.org/productivity.htm
• This method is used to estimate the economic value of ecosystem products or services that contribute to the production of commercially marketed goods. It is applied in cases where the products or services of an ecosystem are used, along with other inputs, to produce a marketed good.
• For example, water quality affects the productivity of irrigated agricultural crops, or the costs of purifying municipal drinking water.
• Economic benefits of improved water quality can be measured by the increased revenues from greater agricultural productivity, or the decreased costs of providing clean drinking water.
• This in turn may affect the price and/or quantity supplied of the final good. It may also affect the economic returns to other inputs. 
• Advantages of the Productivity Method
• In general, the methodology is straightforward.
• Data requirements are limited, and the relevant data may be readily available, so the method can be relatively inexpensive to apply.
• Issues and Limitations of the Productivity Method:
• It is limited to valuing those resources that can be identified as inputs in production of marketed goods. 
• When valuing an ecosystem, not all services will be related to the production of marketed goods. The inferred value of that ecosystem may understate its true value to society. The value of increased productivity realized from water used for irrigation is manifest in crop prices. But the value of benefits foregone, such as loss of a prize trout stream dewatered by irrigation, is not part of the market transaction.
• Information is needed on the scientific relationships between actions to improve quality or quantity of the resource and the actual outcomes of those actions. In some cases, these relationships may not be well known or understood.
• If changes in the natural resource affect the market price of the final good, or the prices of any other production inputs, the method becomes much more complicated and difficult to apply. 
• The Hedonic Methodhttp://www.ecosystemvaluation.org/hedonic_pricing.htm
• This is used to estimate the value of environmental amenities that affect prices of marketed goods. Most applications use residential housing prices to estimate the value of environmental amenities. For example, wilderness designation has been shown to increase the value of nearby properties.

• Travel Cost Method: http://www.ecosystemvaluation.org/travel_costs.htm

• This method is used to estimate the value of recreational benefits generated by ecosystems. It assumes the value of the site or its recreational services is reflected in how much people are willing to pay to get there. Thus, peoples' preferences are revealed by their choices.
• Peoples' willingness to pay to visit the site can be estimated based on the number of trips that people make at different travel costs.
• The method can estimate the benefits or costs resulting from:
• Changes in access costs for a recreational site
• Elimination of an existing site
• Addition of a new site
• Changes in environmental quality at a site.
• It uses information on actual behavior rather than hypothetical scenarios.
• It is relatively inexpensive to apply.
• Many factors affect the number of visits to a site, e.g., income levels, alternatives available, personal interest in a site or recreational experience. A thorough application will take these and other factors into account in the statistical model.
• Advantages of the Travel Cost Method:
• It closely mimics the more empirical techniques used by economists to estimate economic values based on market prices.
• It is based on what people actually do, rather than what they say they would do in a hypothetical situation.
• It is relatively inexpensive to apply
• On-site surveys provide opportunities for large sample sizes, as visitors tend to be interested in participating.
• The results are relatively easy to interpret and explain.
• Issues and limitations
• It assumes people perceive and respond to changes in travel costs the same way they would respond to changes in admission price.
• It can be difficult to apportion the travel costs among various purposes.
• Defining the measuring the opportunity cost of time, or the value of time spent traveling, can be problematic.
• Availability of substitute sites will affect values.
• Those who value certain sites may choose to live nearby, meaning low travel costs undervalue the site.
• Sampling biases.
• It cannot be used to assign values to on-site environmental features and functions that users of the site do not find valuable.
• IT CANNOT BE USED TO MEASURE NON-USE VALUES
• Statistical problems
• Case Study Example of the Travel Cost Method: Hells Canyon offers spectacular vistas and outdoor amenities to visitors from around the country and supports important fish and wildlife habitat.
• It also has economic potential as a site to develop hydropower. A dam and the resulting lake would significantly and permanently alter the ecological and aesthetic characteristics of Hells Canyon. 
• During the 1970's, environmental economists from Resources For The Future developed an economic analysis to justify preserving Hells Canyon in its natural state in the face of its obvious economic potential as a source of hydropower.
• Researchers estimated that the net economic value (cost savings) of producing hydropower at Hells Canyon was $80,000 higher than at the "next best" site which was not environmentally sensitive.
• They then conducted a low-cost/low precision travel-cost survey to estimate the recreational value of Hells Canyon and concluded that it was about $900,000.
• The researchers did not attempt to strongly defend the "scientific" credibility of the valuation method they used or the results.
• They emphasized that, even if the "true value" of recreation at Hells Canyon was ten times less than their estimate, it would still be greater than the $80,000 economic payoff from generating power there as opposed to the other site.
• They also illustrated that overall demand for outdoor recreation, for which the supply is limited, was going up, while many other sources of energy are available besides Hells Canyon hydropower.
• Based largely on the results of this non-market valuation study, Congress voted to prohibit further development of Hells Canyon.

