Valuing language diversity: an environmental economics perspective

1. Valuing language diversity: an environmental economics perspective Paulo A.L.D. Nunes International Summer School Valuing Cultural Diversity In Cities: Challenges To Cultural Economics Island of Procida, 4|8 September 2009

2. Contents • Background • Motivation • Definition of the total economic value • Biological diversity Vs Language diversity • Take home message: interdisciplinarity

3. Background Sustainable Development and Language Diversity Economic Valuation methods

4. Motivation: price, values and human welfare • Price is an output of the market mechanisms. • Markets: consumers, producers. • Equilibrium

5. Motivation: price, values and human welfare

6. Market failure • Market price does not translate the economic value of the resource. • Market price is zero, does not mean that the economic value is zero. • If the market price is zero, moving towards a zero level of provision will have a welfare impact. • From the sustainable allocation of resources view-point, it is not policy advisable to go for a “zero” supply of the resource.

7. Definition of the total economic value TEV = Use values + + Non-Use values + + (Warmglow and altruism values) Characterize!

8. Environmental quality: biological diversity

9. Environmental quality: biological diversity Arise without the need for any use or experience the environmental asset (e.g. natural park) Therefore the possible loss of the environmental asset would result in a welfare loss to the general public, including individuals that never visited the natural park and may never do so.

10. Non-market valuation methods The economist needs to study this effect. The economist needs to estimate the magnitude of this effect. The economist needs to value this effect in monetary terms. Archaeologist type of behaviour. The economist has access to a rather rich tool box, in which one can explore a set of wide range of valuation tools. Or better, a wide range of non-market valuation methodologies. Before however.

11. Biological diversity Vs Language diversity

12. Biodiversity, ecosystem services and well-being Forests systems Coastal and freshwater systems Marine systems Source: MEA (2005), adapted.

13. Biodiversity, ecosystem services and well-being • Goods and Services provided by Marine and Coastal Ecosystems • The Millennium Ecosystem Assessment defines four categories of ecosystems services: • Provisioning Services: e.g. fisheries, aquaculture, petroleum, natural gas • Regulating Services: e.g. shoreline stabilization and protection, climate regulation, nutrient regulation, carbon sequestration • Cultural and Amenity Services: e.g. culture, tourism, and recreation • Supporting Services: e.g. habitat provision, nutrient cycling, primary productivity, resilience against non-native species.

14. The Economist, 15th October 2008

15. Why economic valuation Marine Ecosystems are a scarce resource • Cost-benefit-analysis and policy formulation • Legal claims and natural resource damage assessment • Environmental accounting

16. TEEB: Stern like review on biodiversity • COP9, May 2008, Bonn • FEEM - Nunes & Markandya has been the study leader of the review contract with DG Environment, Review on the economics of biodiversity loss – phase 1 (scoping) – Economic analysis and synthesis - a project under the Framework contract for economic analysis ENV.G.1/FRA/2006/0073 • FEEM – Nunes & Markandya has been the study leader of the European Environment Agency project on scaling up biodiversity values. • FEEM – Nunes and Markandya has been partner of the consortium COPI - The Cost of Policy Inaction (COPI): the case of not meeting the 2010 biodiversity target, ENV.G.1/ETU/2007/0044(4) • Now phase 2 (2008-2010)

17. Economic valuation perspective • Characterize!

18. Alternative perspectives Welfare vs. intrinsic valuation. Monetary vs. physical indicators. Market vs. nonmarket values. Direct vs. indirect values resources.

19. Alternative perspectives Value of levels vs. values of changes (in the languistic system under consideration) Local vs. global benefits. Primary vs. transfer values. Holistic vs. reductionist approaches. Expert vs. general public assessments.

20. All in all… It is clear that many different valuation perspectives can be distinguished based on the above nine considerations. This means that different opinions on biodiversity value may in fact based on different perspectives. This does not mean that one is right and the other is wrong. Evidently, it is crucial to know the perspective being adopted.

21. Economic perspective, which underpins the concept of (economic) value • Instrumental perspective • Metric assessment providing a monetary indicator • Valuation is operationalized through explicit system changes, preferably marginal or small (interpreted as alternative scenarios) Calls for interdisciplinarity

22. Take home message: interdisciplinarity Linguistics

23. Language diversity, language services and well-being HOMEWORK: mapping of the services!

24. Contact: THANK YOU. pnunes@unive.it Campo S. Maria Formosa 30122 Venezia - Italy tel +39 | 041 | 27 11 400 fax +39 | 041 | 27 11 461 web http://www.feem.it

25. Overview of valuation methods Paulo A.L.D. Nunes International Summer School Valuing Cultural Diversity In Cities: Challenges To Cultural Economics Island of Procida, 4|8 September 2009

26. Contents • Modeling the concept of economic value • Types of Environmental Benefits • Market and Non-Market Valuation Methods • Conclusions and take home messages.

27. Types of Environmental Benefits (cont.) The concept of economic value v is the indirect utility function for individual i p is the market price (observed) of the private good M the amount of (monetary) income za ecosystem quality indicator (e.g. species richness)

28. Types of Environmental Benefits (cont.) The concept of economic value (cont.) Policy/Regulation:zspecies richness: moving from z0to z1 with z0 > z1 This change may be interpreted as the introduction of a set of new regulations designed to allow commercial development in protected areas.

