Economics of Investment In Prevention, Rapid Response, and Management

Donna J. LeeDonna J. LeeUniversity of Florida

Gainesville 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.

Key concepts

• Risk• Time• Optimal investment

• Monitoring and Prevention• Rapid response (Early eradication)• Long term management

ProblemProblem SettingSetting

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)

Sources of Exotic Introductions

• Trade – legal, illegal• Incidental - hitch hikers in boats, on vehicles,

with people, with traded goods)• Natural – air and water

Types of Ecosystem Values

• Direct useDirect useo collection, harvest, extractiono recreation

• Indirect use Indirect use o native species habitato ecosystem services e.g. erosion control, water supply

• Non-use Non-use o aesthetico culturalo existence

BNZ Priority Ecosystems

• High country• Aquatic• Marine• Indigenous forest

BNZ Priority Pests and Diseases

• Salvinia • Water Hyacinth • Cape Tulip • Johnson grass• Pyp grass • White Bryony • Hornwort (South

Island) • Hydrilla

• Rainbow Lorikeets • Dutch Elm Disease• Manchurian wild rice • Phragmites • Rainbow skinks • Giant hogweed• Argentine ant • Darwin’s Ant • Chilean needle grass • Wilding conifers

Management Goals

• Stimulate or maintain economic health• Safeguard ecosystem biodiversity and

functions• Provide quality nature based opportunities• Protect culturally significant resources

RiskRisk

Gambling games

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)

Game A

There is a 50% chance that you will win $200There is a 50% chance that you will win $200and a 50% chance that you will win $100and a 50% chance that you will win $100What’s the most you would pay to modify the

game so that…There is a 60% chance that you will win $200 There is a 60% chance that you will win $200

and a 40% chance that you will win $100and a 40% chance that you will win $100Amount you would pay $_______

Analysis of Game A

Old gameExpected benefit = .5(200) + .5(100) = $150

New gameExpected benefit = .6(200) + .4(100) = $160

WTP = approximately $10

Analogy to IS50% = probability of an invasion40% = probability of an invasion with Prevention

measures

$200 = Ecosystem Benefit with no invasive specie$100 = Ecosystem Benefit with invasive specie

$10 = Value of Prevention

Game B

There is a 50% chance that you will win $200 There is a 50% chance that you will win $200 and a 50% chance that you will win $100and 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 There is a 50% chance that you will win $200 and a 50% chance that you will win $150and a 50% chance that you will win $150

Amount you would pay $_______

Analysis of Game B

Old gameExpected benefit = .50(200) + .50(100) = $150

New gameExpected benefit = .50(200) + .50(150) = $175

WTP = approximately $25

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

Game C

There is a 50% chance that you will win $200 There is a 50% chance that you will win $200 and a 50% chance that you will win $100and 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 There is a 30% chance that you will win $200 and a 70% chance that you will win $100and a 70% chance that you will win $100

Smallest amount you would accept $______

Analysis of Game C

Old gameExpected benefit = .50(200) + .50(100) = $150

New gameExpected benefit = .30(200) + .70(100) = $130

WTA = approximately $20

Analogy to IS

50% = probability of an invasion70% = probability of an invasion (e.g. with

permitted imports)$20 = Value of Loss from IS threat

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?Why?

TimeTime

IS growth over timeIS growth over time

Year

IS S

tock

1050

%

100

50

0

Moderate speedModerate speed

Carrying capacityCarrying capacity

FastFast Slow speedSlow speed

Value of Ecosystem ServicesValue of Ecosystem Services

IS Stock0 %

100

High

Low

Value of Ecosystem Services

$

Economic Loss over time due ISEconomic Loss over time due IS(for a pristine ecosystem)