• Damage Cost Avoided, Replacement Cost, and Substitute Cost Methods: http://www.ecosystemvaluation.org/cost_avoided.htm

• These related methods estimate values of ecosystem services based on either costs of avoiding damages due to lost services, the cost of replacing ecosystem services, or the cost of providing substitute services. For example:
• Valuing improved water quality by measuring the cost of controlling effluent emissions.
• Valuing erosion protection services of a forest or wetland by measuring the cost of filtering and chemically treating water.
• Valuing fish habitat and nursery services by measuring the cost of fish breeding and stocking programs.
• Advantages
• They provide a rough indicator of economic value between related goods.
• It is easier to measure the costs of producing benefits than the benefits themselves, so these approaches are less data- and resource-intensive.
• They provide surrogate measures of value that are as consistent as possible with the economic concept of use value, for services that may be difficult to value by other means.
• Issues and limitations
• Costs usually are not an accurate measure of benefits.
• These methods do not consider social preferences for ecosystem services, or individuals' behavior in the absence of those services.
• The cost of a protective action may actually exceed the benefits to society.
• The replacement cost method requires information on the degree of substitution between the market good and the natural resource. Substitute goods are unlikely to provide the same types of benefits as the natural resource. The goods or services being replaced probably represent only a portion of the full range of services provided by the natural resource, thus understating benefits from protective actions.
• Without evidence that the public would demand the least-cost alternative, this methodology is not an economically appropriate estimator of ecosystem service value.

• Contingent Valuation Method (CVM): http://www.ecosystemvaluation.org/contingent_valuation.htm

• CVM can be used to estimate both use and non-use values
• It is the most widely used method for estimating non-use values.
• It is the most controversial of the non-market valuation methods.
• CVM circumvents the absence of markets for environmental goods by presenting consumers with hypothetical markets in which they have the opportunity to pay for the good in question.
• The fact that CV is based on what people say they would do, as opposed to what people are observed to do, is the source of its greatest strengths and its greatest weaknesses.
• It is one of the only ways to assign dollar values to non-use (passive) values, including:
• Basic life support functions associated with ecosystem health or biodiversity,
• Enjoyment of a scenic vista or a wilderness experience,
• Appreciating the option to fish or bird watch in the future,
• The right to bequest those options to your grandchildren,
• The value people place on simply knowing that wild things exist.
• The conceptual, empirical, and practical problems associated with developing dollar estimates of economic value on the basis of how people respond to hypothetical questions about hypothetical market situations are debated constantly in the economics literature.
• But the non-use values (listed above under d.) are likely to be implicitly treated as zero unless their dollar value is somehow estimated. So, how much are they worth? Since people do not reveal their willingness to pay for such values through their purchases or by their behavior, the only option for estimating a value is by asking them questions
• Since non-use values are significant, and few people actually visit, for example, a wildlife habitat site, other methods, such as the travel cost method, will underestimate the benefits of preserving the site. 
• So, in addition to determining exactly what services are being valued, because it is federally owned public land, the relevant population would be allcitizens of the U.S.
• Applying the Contingent Valuation Method
• See long list under this subheading of survey and statistical standards that must be met to ensure credible results.
• Advantages of CVM:
• Enormously flexible
• Most widely accepted method for estimating total economic value, including use values, option and bequest---and non-use values.
• Though the technique requires competent survey analysts to achieve defensible estimates, the nature of CV studies and the results of CV studies are not difficult to analyze and describe.

