RICHARD F. KOSOBUD
is professor of economics at the University of Illinois at Chicago. His latest book is Emissions Trading: Environmental Policy's New Approach, published by John Witey & Sons Acknowledgments and the full study ore available at wvw.uic.edu/-kosobud. "Putting a Value on Prairies and Wetlands: The Economic Case for Recovering Natural Areas in the Chicago Region" is reprinted with permission from the University of Illinois Institute of Government and Public Affairs. See www.iga.uiltinois.edu.

Putting a Value on Prairies and Wetlands

Nowhere is the influence of humans on their environment more obvious than in metropolitan areas like Chicago. In these places, population growth and technology have led to the development of nearly every usable piece of land for the production of marketable goods and services. But, does this spread of population, often called urban sprawl, satisfy the public's preference for open and natural space?

Because the benefits of open spaces are public goods and are not marketable like other land uses, the marketplace has failed to provide enough of them. Government policies have also overlooked the adequate provision of open spaces.

The failure of the market and local governments to provide for natural open spaces does not mean this public good is without value. A survey of Chicago area residents found them willing to pay an average of approximately $20 a year in increased taxes to recover and maintain natural open spaces.

Findings

Chicago's urban sprawl and the scope of intensive agricultural practices of the farm belt surrounding it have left only remnants of the native prairie grasses and flowers, woodlands, oak savannas, and large stretches of wetlands that once characterized the area.

Tax advantages, subsidies and expressway construction encourage low-density development. However well intentioned, such tilting has worked against natural areas. Local government policies, occupied with obtaining revenues from development, overlook the benefits of open spaces. These limitations of the market and government have led to an unsatisfied public preference for more open space in the natural or wilderness state.

A survey to determine how much the public is willing to pay for more open space found that the Chicago area residents, on average, were willing to pay about $20 a year per household in additional local taxes to obtain more natural settings in the region. This could yield up to $50 million per year for the region for the creation, recovery, and maintenance of areas that would add to the well-being of residents.

Balancing the cost of creating more open spaces against what people are willing to pay for these spaces, as revealed by the survey, leads to the finding that, in the first year, up to 5,000 acres (one acre equals a football field) of new space could be carved out of, or recovered, from the region. Since each acre requires maintenance, it is not possible to add 5,000 acres each year. Rather, annual spending goes increasingly to maintenance of continued growth so that, in the end, with this revenue stream, some 25,000 acres of new natural areas could be added to the region's stock. This would be an increase of a little more than 10 percent of existing spaces of a similar nature.

The Chicago Region's Deconcentration

Private decisions affecting 3,800 square miles of land are being made by approximately three million households, thousands of private enterprises, and hundreds of not-for-profit institutions in the Chicago

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region. The metropolitan area contains close to 300 different municipalities and more than 1,000 taxing districts. Many of these bodies play important roles in determining land use through direct ownership, zoning ordinances, building codes, direct regulation, land use plans and transportation designs. In many ways this is a remarkable decentralized system of markets and governments that can give play to a wide range of individual preferences.

But, important questions can be raised about the ability of this system to fully serve the welfare of its residents with respect to land use. Externalities, or spillovers, from market activities that affect individual welfare and business operations, but are not reflected in prices, can deflect the region from its potential. Examples include urban land uses that harm the hydrologic or water cycles of ecosystems, uses that limit habitat for species or uses that disburse pollution to unwilling victims.

Spillovers arising from government actions can also lead to welfare losses. Examples include zoning upstream of wetlands for development or not providing an adequate amount or range of public goods and services, including natural areas.

Markets can fail to provide public goods like natural areas because no one can realize gains from their provision and not all of these impacts are addressed by effective public policies. That is, both market and government failures have a bearing on natural areas and related biodiversity.

It must be stated clearly at the outset that the test is whether correcting these market or government failures could lead to a more efficient allocation of land to competing uses that would satisfy better the public's preferences. Note that it is the individual member of the public whose preferences are important for this purpose. These preferences lead to valuations of both public and private goods and services. These valuations enable the attachment of monetary amounts to open spaces so that open spaces can be compared to other uses of public and private money. The intrinsic value of prairie flowers or biodiversity is not being measured, but the individual's valuations of them. This approach is not always in line with the views of biologists and ecologists who may prefer searching for intrinsic values. But intrinsic values have proved very hard to quantify monetarily.

A survey of Chicago area residents found them willing to pay an average of approximately $20 a year in increased taxes to recover and maintain natural open spaces.

Consequences of the Region's Deconcentration

What is happening to the Chicago area appears to be happening in a general way to metropolitan areas as well. City density declines as one travels to the city edge. This relationship shifts over time reflecting urban deconcentration as city center density decreases and outlying places are built-up. This shift is happening in many other metropolitan areas, but with important variations. For example, European cities tend to be more densely settled than cities in the U.S.

While this shift may be attributed to higher incomes, increased education, and changes in transportation and information technologies, these patterns are not an economic law but a reflection of the many benefits and costs of locational decisions, both residential and non-residential. They can change as benefits and costs change. Studies that emphasize only the costs of urban sprawl - or only the benefits - may miss important underlying regulations, decisions and patterns that affect the use of land for residential and other purposes.

Are the private and public benefits and costs of urban deconcentration, especially as they concern wilderness areas, fully and fairly reflected in contemporary market and government decisions on the use of land? The answer is, subject to many qualifications and caveats about the adequacy of data, that they are not. The implication, in economic terms, for natural areas is that there are inefficiencies in the present sprawl pattern. The correction of these inefficiencies could improve the general welfare.

