When I read this headline I could not believe they would estimate it so low, and assumed the study was funded by the oil industry:The scientists developed a survey to put a dollar value on the natural resources damaged by the BP Deepwater spill by determining household willingness to pay for measures that would prevent similar damages should a spill of the same magnitude happen in the future. Survey information included descriptions of damaged beaches, marshes, animals, fish, and coral.
On top of estimating the impact of the spill, the $17.2 billion represents the benefits to the public to protect against damages that could result from a future oil spill in the Gulf of a similar magnitude.
So their estimate of the cost of the spill is based on:
- How much survey respondents claim they might be willing to spend to save the cute animals, and keep their vacation spots pretty;
- Estimates of the cost of a program to prevent it from happening in the future.
That is now how you calculate costs!
We may still learn that this event was a civilization-ender.
And don't forget, nobody will ever do any prison time. The fact that the BP "Corporate Person" has not been executed for this is a crime against literal Humanity.
Previously, previously, previously, previously, previously, previously, previously, previously.
Don't be silly.
There's a branch of economics called Environmental Economics, and this is what they do.
They basically have 2 ways to do their valuation. Ask the side that does the polluting, or the people who're affected by it.
And this is based on a thesis by a recently deceased economist Ronald Coase.
See more in detail here
To be honest, this is kind of like using GDP to gauge country's economic output, it's pretty lame but it's all we got right now and no one's able to convince others there's a better way.
Well it's early but that's the stupidest thing I've heard all day.
Let's say there's a car wreck, and someone is so badly injured that putting them back together cost $20M and takes years. Let's say that the damage could been prevented with a $20 headlight.
Is the cost of the incident $20M? Or is it $20?
These are not matters of opinion.
According to the theorem, if you assign the property right to the victim, then from now on he'd be charging $20M to use the road close to him. And the market reacts accordingly (perhaps now they will start using that $20 headlight fix).
Or if you assign the property right to the car doing the damage, who will pay out $20 every time it causes an accident. Then the market will act accordingly, everyone will get the fuck outta their way as they know the payout is so low.
It's not an opinion, and it is stupid, but hey that's what our brightest have come up, perhaps without getting shot.
Do you count how much money the victim could have been making while they were spending $20M over the years they were recuperating?
I think that's the idea behind asking the property owner, they'd come up with a figure which they would deem reasonable.
Then it becomes the issue of who do we assign to be the property owner.
Now if we would assign property owner of the ocean to the public, gov would be asking, how much would people pay to avert such disaster(some figure they would pay to preserve the environment).
or ask BP how much would they pay to avoid similar disaster (some price less than profit, otherwise not profitable).
The events can only unfold after the price is set. If it's huge, oil companies won't be able to develop. If it's tiny, we'd be polluted up to the wazoo.
At the end of the day real issue remains no one knows how to price these things, hence resorting to these dodgy methods...
Don't you think it's reasonable to include the cost of lost profits, lost businesses, lost livelihood, and lost productive life from the seafood contamination? Gulf shrimp was off the menu for years.
You're reading the first part wrong. They're not asking how much it would cost to prevent, but how much people would be willing to pay, hypothetically speaking. It's a linguistically subtle difference, but a pretty big methodological one.
The point is you're not just looking up the price up in a catalog -- you're asking around to see what people think it would be worth to prevent such an accident. If people say they'd only be willing to pay around $20, maybe it's not as as horrific as you describe*. OTOH, if it is that horrific, people should be willing to pay a proportionally higher amount to prevent it.
Note that this approach only works (but also only needs to be used) where information about the costs is scarce. If people know a simple fix can prevent disaster, that's going to influence their responses downward (why should anyone pay more than that?).
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* Note that the estimate of the risks involved (implicit or otherwise) is usually an important factor too. If the chances of that accident happening again are 10^-25 or something, even the $20 headlight probably isn't worth it.
And yes, there are some well known problems with these approaches, including the BS assumptions about rationality and so forth at the core of conventional microeconomics. But like Alex says, in many situations it's still the best we've got.
They forgot to account for the average cost of a movie ticket and the public's willingness to continue seeing movies that star Mark Wahlberg.
Conveniently less than the already-agreed-upon BP setaside of $20B. One presumes the $2B+ change goes into election campaigns, et al, after laundering.
I'd wager these academics value their lives, and have a mortgage to pay.
I remember reading about many people had car crashes right after deepwater horizon incident... conveniently or inconveniently depending where you're from.
To be filed under "not surprising": On Alabama coast everyone is gung-ho to use most of the BP money to build another bridge to the eastern shore for faster commutes to their mcmansions. The cute animals are on their own.
http://www.buildthei10bridge.com/
This was a giant disgusting mess, but if natural seeps do happen all the time as they apparently do, how many days or years or millennia does it take for the gulf to be as gunky as one Deepwater Horizon?
Obviously it's way, way shittier when you hit a big reservoir like that and it all comes out at once, but to the extent that we all like to panic about contaminated seafood I'm curious what the natural contamination is anyway. Something we've evolved to deal with, presumably.
"RADIATION! YES INDEED! You hear the most outrageous lies about it. PERNICIOUS NONSENSE! Everybody could stand a hundred chest X-rays a year! They oughta have 'em, too."
I'm big on hormesis but I have to be because it turns out every house I grew up in had a terrifying radon problem discovered when economics demanded the tests for the sales.
I think my herp derp postscript to that is that - and I'm saying this as a veteran of the boring small end of the legal services industry where all proceeds from my decade there are going directly to my psychiatrist - while we've called out all the horrible creepy bullshit our current concepts of corporate personhood and immunity allow, if we extended a fraction of that to actual human persons the world might be a less horrible and creepy place, although probably no less polluted (Though how much pollution is the result of 'gotta pay the bills or terrible things will happen so fuck the environment?' This doesn't excuse BP although technically the BOP was at least there and supposed to work if not for every which kind of stupendous fuckup and bad luck, but the shitheads in my area who get caught repeatedly dumping shit into the sewers or the storm drains are .. shitheads, but small-time shitheads up against the fact that doing it right may be economically unviable.)
As the resident furry I'll say our biggest problem as a species is that it's too easy to see our own as malicious assholes instead of cute animals. Cute, incredibly dangerous, often operating out of instinct or for reasons of sheer survival animals (this is of course relative because take your CEO out of the yacht races and his adorable walnut-sized lizard brain surely thinks it's been left for dead which is why it demanded such a sweet parachute for assuming the risk) but if everyone would put on a Moby album sometime instead of assuming we're all irredeemable and out to get each other maybe we could actually do something about all the fucking problems.
They don't call economics the 'dismal science' for nothing.