• CV has been widely used, and a great deal of research is being conducted to improve the methodology, make results more valid and reliable, and better understand its strengths and limitations. 
• Issues and Limitations
• Section 6, presents a long list of cautions and standards for the use of surveys and statistics, concluding with two major qualifications:
• When conducted to the exacting standards of the profession, contingent valuation methods can be very expensive and time-consuming, because of the extensive pre-testing and survey work. 
• Many people, including jurists policy-makers, economists, and others, do not believe the results of CV.
• Case Study Example of the Contingent Valuation Method
• Rivers in the Four Corners Region provide 2,465 river miles of critical habitat for nine species of fish that are listed as threatened or endangered. A contingent valuation survey was used to estimate the economic value for preserving the critical habitat.
• Survey respondents were provided detailed maps and told that efforts to raise funds would involve contributions from all U.S. taxpayers. If a majority of households voted in favor of the fund, the fish species would be protected from extinction.
• On the other hand, if a majority of households in the U.S. voted not to approve the fund biologists expected that four of the nine fish species would likely become extinct in 15 years.
• The questionnaire was sent to a random sample of 800 households in the Four Corners states, and an additional 800 households from the rest of the U.S.
• The average willingness to pay was estimated to be $195 per household nationwide. When extrapolated to the general population, the value of preserving the habitat areas was determined to be far in excess of the costs.

• Contingent Choice Method: http://www.ecosystemvaluation.org/contingent_choice.htm

• Similar to contingent valuation, Contingent Choice can be used to estimate economic values for virtually any ecosystem or environmental service, and can be used to estimate non-use as well as use values. A hypothetical method -- it asks people to make choices based on a hypothetical scenario, and values are inferred from the hypothetical choices or tradeoffs that people make. 
• The contingent choice method asks the respondent to state a preference between one group of environmental services or characteristics, at a given price or cost to the individual, and another group of environmental characteristics at a different price or cost.
• Because it focuses on tradeoffs among scenarios with different characteristics, it is especially suited to policy decisions where a set of possible actions might result in different impacts on natural resources or environmental services.
• For example, improved water quality in a lake will improve the quality of several services provided by the lake, such as drinking water supply, fishing, swimming, and biodiversity.
• While contingent choice can be used to estimate dollar values, the results may also be used to simply rank options, without focusing on dollar values.
• Advantages of the Contingent Choice Method (in addition to those for CVM)
• The method allows respondents to think in terms of tradeoffs, which may be easier than directly expressing dollar values. The tradeoff process may encourage respondent introspection and make it easier to check for consistency of responses. In addition, respondents may be able to give more meaningful answers to questions about their behavior (i.e. they prefer one alternative over another), than to questions that ask them directly about the dollar value of a good or service or the value of changes in environmental quality. Thus, an advantage of this method over the contingent valuation method is that it does not ask the respondent to make a tradeoff directly between environmental quality and money.
• Respondents are generally more comfortable providing qualitative rankings or ratings of attribute bundles that include prices, rather than dollar valuation of the same bundles without prices, by de-emphasizing price as simply another attribute.
• Survey methods may be better at estimating relative values than absolute values. Thus, even if the absolute dollar values estimated are not precise, the relative values or priorities elicited by a contingent choice survey are likely to be valid and useful for policy decisions.
• The method minimizes many of the biases that can arise in open-ended contingent valuation studies where respondents are presented with the unfamiliar and often unrealistic task of putting prices on non-market amenities.
• The method has the potential to reduce problems such as expressions of symbolic values, protest bids, and some of the other sources of potential bias associated with contingent valuation. 
• Issues and Limitations
• Respondents may find some tradeoffs difficult to evaluate, because they are unfamiliar.
• The respondents' behavior underlying the results of a contingent choice study is not well understood. Respondents may resort to simplified decision rules if the choices are too complicated, which can bias the results of the statistical analysis.
• If the number of attributes or levels of attributes is increased, the sample size and/or number of comparisons each respondent makes must be increased.
• When presented with a large number of tradeoff questions, respondents may lose interest or become frustrated.
• Contingent choice may extract preferences in the form of attitudes instead of behavior intentions.
• By only providing a limited number of options, it may force respondents to make choices that they would not voluntarily make.
• Contingent ranking requires more sophisticated statistical techniques to estimate willingness to pay.
• Translating the answers into dollar values, may lead to greater uncertainty in the actual value that is placed on the good or service of interest.

• Although contingent choice has been widely used in the field of market research, its validity and reliability for valuing non-market commodities is largely untested.

