Harvest the Earth?

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Harvest the Earth?

By: Jerry Johnson, D.A.
Posted on August 28, 2013 FREE Insights Topics:

Introduction by John Baden, Chairman, FREE

My friend and colleague, professor Jerry Johnson of Montana State University, just returned from two inspiring trips.  One was to Lake Iliamna, the largest lake in Alaska.  The other was the Greater Yellowstone Coalition’s (GYC) first 400-mile bike trip through the Greater Yellowstone area.  Jerry's essay below focuses on the conflicts generated by competing, inconsistent values involving Lake Iliamna.  GYC designed their Yellowstone bike tour to help sensitize Americans to analogous problems in FREE's backyard.  

For many reasons I had hoped to participate in the GYC ride.   One reason is that it brought back good memories.  For over a decade FREE sponsored a 400-mile "Rolling Salon" with a few friends.  These were individuals who respected responsible liberty.  

Salons are small by definition and we requested our participants to study selections of readings on ecology, economics, and ethics.  Our tours, like GYC's were fully supported; cyclists carried only water, sunscreen, and a light jacket.  Our "sag wagons" were a Suburban or an Excursion.  (We love these machines.  They are the perfect size for such work.  Yes, we still have them.)  Unlike GYC’s far, far larger event, ours included formal evening discussion sessions.  

Greater Yellowstone in general, and Bozeman in particular, is a strong magnet.  It attracts interesting, active people concerned with preserving things that matter: liberty, ecology, and prosperity.  Individuals weight these values differently.  Aware and intelligent people initiatively understand the reality and necessity of trade-offs among them.   

Making these tradeoffs requires sensitivity to multiple and oft competing values. Professor Johnson's FREE Insight describes this kind of situation. After reading his essay you might ask this: What avenues might be created down which responsible people might march their good intentions?


Harvest the Earth? by Jerry Johnson

Economics is not about money; it is a convenient metric but mostly, economics is about making and understanding often hard and competing decisions. Everything is a tradeoff. Recently, I was very fortunate to spend three weeks in a place where the strengths of economic analysis were stark and meaningful.

Lake Iliamna is the largest lake in Alaska. The streams and rivers that flow into it are the destination for the largest run of wild salmon left in the world and make up the heart of the Bristol Bay fishery. The sockeye salmon migration here can number more than 40 million fish. The resulting fishing industry is worth more than $400 million. Add to this millions more Chinook, Chum, Silver, and Pink salmon, the best Rainbow trout fishery in the world, Arctic grayling and Dolly Varden and you have a commercial, subsistence, and sport fishery worth in excess of half a billion dollars each and every year. In an age where worldwide fisheries are crashing due to overharvest and industrial assault, the pristine waters of the Iliamna watershed produce millions of pounds of high quality protein for consumers increasingly concerned about food safety.

Looming over the small town of Iliamna (pop. 106) is the proposed site for the Pebble Creek mine – an open pit gold/copper/molybdenum mine with an estimated value of $150 to $200 billion. The proposed pit sits in the Pebble Valley, at the headwaters of two small creeks – the Upper Talarik and Koktuli River.  I won’t belabor the statistics except to say this is a very large project in a very pristine place. It has all the promise of immense wealth generation for a Canadian mining firm and all the potential to ruin the salmon fishery that could be sustained in perpetuity. I will state this unequivocally: if this mine is developed we will lose the Bristol Bay fishery. How can economics help make the decision?

Analysis of the economic impact of the mine vs. fishery is relatively straightforward – amortize the values of the two competing resources over time and run the numbers. The mine has a working lifespan of approximately 25 to 75 years – no one really knows the extent of minerals or what the commodity markets of the future might be. The ecological impact will last forever. Both alternatives accrue a multiplier effect. Economists are working hard on firming up numbers but in the meantime, the Pebble Limited Partnership is spreading money around in the region faster than wildfires burning in the west. They bought the local air service a million dollar plane.

I’m inherently skeptical of the idea of sustainability. It is often a buzzword used to hide the externalities of environmentalism as if protection and conservation have no impact on people or economy. In the case of the Bristol fishery though, it appears to be a truly sustainable resource. According to National Geographic the fishery is one of the three best-managed fisheries worldwide. (The others are in Iceland and New Zealand.) Well-designed functional institutions at the native, state, and federal levels are in place to ensure its continuance. The fishery can last forever given current management practices.

Another form of economic analysis is “true cost accounting”. In this case we would consider the externalities of mining and fishing activity. Once the mine ceases production there will be continued significant costs to monitoring and treating the 10 billion tons of mine tailings in perpetuity. A small leak in the 700-foot tall impoundment will change the chemistry of the watershed and ruin salmon spawning grounds. Americans need only to visit Butte, Montana to understand the scale of regulatory failure of a large gold/copper operation.

The Pebble Partnership is wholly foreign owned; unfortunately, our record of holding non-American firms accountable is dismal and difficult. The main externality of the fishing industry is the perpetual low standard of living among natives. Many live in a subsistence economy and none are wealthy as a result of fishing. However, most communities in the region oppose the project including native corporations, village councils, tribes, and cities. For them, the fishery, caribou habitat and native lifestyle is more important than wealth concentrated in the hands of a few families. Viewed this way the mine is likely a case of Gresham’s Law where overvalued money chases out undervalued. Short-term gain trumps long-term sustainability.

While the analysis above is useful and necessary, I think it misses a central point. Economics recognizes many types of goods and consumer behaviors. A simple example is the tradeoff between hamburger and steak. When one feels relatively wealthier we often chose to purchase steak. In this case steak, if our proportional consumption increase exceeds our proportional increase in income, becomes what is known as a superior good. A superior good may carry with it prestige and luxury but mostly it is defined as a scarce good that we consciously chose to consume because it makes our life better.

Bristol Bay should be considered in this way. It makes our life better and sends a message to the world about our values. Rather than competing as a normal good against mining, we should, as a nation, chose to consume some goods like pure waters and wild salmon runs at higher levels because we can. Traditional economic analysis misses this point when we try to compare a high quality environmental amenity with commodity production.

We are, by any measure, the wealthiest country on earth. Why then would we foreclose not only a sustainable economy based on the salmon of Bristol Bay but also pass up the chance to demonstrate to the rest of the world how rich we really are. So wealthy in fact that we can pass on the option to mine in some places. To do so would show others how we could use our wealth to indulge our preference in protection of the non-pecuniary values of nature. Perhaps it is a lesson for wealthy individuals as well. Economics is not about money.

Rational choices are based on the identification of tradeoffs and consequences among our many options. Economics can and does help make those decisions. I believe we should apply such a framework to the Pebble Creek Mine and chose the salmon.

Jerry Johnson is a professor of political science at Montana State University where he teaches natural resource policy and studies decision making. During the summer he guides fly fishing trips for Bristol Bay Sportfishing (http://www.bristolbaysportfishing.com) based in Iliamna, Alaska.

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