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March / April 2003

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The Nature of Value

Photo by Sherman Hasbrouk

The Nature of Value
New tools developed by resource economists offer insight into the intrinsic worth people place on the environment and how that translates into effective land-use policies

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From the Nation's largest metropolitan areas to the smallest rural communities, public and private land-use decisions can have long-lasting implications for the future. At stake are quality-of-life issues, such as scenic views, clean water and community atmosphere, as well as the economic activities that provide jobs.

There's no crystal ball giving landowners and planners a view of tomorrow to ensure they make the right decisions today. Indeed, development proposals often set the stage for public controversy and lawsuits. However, University of Maine resource economists are going behind the scenes to accurately capture the values that people place on the environment. They are developing tools that help landowners and planners look to the future and contemplate the effects of public and private land-use decisions.

Their work is providing citizen advocates and planners with new ways to address the tendency for expanding urban areas to gobble up farmland and forests. One of their goals is to improve the basis for effective public policies.

Kevin Boyle, UMaine professor of environmental economics, has been tapped by state and federal governments, nonprofit organizations and corporations to estimate, in simplest terms, the values that people place on nature. He has focused on a variety of topics from free-flowing rivers and clear lakes to fishing preferences and forestlands. In academic circles, he is well known for reducing the experimental bias that can mar studies of public values.

Results of well-designed valuation research, he says, can reveal the preferences that individuals express through their daily economic decisions actions that may, in aggregate, be contrary to public policies, such as measures to preserve open space and rural heritage.

UMaine Assistant Professor of Resource Economics and Policy Kathleen Bell studies land-use decisions. Her recent research combines economic modeling with computerized mapping technology (geographic information systems or GIS) to analyze changes in land-use patterns. Visualizing future land-use patterns helps citizens and planners to understand the consequences of public policies.

The maps that she and her colleagues have produced indicate the likelihood that any given land parcel will be developed. They are maps of development pressure based on models that take into account current land-use policies, demographics and the real estate market.

Environmental economists like Boyle and Bell have their critics. For example, some contend that the value of nature cannot be captured in dollars and cents, that land-use decisions involve much more than comparing the economic value of a strip mall or a subdivision to a wetland or forest preserve.

Yet economists bring important information to the decisionmaking table. "We observe peoples' values through their choices. All we're doing is showing people how their values are expressed through the decisions they make. If you do or do not care about natural resource issues, your choices and actions tell us your preferences," Boyle says.

For example, Boyle and Bell have demonstrated that people are willing to pay good money to be close to nature. In a recent study for the U.S. Fish and Wildlife Service, they analyzed data on residential land prices near federal wildlife refuges in Massachusetts, New York and Pennsylvania. Their results show that the closer a house is to a protected wildlife area, the higher the property value.

Property value data, says Boyle, provide an incentive for developers to preserve views, wildlife habitat, recreational areas and other amenities. "On a property, open space is just as important an attribute as a fine kitchen or a luxury bathroom. This is not really the environment versus dollars. Developers can get money out of (protecting open space)."

Bell also points out that economists help citizens and policymakers understand the drivers of land-use change and the efficacy of land management policies. At the heart of the open space versus development issue, she says, is the public's ability to influence private decisions.

Many public amenities, such as vistas and wildlife habitat, are the cumulative result of numerous private landowner decisions. Those amenities may have value for a community, but when owners exercise their development rights, those public benefits can be lost. Often, the public has no recourse or even a role in the decision. The challenge is to design policies that align private and public interests, she says.

In a recent study of rural Calvert County, Maryland, south of Washington, D.C., Bell worked with Elena Irwin of Ohio State University and Jacqueline Geoghegan of Clark University to create an economic model simulating future growth.

"We ran our model using information on past land-use decisions and policies, parcel characteristics and land values, then used the results to forecast where development would happen. We examined whether this future development would be consistent with the county's comprehensive plan."

The result was an eye-opener, Bell says. "Historically, people were very happy with their land-use management policies. They thought their policies were performing admirably because they hadn't seen a lot of residential and commercial development. But we found that these policies were not being pushed. A policy such as a five-acre minimum lot size looked effective until people from Washington, D.C., decided that they were willing to commute for two hours and residential subdivisions started appearing. That five-acre minimum lot size zoning not only did not prevent that growth, but it led to growth that might have been less appealing to the community as a whole, in that you have individual houses taking up more land."

Among the open-space preservation methods included in the Calvert County model, policies that promote development within identified growth areas were the most effective in reducing pressure on open spaces. The model suggests that motivating developers to work within well-defined geographical boundaries would succeed in reducing pressure on open-space rural lands.

Such measures could be particularly important in suburban areas located between highly urbanized and wide-open rural spaces. Yet they seem to have limited appeal to the country as a whole. In an ongoing study of public attitudes for the U.S. Department of Agriculture, Boyle finds that most people don't place a high value on farmland preservation programs. Residents of rural communities with an abundance of open land, and big cities, where development proliferates, tend to consider such programs a low priority for public funds. That leaves the highest concern in communities at the urban fringe, where pressure to convert open space to buildings and pavement is most evident.

The findings could help policymakers fine-tune their approaches to open-space protection, taking into account local circumstances.

"The new information that economists can bring to people," says Bell, "is that land-use decisions are individual decisions, that they reflect human behavior played out on the landscape. We have to respect the complexity of human behavior and acknowledge how people make decisions. The challenge is to align private and public interests through effective policies."

by Nick Houtman
March-April, 2003

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