• Benefit Transfer Method: http://www.ecosystemvaluation.org/benefit_transfer.htm
• The benefit transfer method is used to estimate economic values for ecosystem services by transferring available information from studies already completed in another location and/or context.
• An example: Values for recreational fishing in a particular state may be estimated by applying measures of recreational fishing values from a study conducted in another state. 
• Benefit transfer is often used when it is too expensive and/or there is too little time available to conduct an original valuation study, yet some measure of benefits is needed.
• The simplest type of benefit transfer is the unit day approach, where existing values for activity days are used to value the same activity at other sites.
• These estimates are based on expert judgment in combining and averaging benefit estimates from a number of existing studies.
• "Unit day values" may be adjusted for characteristics of the study site when they are applied.
• A more rigorous approach involves transferring a benefit function from another study statistically relating peoples' willingness to pay to characteristics of the ecosystem and the people whose values were elicited.
• It is most reliable when:
• the original site and the study site are very similar in terms of factors such as quality, location, and population characteristics;
• the environmental change is very similar for the two sites; and
• the original valuation study was carefully conducted and used sound valuation techniques.
• Adjustments can be made for differences in these characteristics, thus allowing for more precision in transferring benefit estimates between contexts.
• Advantages
• Economic benefits can be estimated more quickly than when undertaking an original valuation study.
• The method can be used as a screening technique to determine if a more detailed, original valuation study should be conducted. 
• The method can easily and quickly be applied for making gross estimates of recreational values. The more similar the sites and the recreational experiences, the fewer biases will result. 
• Issues and Limitations
• Benefit transfer may not be accurate, except for making gross estimates of recreational values, unless the sites share all of the site, location, and user specific characteristics.
• Good and appropriate studies for the policy or issue in question may not be available, particularly in the published literature.
• Reporting of existing studies may be inadequate to make the needed adjustments.
• Adequacy of existing studies may be difficult to assess.
• Extrapolation beyond the range of characteristics of the initial study is not recommended.
• Benefit transfers can only be as accurate as the initial value estimate.
• Unit value estimates can quickly become dated.

D. Relative Indicators of Ecosystem Value: http://www.ecosystemvaluation.org/benefits.htm

Reviewer's note: This section is a work in progress presenting information to assist NRCS staff in developing and using conservation benefit indicators to rank and compare environmental investments oriented to agriculture. Seeming like an exercise in Political Science more than Economics or Statistics it aims for sophisticated political decision making well informed on biological conditions. Hence, it emphasizes development of "leading indicators". An indicator can be defined generally as a measure of anything that provides clues about the benefits expected from a conservation practice undertaken at a specific site.

• This section provides insights into how to value environmental assets or conservation practices in terms of their relative value, i.e., ranking. The question is: Is the value of Project X greater or less than the value of Project Y?
• Those who control federal and regional environmental spending (e.g., green payments) have access to three sources of information about FACTS and VALUES.
• Scientists provide them with as much "value-free" FACTS as possible.
• Interest groups bombard them with their spin on VALUES.
• Objective assessments of ecosystem values provided by NRCS provide:
• an important supplement to scientific determinations about facts; and
• an important check on special interest spin about Values.
• "It all goes through the Political Grinder, which chews up the facts, special interest spin, and objective benefit estimation and spits out policy."
• The challenge of developing relative value indicators is to quantify differences in landscape factors that can be expected to enhance or inhibit the expected flow of benefits.
• Investing in the environment (Natural Capital) in many ways is similar to investing in children (Human capital) or highways (Manufactured Capital).
• Each type of investment generates public benefits in many "roundabout" ways that are difficult to trace and measure beyond the boundary of the project area. For example, investments that reduce nutrient deliveries to nearby water bodies may, under certain landscape conditions, result in more Algae and more Submerged Aquatic Vegetation (SAV) and, depending on other landscape factors, may generate pathways of benefits.
• Measuring the effects of specific investments on each potential pathway of benefits (e.g., improved fish habitat), or tracing any "after-the-fact " measure of ecosystem value (e.g., better fishing) to a specific investment may be difficult or impossible.

However, it is possible to use "leading indicators" to determine the likelihood that a specific investment will contribute to the building blocks of ecosystem benefits. The indicators focus on how the landscape context of a site determines what building blocks of ecosystem value are present

• and, therefore, how changing conditions at a site through a conservation practice is likely to generate ecosystem values.
• In this regard making smart investments in the environment is very much like making smart investments in good schools or efficient highway systems.

