Smart Subsidies for Conservation

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Smart Subsidies for Conservation

• Jason Shogren
• University of Wyoming
• October 2005

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• On-going research with
• Todd Cherry
• Peter Frykblom
• Terry Hurley
• Stephan Kroll
• Chris McIntosh
• Greg Parkhurst
• Chad Settle
• Dave Finnoff

Homo economicus?
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Conservation on private lands

• Biological Needs
• Political Realities
• Economic Incentives

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ESA policy

• Endangered Species Act of 1973 in the US
• Habitat Conservation Plans
• Compensation question

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Experimental Economics

• Interactions between humans and nature through
  institutions

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Rule of One

• One person is enough to make a market
• One person is enough to break a game.

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• This distinction makes a difference if you are
  relying on rational choice theory to guide land
  management and environmental policy.
• It makes a bit more sense if people make, or act
  as if they make, consistent and systematic
  choices toward certain and risky events.

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Range of actors

Hamlet
Econobot
Machiavelli
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Markets

Missing Markets
No Markets
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• Land policy and environmental policy is about
  structuring incentives
• What do we know about how people react to
  incentives
• How this affects nature
• How this feedback loop affects people
• And so on

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• Agglomeration Bonus

 
Retired Parcel
Bonus
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Coordination Game

• Multiple Nash equilibria
• Payoff Dominance
• Risk Dominance

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Coordination failure

• Coordination failureany outcome other than the
  first best solution
• 2 forms of coordination failure
• fragmentation
• second best outcomes of contiguous habitat
  reserves.

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Definitions

• Biological efficiency the number of borders
  shared between conserved parcels relative to the
  optimal number of shared borders
• Economic Efficiency the percentage of possible
  rents earned by the group as a whole.

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Payoff MatrixTransfers w/ an
Agglomeration Bonus
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The Grid Game

• 10x10 spatial grid with 100 cells
• 4 players
• Each owns 25 cells
• Retire up to 6 parcels
• Creates 68,000 strategies
• (68,000)4 potential outcomes
• Agglomeration Bonus Menu

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Symmetric land grid
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Conservation Objectives

• Corridor
• Core
• Cross
• Corners

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Corridor
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Core
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Cross
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Corners
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Subsidies

• Four subsidies within the subsidy menu mechanism
  
• Per conserved habitat acre subsidy
• Own shared border
• Row shared border subsidy
• Column shared border subsidy
• Subsidies / / 0.

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Own Shared Border Bonus
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Row Shared Border Bonus
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Column Shared Border Bonus
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Incentive Constraints
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Agglomeration Bonus Menu
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Experiment Design

• Ten structural elements
• Treatments A-B-A design
• Players/matching4 randomly matched each round
  
• Land grid
• Subsidies
• Strategiesbrown out cells
• Grid Calculator
• Communicationpre-play cheap talk
• Informationcommon knowledge about payoffs and
  strategies in a round. Private information for
  accumulated payoffs
• History
• Proceduresstandard protocol/computer

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CoreRound 1
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CoreRound 2
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CoreRound 3
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CoreRound 4
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CoreRound 5
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CoreRound 6
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CoreRound 7
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CoreRound 8
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CoreRound 9
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CoreRound 10
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CorridorRound 11
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CorridorRound 12
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CorridorRound 13
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CorridorRound 14
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CorridorRound 15
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CorridorRound 16
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CorridorRound 17
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CorridorRound 18
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CorridorRound 19
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CorridorRound 20
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CoreRound 21
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CoreRound 22
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CoreRound 23
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CoreRound 24
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CoreRound 25
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CoreRound 26
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CoreRound 27
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CoreRound 28
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CoreRound 29
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CoreRound 30
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New Research

• Asymmetric land values
• Combine agglomeration bonus with other incentive
  mechanisms (TDRs)

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Asymmetric Land Values
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Target Habitat
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Agglomeration Bonus without Communication

• Entire MatrixBonus Specification
• Per brown cell bonus Tokens 20
• Own shared border bonus Tokens 50
• Row shared border bonus Tokens 24
• Column shared border bonus Tokens 22

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Tradable Permit-Pilot treatments
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Weak Bioeconomic Efficiency
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Applications?

• Prairie dog towns in Montana
• Wetland reserves in Mississippi
• Conservation easements in North Dakota
• Conservation auctions in Victoria, Australia

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J Roughgardens Guide to Diplomatic Relations
with Economists

• Joans rules of engagement
• Know who economists are
• Dont assume the higher moral ground
• Get used to their idea of valuation
• Dont underestimate them
• Explain how ecology promotes economic growth

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• If you want to save the environment, dont hug a
  tree, hug an economist.
• Bill Moyers,
• Commentator for US Public Broadcasting System
  (PBS)