Among these market inefficiencies is that the private costs of low-density development, defined as 3 dwelling units per acre or less, are not fully borne by the occupants. Another leading cause is provided by the federal tax code that subsidizes homeownership costs to an extent far greater than the subsidies provided for public housing and rental assistance in the center city. As a consequence, the building fields are tilted toward low-density development that can be destructive of natural areas.

Further, unplanned low-density developments impose increased direct neighborhood and community facility costs not all of which are taken from the pockets of residents in outlying areas. These subsidies have been estimated to range up to $2,000 per unit, and sometimes higher, in regions like Chicago's. Other taxpayers shoulder these expenditures.

Additionally, the monetary costs paid by automobile owners are estimated to be a fraction, say three-quarters, of their true burden. This is due to subsidies for roads, parking, and accident costs, among others. If public or non-monetary factors are added in—for water pollution and flood control, air quality impacts, opportunity costs of land used for roads—motor vehicle users paid an even smaller fraction of the total costs. None of this includes the value of time lost in congestion.

The powerful tools of local governments over land use, ranging from zoning ordinances to building codes, can and often do favor land uses that further urban deconcentration and fail to provide sufficient open space and wilderness areas to meet the general demand. Furthermore, a local government's jurisdiction and tax base rarely encompasses all the beneficiaries, which makes it difficult to provide the optimum amount of wilderness areas.

There are benefits, both private and public, to urban deconcentration that must be examined if we are to understand the reasons for this pattern in most major metropolitan areas. Among them are flexibility from the use of the car in

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shopping, commuting and recreation, the increased range of choice of public goods and services available from numerous local governments, and the apparently strongly held preferences for lower density life-style. The consequence is that even if all private benefits and costs of land-use choices were fully allocated to the appropriate individuals, and all public benefits and costs were properly internalized, and were these changes reflected in new market prices and government tax rates, many people would, in all probability, still opt for lower density living. That is, urban deconcentration would continue to a significant extent, as is recognized in many projections of the future region.

Yet, if these market and government failures were corrected, the region could be noticeably different in twenty years time as a result of selected cost reallocations and implementable public policies. Among the changes that would favor natural areas would be modified prices of varying development densities, altered prices of transportation modes, increased provision for such areas in local and state government budgets and policies, and enhanced private contributions.

Such a difference would depend ultimately upon the public's preferences for allocating scarce resources to wilderness area recovery and extension, and upon the costs for recovery and expansion efforts. As mentioned, to help fill information gaps in these areas, this study carried out a sample survey of public preferences in the region, and collected recovery and improvement cost data from a number of regional sources.

Results From the Survey of Public Preferences for Natural Spaces

The sample for this study was not drawn from the regional population, but was selected to represent a wide variation in key variables such as income and education. Interviews were arranged with middle-income respondents at the Federal Reserve Bank of Chicago. Interviews were arranged in the Pilsen neighborhood with the help of school and local officials. This is primarily a low-income area with little natural space. Interviews were arranged in several suburbs like Evanston by selecting a few blocks to canvass. Finally, interviews were arranged with undergraduates and graduate students. Variation in key variables was close to the variation for the regional population.

All respondents were shown a brochure with pictures of natural space. They were given background data on natural and open space now available in the region. They were also reminded that what they were willing to pay meant a decrease in other expenditures they would like to make. The question was asked in a referendum style as if an increased tax payment were to finance the space. The sample results were than adjusted for the general population by the use of advanced regression analysis.

The survey of 200 residents revealed a significant willingness to pay for new wilderness recovery and extension activities. The mean adjusted for the nonrandom sample was a little less than $20, with sampling variation of about 10 percent. Applied to the close to 3 million households of the region, this estimate indicates that close to $50 million dollars per year could become available for land acquisition, soil preparation, weeding, seeding, maintenance, and other measures.

The amount respondents were willing to pay increased with income and education. That indicates that wilderness recovery has some of the characteristics of a "superior" good. The amount respondents were willing to pay decreased with the age of the respondent. These results, while new for wilderness projects in the region, are consistent with other studies. When asked if a further increase would be supported several years later for additional activities, the respondents were on the average favorably inclined, but at a reduced level of support, as one might expect if respondents were thinking seriously about the question and about the alternate uses of their money.

Results From the Review of Natural Area Creation and Recovery Costs

To satisfy this demand for natural areas requires supplying costly resources. The extent of recovery or improvement that could be achieved would depend in part on how high the costs were for improvement per acre, and the rise in costs as efforts continued. Data collected from a number of sites and sources yielded a wide range of estimates that varied according to the objectives of the managers and the initial conditions of the site. Cost per acre can be quite large at the beginning of an operation, a reasonable range being $3,500 to $22,500, when soil movement, grading, seeding, weeding, and stimulation of growth are required. Wetlands are more expensive to restore or create than prairies. Spending per acre declines appreciably as the size of the wilderness site increases. Costs also decline appreciably as the site reaches stability and only maintenance is needed.

Balancing preferences and costs shows, first, that an expansion and improvement of the region's wilderness space over present efforts in this direction is supportable in strictly economic terms. Second, and more concretely, about 5,000 additional acres in the initial year could be added to existing native areas. As maintenance spending to assure vigorous and continuing growth is essential, the annual addition of new acres would decline as the proportion of the annual revenue stream spent on maintenance increases. The end result of this decline is that 25,000 acres eventually could be added to the region's existing stock, or an increase of a litte over ten percent. These new natural spaces would be an increase over presently planned efforts of this nature, and would represent an addition to the present stock of indigenous biodiversity. It would mean an increase in the annual stream of human-valued "services" emanating from that stock, adding to our welfare, and to the welfare of future generations. 

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