The Economic Value of Water and Ecosystem Preservation

expenditures indicating a high value of freshwater inflows. Further analysis could
be undertaken to calculate an aggregate value for the region, but was unable to
be conducted here.
Production Function Approach
A key goal of the research was to provide useful economic information to
inform the debate on freshwater inflows in Texas rivers. The debate is especially
concerned with competing uses for freshwater inflows. Therefore, it is important
to try to relate the value of ecotourism to quantities of freshwater inflows.
A core tool in economics is the production function which mathematically
relates known inputs to the production of outputs. Economists have also adapted
production function analysis to estimate the value of irrigation water in the
production of crops. This study adopts a similar approach with the assumption
that freshwater inflows are an input into the production of ecotourism. An
ecotourism production function is estimated as a function of inflows and other key
variables. This function was then used in conjunction with the ecotourism values
estimated using the Travel Cost Method to calculate a marginal value for
freshwater inflows.
For this study, the freshwater inflows are the only input to ecotourism
included in the model. The output, ecotourism, is equated with the number of
visitors to the Aransas National Wildlife Refuge. This implies that ‘units’ of
ecotourism are not produced until consumed. Finally, various factors are included
to account for likely sources of correlation between input and output. These
included precipitation, summer holiday period, nesting period for whooping
cranes, and period for ‘winter Texans’.
There are several problems with using a production function approach to
estimating the value of freshwater inflows to the production of ecotourism. The
primary problem is the complex relationship between inflows and the status of
the ecosystem. It is known that freshwater inflows have a highly significant
impact on the ecosystem, but this is through a complex interaction with the other
elements of the ecosystem. The inflow regime poses particular problems
because:
• Inflows are continual rather than applied in discrete amounts;
• Inflows vary across the year with important high and low flow periods;
• Inflows experience periods of flood and drought which are also useful
to maintaining the ecosystem; and,
• The resulting ecosystem services are not simply an increasing
function of freshwater inflows
Thus, there is a fundamental question in how to best incorporate the inflows
into a production function. The present model is viewed as an initial step in this
direction. Average inflow rates were taken on a monthly basis. These flows were
then compared to visitor data lagging the flows by one month up to 18 months.
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