29. Types of Environmental Benefits (cont.) The concept of economic value (cont.) The economic literature suggests two alternative measures that can be used to assess the magnitude of the welfare change as described by the introduction of the new regulation.

30. Types of Environmental Benefits (cont.) The concept of economic value (cont.) The economic literature suggests two alternative measures that can be used to assess the magnitude of the welfare change as described by the introduction of the new regulation. Task: empirical assessment of the HE/HC income magnitude

31. Total Economic Value = Use values + Non-Use values Types of Environmental Benefits/Values Use benefits refer to the utility arising from direct or indirect physical use of a resource including commercial use, recreational use, and aesthetic use.Non-use benefitsrefer to utility that is derived from environmental resources without physical interaction with the resource:

32. Use Benefits • Consumptive use benefits are private benefits that are derived from resource consumption and contribute to resource depletion. Examples are farming, forestry, fishing, grazing, hunting, mining. • Non-consumptive use benefitsare generally public good benefits that do not contribute to resource depletion. Examples are swimming, boating, hiking, camping, viewing wildlife, observing scenic forests, mountains, rivers, waterfalls.

33. Non-use (or passive) benefits • Existence benefits, or inherent benefits refer to utility derived from the knowledge of the mere existence of environmental resources. You might never see many of the endangered species but you might still value their existence. • Bequest benefits refer to benefits derived from passing an environmental resource on to children and/or future generations. • Warmglow benefits refer to benefits derived from impure altruistic reasons including from knowing that we feel with good with ourselves when contributing to ‘good-causes’ such as the conservation of the worlds’ resources.

34. Non-use (or passive) benefits • Existence benefits, or inherent benefits refer to utility derived from the knowledge of the mere existence of environmental resources. You might never see many of the endangered species but you might still value their existence. • Bequest benefits refer to benefits derived from passing an environmental resource on to children and/or future generations. • Warmglow benefits refer to benefits derived from impure altruistic reasons including from knowing that we feel with good with ourselves when contributing to ‘good-causes’ such as the conservation of the worlds’ resources. public good benefits

35. Types of Environmental Benefits (cont.) Market and Non-Market Valuation Methods • Market Valuation methods: The use of market prices is the most direct method (e.g. resort skiing, commercial whale watching). But 1) Market fails in capturing the public good benefits; 2) Environmental resource are characterized by a strong public good character; 3) Market prices do not embed the full value range of environmental resource… =>Alternative valuation methods!

36. Alternative valuation methods • Classification: • Revealed preference methods • Stated preference methods • Dose response methods Anchored at consumer behaviour (utility function)

37. Dose response methods Production/Cost methods: if natural resources can be restored (such as species richness) engineering and nature development techniques can be applied to estimate the cost of restoration/replacement.

38. Non-Market Valuation Methods General public • Revealed preferences methods; • Stated preferences methods; Nota bene:If the economic valuation exercise is only based on special interest groups’ preferences we refer to expert value assessment (implicit valuation exercise, delphi valuation method, multicriteria analysis).

39. A classification of valuation methods attribute based method

40. Hedonic price method • Goods in general can be thought of as bundles of characteristics. • The hedonic pricing method is used to estimate economic values for environmental services that directly affect market prices. • It can be used to estimate economic benefits or costs associated with: • environmental quality, including air pollution, water pollution, or noise • environmental amenities, such as aesthetic views or proximity to recreational sites ** think on tuition fees for private schools and the schooling program, professors cv, languages, etc…

41. Hedonic price method: regression analysis • Market price of a commodity is related to a set of characteristics , including environmental quality.

42. Hedonic price method: regression analysis • The hedonic price function approach is a method that infers the marginal value of each characteristic (Zi) form the price of the combined bundle: • Implicit prices or valuation (ai) of environmental quality such as air quality can be deduced from market prices (e.g. Day, Bateman and Lake 2007) • Market price of a commodity is related to a set of characteristics , including environmental quality.

44. Hedonic price method • Weaknesses • It requires good quality data on each market transaction and information on how to map environmental quality into the market demand functions. • Multiple demand equation is data demanding and may be difficult to estimate/econometrics • Use values only.

45. Travel cost method • The travel cost method uses actual travel expenditures (e.g. gas, plane tickets, etc.), and opportunity costs of time (e.g. wage rate) to infer valuation of recreational activities.

46. Travel cost method • Example: Zandvoort beach in the NL

47. Travel cost method • Example: Zandvoort beach in the NL

48. Travel cost method • Example: Zandvoort beach in the NLIt attracts 2,400,000 visitors/year. Each visitor spends 1 and 1/2 hours traveling. The opportunity cost of time is 30 Euro/hr for the average visitor. Gas and car use cost 10 Euro per visitor. Parking cost is 5 Euro/visit. Thus, the total travel cost is: • 2,400,000 * [1,5 * 30 + 10+ 5] = 40,000 * 70 = 132,000,000 Euro (2003)

50. Travel cost method • The 132 million is an estimate of a lower bound for recreational benefits from the visiting Zandvoort, because anyone that finds it optimal to spend time at the Zandvoort beach must receive at least enough benefit to cover the travel cost of getting there, but might receive considerably more. • If there are other substitute, travel cost methods become more complex. For example, closure of one beach (in this case due to harm full algal blooms) for a specific recreational activity will cause some people to use substitute beaches. In turn, these get more congested and the benefits of using them will decline. • Only visitors • Use values only.