The change-in-productivity technique

The concept

Market prices can often be used to value the output from a productive process and environmental conditions often affect such processes. In these circumstances, values for a change in the environment can be derived from the associated change in productivity. An increase in output due to the change is a measure of an increase in benefit, and a decrease in output is a measure of an increase in cost.

When to use it

• Does the minimum benefit of noise control cover the cost?
• What are the economic effects of reducing emissions of greenhouse gases?

To resolve the latter question, the monetary values would need to be estimated for the benefits of land conservation, shelter belts on farms and the preservation of forests. The monetary values for the costs of land degradation would also be required.

One cost to society of preserving native forests is the loss in timber output following preservation. This loss can be measured as the decrease in income from logging, which Rogers (1992) assessed in the following two ways:

• loss in income due to failure to harvest the existing forest
• loss in income due to failure to harvest the existing forest and then regenerate and harvest the subsequent forest.

In their evaluation of cessation of logging in National Estate forests, Streeting and Hamilton (1991) expanded the concept of lost production to include the cost of unemployment. They also rounded out the analysis by including the benefits of ceasing logging, which included cost savings in the forest and mill.

Strengths and weaknesses

The strengths of the technique include:

• it is direct and straightforward
• it relies an observed market prices
• it relies on observed output levels.

  The difficulties include:

• defining the physical flows of output over time
• ensuring the change in flow is related to the change in the environment.

The technique is widely used, especially in land conservation, forest management, watershed management, tourism and grazing.

©İsmail Güneş
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