Economics and the Endangered Species Act

Economics plays strong roles in the design, implementation, and evaluation of the Endangered Species Act (ESA). First, the ESA’s language allows for economic analysis of critical habitat designations, recovery plan implementations, listing postponements, and the design of habitat-conservation plans. Extensive administrative changes to the ESA in the 1990s were designed to reduce economic costs and to elicit landowners’ cooperation. These reforms were partly motivated and guided by economic analysis. Second, economic analysis plays a role in providing credible estimates of the economic costs of ESA implementation. Cost estimates are highly variable and likely to depend on species’ characteristics and the effectiveness of recovery programs. Emerging evidence suggests that the 1990 reforms are reducing costs and increasing effectiveness. Third, economic science contributes to estimation of benefits. Because of the “public goods” nature of nearly all ecosystem and species conservation efforts, estimates must be based on stated preference methods. This use leads to difficulties in establishing the authenticity of benefits estimates. Also, research suggests that benefits estimates are highly sensitive to the spatial nature of the market (beneficiaries’ geographic locations). Future research needs to tackle both authenticity and spatial issues. Fourth, benefit–cost analysis (BCA) is required by law to inform many resource decisions affecting ecosystem and species conservation. Four illustrative BCAs show that whether benefits exceed costs is highly dependent on the authenticity of benefits based on stated preference methods and assumptions about the spatial nature of the market. Substantial uncertainty accompanies both benefit and cost estimates.