Year

Eco

syst

em V

alu

e

1050

$

0

Economic Loss

BaselineBaseline

With infestationWith infestation

No No infestationinfestation

Alternate Ecosystem Baseline ProjectionsAlternate Ecosystem Baseline Projections

Year

Eco

syst

em V

alu

e

1050

$

BaselineBaseline

0

With infestationWith infestation

Economic Loss

DecliningDeclining

StableStable

RecoveringRecovering

Benefit from PreventionBenefit from Prevention

Year

Eco

syst

em V

alu

e

1050

$

BaselineBaseline

0

Without preventionWithout prevention

With preventionWith prevention

Benefit from prevention

Benefit from Benefit from Rapid ResponseRapid Response

Year

Eco

syst

em V

alu

e

1050

$

BaselineBaseline

0

WithoutWithoutrapid responserapid response

With rapid responseWith rapid response

Benefit fromrapid response

Economic Loss

Benefit from Benefit from ManagementManagement

Year

Eco

syst

em V

alu

e

1050

$

BaselineBaseline

0

Without managementWithout management

With managementWith management

Benefit from managementEconomic Loss

Optimal investmentOptimal investment

PreventionRapid Response

(Long Term Management)

Net benefit from preventionNet benefit from prevention

$

Prevention ($)

Benefit

Cost

Net Benefit

$

Prevention (P)

Net Benefit

$

Benefit

Cost

P*

Prevention (P)

Maximum Net Benefit

Maximum Net Benefit

from Prevention

$

Net Benefit

$

Benefit

Cost

R*

Response (R)

Response (R)

Net benefit from rapid responseNet benefit from rapid responseMaximum Net Benefit

from Rapid Response

Maximum Net Benefit

Maximum Maximum Net BenefitNet Benefit from from Prevention and Rapid ResponsePrevention and Rapid Response

Game DPrevention is costly

Three levels of PreventionNone Low High

Three levels of Rapid ResponseNone Low High

Choose level of each to maximize Net Benefit

Game DPrevention and Rapid Response Choices

PREVENTION PREVENTION

costcostNoneNone

$0$0LowLow$50$50

HighHigh$70$70

RAPID RAPID RESPONSERESPONSE

None None $0$0

LowLow$5$5

HighHigh$10$10

Net Benefit from Prevention and Rapid Response

PREVENTION PREVENTION

NoneNone$0$0

LowLow$50$50

HighHigh$70$70

RAPID RAPID RESPONSERESPONSE

None None $0$0

$0$0 $200$200 $150$150

LowLow$5$5

$400$400 $500$500 $350$350

HighHigh$10$10

$800$800 $1000$1000 $750$750

Game ERapid response is costly

Three levels of PreventionNone Low High

Three levels of Rapid ResponseNone Low High

Choose level of each to maximize Net Benefit

Game EPrevention and Rapid Response Choices

PREVENTION PREVENTION

NoneNone$0$0

LowLow$10$10

HighHigh$50$50

RAPID RAPID RESPONSERESPONSE

None None $0$0

LowLow$100$100

HighHigh$400$400

Net Benefit from Prevention and Rapid Response

PREVENTION PREVENTION

NoneNone$0$0

LowLow$10$10

HighHigh$50$50

RAPID RAPID RESPONSERESPONSE

None None $0$0

$0$0 $40$40 $90$90

LowLow$100$100

$20$20 $50$50 $100$100

HighHigh$400$400

$15$15 $45$45 $75$75

Summary

Optimal investment depends onOptimal 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

More on Managing Invasive Species

Choices, Costs, and Benefits

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

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

BenefitsMonitoring Prevention Response• Avoided ecosystem damages and loss in biodiversity• Avoided economic, cultural, social losses from ecosystem

impairment• Avoided secondary consequences from eradicationRestoration• Gain in ecosystem function and biodiversity• Gain economic, cultural, social losses from improved

ecosystem function• Reduction in future management outlays for treatment and

removal

How much should you invest in…

Monitoring and PreventionRapid Response

Long Term ManagementResearch

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

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

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

How much should you invest in Research?

• Factors that influence the Benefit and cost of Research

• Quality of existing information• Value of additional information• Risk of making a mistake due to insufficient

information