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Economics of Investment In Prevention, Rapid Response, and Management

Economics of Investment In Prevention, Rapid Response, and Management. Donna J. Lee University of Florida Gainesville Florida USA.

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Economics of Investment In Prevention, Rapid Response, and Management

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  1. Economics of Investment In Prevention, Rapid Response, and Management

  2. Donna J. LeeUniversity of FloridaGainesville Florida USA “Economics Of Investment In Prevention, Rapid Response, And Management,” Non-market Valuation, Decision Support Systems And The Management Of Invasive Species: Economic Tools For Public Agencies,, AARES Preconference Workshop, Queenstown NZ, Feb. 13 2007.

  3. Key concepts • Risk • Time • Optimal investment • Monitoring and Prevention • Rapid response (Early eradication) • Long term management

  4. ProblemSetting

  5. How Pests Interfere With Native Ecosystems • Predator-prey (Brown tree snake) • Parasitic (Soybean aphid) • Compete for food, space, sunlight (Miconia) • Alter environment (Zebra mussel) • Disrupt economic activities (Armored catfish)

  6. Sources of Exotic Introductions • Trade – legal, illegal • Incidental - hitch hikers in boats, on vehicles, with people, with traded goods) • Natural – air and water

  7. Types of Ecosystem Values • Direct use • collection, harvest, extraction • recreation • Indirect use • native species habitat • ecosystem services e.g. erosion control, water supply • Non-use • aesthetic • cultural • existence

  8. BNZ Priority Ecosystems • High country • Aquatic • Marine • Indigenous forest

  9. BNZ Priority Pests and Diseases • Rainbow Lorikeets • Dutch Elm Disease • Manchurian wild rice • Phragmites • Rainbow skinks • Giant hogweed • Argentine ant • Darwin’s Ant • Chilean needle grass • Wilding conifers • Salvinia • Water Hyacinth • Cape Tulip • Johnson grass • Pyp grass • White Bryony • Hornwort (South Island) • Hydrilla

  10. Management Goals • Stimulate or maintain economic health • Safeguard ecosystem biodiversity and functions • Provide quality nature based opportunities • Protect culturally significant resources

  11. Risk Gambling games

  12. What is your risk preference?  Check one • Risk Loving (dangerous activities, gamble with money, motorcycle) • Risk Averse (low impact activities, conservative investments) • Risk Neutral (indifferent to upside gains and downside loss)

  13. Game A There is a 50% chance that you will win $200 and a 50% chance that you will win $100 What’s the most you would pay to modify the game so that… There is a 60% chance that you will win $200 and a 40% chance that you will win $100 Amount you would pay $_______

  14. Analysis of Game A Old game Expected benefit = .5(200) + .5(100) = $150 New game Expected benefit = .6(200) + .4(100) = $160 WTP = approximately $10

  15. Analogy to IS 50% = probability of an invasion 40% = probability of an invasion with Prevention measures $200 = Ecosystem Benefit with no invasive specie $100 = Ecosystem Benefit with invasive specie $10 = Value of Prevention

  16. Game B There is a 50% chance that you will win $200 and a 50% chance that you will win $100 What’s the most you would pay to modify the game so that… There is a 50% chance that you will win $200 and a 50% chance that you will win $150 Amount you would pay $_______

  17. Analysis of Game B Old game Expected benefit = .50(200) + .50(100) = $150 New game Expected benefit = .50(200) + .50(150) = $175 WTP = approximately $25

  18. Analogy to IS $200 = Ecosystem Benefit no invasive specie $100 = Ecosystem Benefit with invasive specie $150 = Ecosystem Benefit with invasive specie plus net gain from Rapid Response or IS management (e.g. eradication, damage mitigation, containment, habitat restoration) $25 = Value of Rapid Response or Value of IS management

  19. Game C There is a 50% chance that you will win $200 and a 50% chance that you will win $100 What’s the smallest amount you would accept for this change in the game… There is a 30% chance that you will win $200 and a 70% chance that you will win $100 Smallest amount you would accept $______

  20. Analysis of Game C Old game Expected benefit = .50(200) + .50(100) = $150 New game Expected benefit = .30(200) + .70(100) = $130 WTA = approximately $20

  21. Analogy to IS 50% = probability of an invasion 70% = probability of an invasion (e.g. with permitted imports) $20 = Value of Loss from IS threat

  22. In your opinion, how should we manage our ecosystems? Check one • Risk Loving (combat problems as they appear) • Risk Averse (protect against worst case scenarios) • Risk Neutral Why?

