Tasmania: Regret and Ex-post Willingness to Pay

Just last weekend I spent few days in Tasmania, in and around Hobart and Launceston. Marvelous sceneries, beautiful nature and good museums. Couple of things that I saw in the Tasmanian Museum and Art Gallery made me think about some of the conundrums of nature conservation. The first one was a small exhibition about the Thylacine, or better known as the Tasmanian tiger. As is widely known, this marvelous creature was extinct some 90 years ago. The reasons for the extinction are still debated. Whatever the reasons, I felt an enormous regret that the creature is not around any more, and if asked, I would have probably stated substantial willingness-to-pay for preventing its extinction, had this been somehow possible.
The second was an even smaller exhibition about whaling in the Derwent River Estuary. The exhibition stated that whales were once so abundant in the Estuary that residents complained about the noise they were making. Similarly to the Thylacine, whales have been extinct from the Estuary. This again caused emotions of sorrow and regret, as well as likely high willingness-to-pay (WTP) to prevent it, had it been in some way possible.
The point is that while we might have very high WTP for conserving nature ex-post, all the decisions that are made about conservation are, at best, based on ex-ante WTP. Indeed, the extinction of species in Tasmania was not based on any assessment of societal preferences, but even if it were, the stated WTP for preserving the species at that time would be minimal, or even negative.
And what does this mean for some of the current dilemmas that we face: e.g. climate change? While current generations might have relatively low WTP for preventing climate change, it may turn out that future generations will feel enormous regret for us not doing enough about it. This will be translated in very high WTP on their behalf to prevent climate change that is happening now. Unfortunately, with the current state of knowledge and modeling techniques it is not possible to take into account the ex-post WTP in conducting ex-ante benefit-cost analyses that inform current decisions. But, this is something that should be taken into account at policy level. Let’s be wise now, to prevent large regret in the future!

Author: Tiho Ancev

Tiho Ancev is a Professor of Agricultural and Resource Economics in the School of Economics, University of Sydney. His main research areas are agricultural, environmental, natural resource and energy economics. Tiho’s main contributions have been in water economics and policy, economics of energy, economics of air pollution and climate change policies, and economics of precision agriculture and agricultural input use. He has published widely on these topics in top international peer reviewed journals. Tiho has led and contributed to national and international research projects in these research areas. He is currently the Managing Editor-in-Chief of the Australian Journal of Agricultural and Resource Economics.