ࡱ> 9;8g #bjbjVV *0r<r<88fj6666%%%egggggg$LB%%%%%66%R66e%e6@װ?wQ0@@@@%%%%%%%%%%%%%%@%%%%%%%%%8 F:  SEQ CHAPTER \h \r 1Dam Removal on the Elwha River: Salmon Recovery, the Restoration of Klallam Livelihoods and the Role of Cost-Benefit Analysis By Peter Dorman Teaching Notes Learning Objectives: 1. Become familiar with the Elwha River Restoration Project and its importance for Lower Elwha Klallam Tribal livelihoods. 2. Understand the role played by cost-benefit analysis (CBA) in the federal decision-making process for projects with substantial economic consequences. 3. Learn about the main features of CBA: the inclusion of all major project alternatives, the identification of all pertinent cost and benefit items, and the necessity for monetizing all costs and benefits that affect the analysis bottom line. 4. Assess the gains and losses of translating, or failing to translate, intangible values, like the ecological and cultural aspects of salmon habitat restoration, into monetary quantities. 5. Acquire greater expertise in employing, or countering, CBA methods in interactions with government agencies over natural resource issues. Audience: This case assumes no prior acquaintance with economics, although some exposure would be helpful. It is expected that participants will have the quantitative skills to replicate the calculations that make up the CBA: multiplying unit costs and benefits by the number of units, and expressing the resulting quantities as proportions of bottom line figures. Reading the CBA also requires a general knowledge of electricity generation and pricing, the tourism and fishing industries, and the role of riparian habitats for salmon restoration. The case is suitable for undergraduate and graduate students, with applications to natural resource policy, economics and public administration. Implementation: The case describes the intended implementation in detail. In order for the process to work, these points are essential: 1. All five groups should be formed well in advance; students should know which group they are in. There cannot be fewer or more than five groups. 2. All students should have a copy of the CBA to read well before the day in which the case is to be analyzed. 3. Groups should have sufficient time to prepare their presentation. There should be enough time to talk through the sometimes complex detail of the CBA as well as to organize a presentation to the entire class. In practice, this takes at least an hour. If not enough time is available, the groups should meet separately outside of class prior to the day they are scheduled to present. 4. Presentation itself is also time-consuming; plan on at least 15 minutes per group, with enough time allocated so clarifying questions can be asked. 5. Group 4, which is assigned the presentation of Chapter 8 will be strongly tempted to depart from the methodology laid out in the case study, since it doesnt seem to apply to them. That is, the methodology assumes that a monetary cost or benefit is calculated in each chapter, but that is not true for Chapter 8. Because of this Group 4 may wish to discuss its contents in purely qualitative terms. To do this would miss a key point of the exercise however, that tribal values play no role in the CBA because they are not monetized. In order to bring out this crucial fact, it is essential that Group 4 try to implement the methodology; they have to make it clear to the class that no costs or benefits, as defined in CBA methodology, result from impacts on tribal values, and that these values therefore play no role in the CBAs bottom line. 6. Group 5 comes last because it turns out that its chapter completely dominates the CBA as a whole: the value of the salmon, as determined by the contingent valuation survey, is so great that none of the other costs or benefits matter. This recognition should be accompanied by a powerful irony, that the benefit item that dominates the results is determined by a methodology that is likely to be viewed as far less convincing than those used to calculate electricity costs and tourism and fishing benefits. 7. The purpose of the final discussion is to move from the details to the big picture. Two intangible outcomes are addressed in the CBA, tribal values and the intrinsic value (or existence value in economics jargon) of salmon restoration. The first is not monetized and drops out of the CBA calculation; the second is but at the cost of diminished credibility. What are the costs and benefits of putting numbers on these costs and benefits? Would it have been better to express tribal values in terms of money, so they could have entered the bottom line? Should the intrinsic value of salmon have been left in qualitative terms, so that only hard economic values would have been added up? What is gained and lost by these decisions? These are the kinds of choices that tribes and other policy actors have to face when CBA methods are mandated. Note: the procedure laid out in the case study avoids the issue of setting a discount rate, even though this occupies a large portion of the document. Because of the enormous impact of Chapter 6, discount rates have no effect on the bottom line. In addition, the choice of discount rate, while an important topic in CBA methodology, is largely unrelated to the question of monetizing intangible values, which is the focus of this case study. Additional Resources: These books, websites and films provide more background on the Klallam Tribe, the Elwha, and the history of the dams: Historical novel: Evison, J. (2011). West of here. Chapel Hill, NC: Algonqui ADVANCE n Books. Lower Elwha Klallam Tribes website: www.elwha.org Olympic National Park Elwha River Restoration website: www.nps.gov/ ADVANCE olym/naturescience/ ADVANCE elwha-ecosystem-restoration.htm National Park Service. Olympic National Park. Elwha Restoration Documents. Retrieved 6/28/11 from:  HYPERLINK "http://www.nps.gov/olym/naturescience/elwha-restoration-docs.htm" http://www.nps.gov/ ADVANCE olym/ ADVANCE naturescience/ ADVANCE elwha-restoration-docs.htm Film: Simon, C. (Producer), & Lundahl, R. (Director). (2002). Unconquering the last frontier. USA: Bullfrog Films. The following four books provide greater depth on the foundations and methods of cost-benefit analysis. The first is the standard, comprehensive reference; the second is a shorter introduction; the third is the official methodology promulgated by federal regulatory agencies; and the fourth is a prominent critique. Boardman, A. Greenberg, D., Vining, A., & Weimer, D. (2011). Cost-benefit analysis: Concepts and practice (4th ed.). Upper Saddle River, NJ: Prentice Hall. Gramlich, E. (1997). A Guide to Benefit-Cost Analysis (2nd ed.). Long Grove, IL: Waveland Press. National Center for Environmental Economics. (n.d.) Guidelines for Preparing Economic Analyses. Retrieved from: http://yosemite.epa.gov/ee/epa/eed.nsf/pages/Guidelines.html Ackerman, F. & Heinzerling, L. (2004). Priceless: On knowing the price of everything and the value of nothing. New York, NY: New Press.  * 1 8  * \8:YZdexy»µ«««ٜh<+h3QaJ hc>aJjh3QUaJ hxaJ h3Q6aJ h3QaJ h _5aJh<+h _6aJ h _aJh<+h _5aJh<+h _aJjh<+h _UaJ:F   ) * cdhi $1$a$gd _ $1$a$gd _34~2 3 p!q! 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