  23. Time

  24. IS growth over time % Fast Moderate speed Slow speed Carrying capacity 100 IS Stock 50 0 0 5 10 Year

  25. Value of Ecosystem Services $ High Value of Ecosystem Services Low % 0 100 IS Stock

  26. Economic Loss over time due IS(for a pristine ecosystem) $ No infestation Baseline Economic Loss Ecosystem Value With infestation 0 0 5 10 Year

  27. Alternate Ecosystem Baseline Projections Recovering $ Stable Baseline Declining Economic Loss Ecosystem Value With infestation 0 0 5 10 Year

  28. Without prevention Benefit from Prevention $ With prevention Baseline Benefit from prevention Ecosystem Value 0 0 5 10 Year

  29. Without rapid response Benefit from Rapid Response $ Baseline With rapid response Benefit from rapid response Economic Loss Ecosystem Value 0 0 5 10 Year

  30. Without management Benefit from Management $ Baseline With management Ecosystem Value Economic Loss Benefit from management 0 0 5 10 Year

  31. Optimal investment Prevention Rapid Response (Long Term Management)

  32. Net benefit from prevention $ Benefit Net Benefit Cost Prevention ($)

  33. $ Maximum Net Benefit from Prevention Benefit Cost Prevention (P) $ Net Benefit Maximum Net Benefit Prevention (P) P*

  34. Net benefit from rapid response Maximum Net Benefit from Rapid Response $ Benefit Cost Response (R) $ Net Benefit Maximum Net Benefit Response (R) R*

  35. Maximum Net Benefit from Prevention and Rapid Response

  36. Game DPrevention is costly Three levels of Prevention • None Low High Three levels of Rapid Response • None Low High Choose level of each to maximize Net Benefit

  37. Game DPrevention and Rapid Response Choices

  38. Net Benefit from Prevention and Rapid Response

  39. Game ERapid response is costly Three levels of Prevention • None Low High Three levels of Rapid Response • None Low High Choose level of each to maximize Net Benefit

  40. Game EPrevention and Rapid Response Choices

  41. Net Benefit from Prevention and Rapid Response

  42. Summary Optimal investment depends on • Probability an invasion will occur • Speed of establishment and spread • Risk preferences • Available choices (technology) • Ecosystem benefits • Cost and relative effectiveness of management choices

  43. More on Managing Invasive Species Choices, Costs, and Benefits

  44. Choices • Do nothing • Prevention (and monitoring) • Border containment • Quarantine • Ban • Ecosystem restoration and protection • Rapid response • Eradication • Adaptation • Education to prevent spread and reduce damages • Long term management • Removal • Containment • Education to slow spread and limit damages

  45. Costs Monitoring Prevention Response • Program and administrative expenditures • Lost income from banned imports and sales • Lost use values from areas closed to harvest, extraction, cultivation, recreation • Cost of eradication and removal • Cost due to unintended or secondary impacts from eradication and removal (e.g. Chemical use, etc.) • Cost of research and information gathering

  46. Benefits Monitoring Prevention Response • Avoided ecosystem damages and loss in biodiversity • Avoided economic, cultural, social losses from ecosystem impairment • Avoided secondary consequences from eradication Restoration • Gain in ecosystem function and biodiversity • Gain economic, cultural, social losses from improved ecosystem function • Reduction in future management outlays for treatment and removal

  47. How much should you invest in… Monitoring and Prevention Rapid Response Long Term Management Research

  48. How much should you invest in Monitoring and Prevention? Factors that influence the Benefit and Cost of Monitoring and Prevention • Risk of entry with no prevention • Effectiveness of prevention measures • Ability to detect an introduction before establishment • Cost of early eradication • Likelihood of establishment and spread • Speed of establishment and spread. How much time do you have to respond? • Cost of eradication after establishment • Magnitude of potential damages avoided

  49. How much should you invest in Rapid Response? Factors that influence the Benefit and Cost of Rapid Response • Speed of establishment and spread -- How much time do you have to respond? • Cost of preparedness • Cost of eradication • Magnitude of potential damages avoided

  50. How much should you invest in Long Term Management? Factors that influence the Benefit and Cost of Long Term Management • Cost of control and containment • Magnitude of damages avoided • Future replacement cost or restoration cost

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