Discounting the Economic Costs of Conservation and Compensation

Abstract

Sites are scarce, depletable resources. Development at sites frequently involves losses of aesthetic, recreational, and spiritual qualities. Attempts to quantify these losses are increasingly made via nonmarket valuation techniques. Conservation of sites frequently involves foregoing alternative uses of the sites. The benefits which could potentially be provided by alternative uses of sites can be evaluated to provide estimates of the gross economic costs of conservation. The economic costs likely to be imposed by protecting rock from quarrying at a site near Dunedin, New Zealand, are examined, and attempts are made to estimate compensation requirements. Protection of this site is expected to impose costs on the quarryowners and society at a distant time. The choice of discount rate is of overriding importance in estimating the magnitudes of these distant costs. In the case studied, ‘high’-magnitude discount rates appear to reduce the costs of conservation and ‘low’-magnitude discount rates increase those costs.