Abstract:
In April 1983, the City and County of San Francisco and two irrigation districts in Merced and Stanislaus counties commissioned a feasibility study of their long-standing proposal to dam the Tuolumne River for power and water. At the same time, a coalition of environmentalists, rafters, fishing enthusiasts and California residents known as the Tuolumne River Preservation Trust was lobbying Congress to protect the river from further development under the federal Wild and Scenic Rivers Act. The dam proponents had already produced several favorable cost-benefit studies of their proposal; in June 1983, the Trust asked economists at the Environmental Defense Fund to respond to those studies with an economic assessment of the proposed dam's environmental costs.
Learning Objective:
This case is intended to provoke a discussion of how to place an economic value on environmental benefits that are seemingly intangible. The case calls particular attention to the measurement of user benefits, and the special problem of calculating the value placed by non-users on the sheer existence of an environmental asset ("existence value") and the option to use it someday ("option value"). Also relevant is the problem of discounting over the life of a long-term project.