• Steps in Developing Relative Value Indicators: http://www.ecosystemvaluation.org/Indicators/ecosysvalind.htm
• Prioritizing public investments in conservation practices on the basis of intuition or a few "rules of thumb" can work sometimes. However, the essential links between "green payments" and environmental benefits are often too complicated to expect that general decision rules will be effective and avoid waste.
• Indicators based on such linkages will be useful for comparing changes in various types of benefits.
• This section continues with step by step explanations of indicator use and development. Readers are urged to access the website for detail.
• Environmental investments at a particular site often generate active and passive values that accrue on or near the site as well as many miles away.
• The offsite passive use values associated with many environmental investments often far exceed their onsite active use values.
• Because of the difficulties in measuring offsite and nonuse values in terms of dollars, these values must be accessed and compared using indicators.
• Such indicators are summarized by the following table:

• Types of Indicators: http://www.ecosystemvaluation.org/Indicators/conbenind.htm
• The purpose of conservation benefit indicators as they are developed here is to manage and improve performance, not to measure it.
• Indicators can be used to assess and compare the expected payoff from investing in conservation practices at different sites.
• The indicators reflect different types of environmental benefits, but are based on an assumption that the sole purpose of conservation spending is to achieve environmental benefits.
• In some cases patterns of spending that achieve the greatest environmental benefits per dollar spent will result in funding allocations that are considered inequitable or undesirable for other reasons. In those cases the indicators may be used to measure differences in attainable levels of environmental benefits that result from constraining conservation spending to achieve non-conservation goal.
• If developed and used correctly, these indicators can provide an economic basis to account for both active and passive conservation investment decisions and, within limits, can be used to justify continued or increased levels of spending.
• They are not useful for justifying a particular level of dollar spending on conservation, but they are useful for managing conservation spending to achieve the greatest benefits per dollar spent.
• Showing that the environmental benefits from spending on one project are greater than the benefits of spending on another project is much easier than estimating the dollar benefits of either project. It is easier to justify that spending is being managed to maximize environmental benefits per dollar spent than to justify any particular level of dollar spending.
• While the underlying biophysical and socioeconomic relationships of the benefits indicators need to be sound, the benefits indicators, because they are rankings, not absolute values, do not need to be scientifically rigorous to be useful.

QUESTIONS RAISED FOR THE THREE FORESTS

• Do you consciously justify alternative management proposals in terms of benefits versus costs?
• Do you rank competing alternatives in terms of conservation benefit indicators?
• As you wrestle with the problem of balancing recreation opportunities and ecosystem protection you hear much about ATV benefits to local communities and individuals. Will you attempt to assess the value of motorized recreation relative to ecosystem protection considering the values held by all US citizens rather than just local residents?
• The contingent choice method asks the respondent to state a preference between one group of environmental services or characteristics, at a given price or cost to the individual, and another group of environmental characteristics at a different price or cost.
• Because it focuses on tradeoffs among scenarios with different characteristics, it is especially suited to policy decisions where a set of possible actions might result in different impacts on natural resources or environmental services.
• Will you develop policy for such decisions focusing on tradeoffs?
• What value/problems do you see in the NRCS method of estimating relative indicators of ecosystem value?

RELEVANCE TO FOREST MANAGEMENT

• We are dealing with public land, owned by all Americans.
• Local people and communities weigh heavily in all Forest decisions.
• "Best professional judgment" is highly suspicious to all but those who benefit from such decisions.
• Econometric analysis is also highly suspicious---dangerous if misused, especially by non-economists who do not understand the rigorous statistical standards that must be applied to surveys of human preferences.

But, Ecosystem Valuation clearly demonstrates:

• There are proven ways to balance local and national values; use values and nonuse; ecosystem sustainability and contradictory human desires.
• Credible economists demand scientific rigor and peer review of their work.
• The painstaking review of shortcomings, statistical standards, and references to myriad organizations and persons interested in ecosystem protections analysis should set a standard for the Forests.
• The Hells Canyon, Four Corners River and other examples not summarized above prove that even with huge margins for error, benefit analysis can sway public opinion.
• While most of the methods summarized above, when applied with sufficient scientific rigor, are rarely affordable by individual Forests, there are viable ways to bring ecosystem benefit analysis into play.

• The existence of so many rigorous methods to evaluate ecosystem services and non-commercial values of people show that a socioeconomic analysis that does NOT systematically evaluate ecosystem tradeoffs, ecosystem services and non-commercial values of each Forest Plan alternative will be inadequate and indefensible under National Environmental Policy Act regulations.