The economist who puts a price tag on wild animals

Bats, the world’s only flying mammals, spend much of their lives eating. In North America, most of them chow down on insects — things like mosquitos, moths, and leafhoppers. They can catch as many as 1,000 bugs in a single hour. We benefit from bats’ dietary preferences. Beyond limiting the number of disease-carrying, skin-irritating mosquitoes, bats eat the insect pests that damage our crops, such as corn earworms. They voluntarily provide pest-control services for farmers across the country. What is that service worth? That’s a question that people like Amy Ando seek to answer. One of the nation’s few environmental economists, Ando, a professor at The Ohio State University, tries to put a price tag on animals and ecosystems to make sure they’re adequately valued in our modern economy. Protecting nature from the many threats it faces, such as deforestation and climate change, can be expensive. Ando’s goal is to make sure the benefits of those protections are not overlooked. In a paper of hers, published in 2022, she and Dale Manning, another researcher, estimated the financial losses to farmers of a wildlife disease called white-nose syndrome that has been wiping out bats across the US. By detailing the extent of those losses in dollars, the authors make a strong case for spending money on protecting bats against the disease. Vox reporters Benji Jones and Byrd Pinkerton spoke with Ando for an episode of Unexplainable. The episode is part of a special series about economic mysteries. A portion of their conversation, edited for clarity, is included below. Benji Jones First of all, what is an environmental economist? Amy Ando A lot of people think that those two words are opposites, that environment and economics are opposites because economic activity is often the thing that damages the environment. Environmental economists do a couple of things that are really important for environmental protection. We do policy design; we try to understand how environmental policies will affect human behavior, which is what causes environmental problems. We also do what we call non-market valuation. Government decisions involve trading off benefits and costs, which are measured in dollars. So when you're saying there is going to be a cost to protecting the environment, what are the benefits to go alongside that? We try to measure those. Benji Jones So if, say, a city wants to build a park, someone like you could come in and say something like: “While yes this park would be expensive, its green space would also provide X amount of value to the city’s citizens”? Amy Ando That's right, and we might express that value in a couple of different ways. We might say that your citizens will be better off and be hypothetically willing to pay $1 billion for that park. We can also say that housing values in your city will go up by 10 percent as a result of this park, and that will increase tax revenues by X amount. And it might actually be that the park pays for itself. Benji Jones Is the core of what you’re doing here putting a number on nature? That seems controversial. Amy Ando Yes. And when we put it that way, it is controversial. One of the basic features of economics is that we tend to treat goods as exchangeable. So, for example, I will trade off one unit of bananas for three units of pizza. The challenge is that some things in nature are less exchangeable; some things are irreplaceable. This comes up a lot when we’re talking about biodiversity. There are some human value structures in which this whole approach is abhorrent. [Image: Amy Ando. https://platform.vox.com/wp-content/uploads/sites/2/2024/06/2023_AmyAndo05-official.jpg?quality=90&strip=all] However, governments have to make decisions. We make decisions all the time about what regulations we're going to put in place and what investments we're going to make in conservation. The structures that the United States has for making those decisions tend to use cost-benefit analyses. And if you don't have a dollar amount for nature to balance against the dollar amount of the cost, then it's hard to think that you're really doing a thorough job of the analysis. We can't just wave our hands and say, “Oh, well, nature. It's important.” Some people really need to hear the dollar values. Benji Jones One example comes from a paper you published in 2022 about the cost of losing bats. What did you learn? Amy Ando Around 2006, some bat colonies in caves started developing a fungal disease called white-nose syndrome. It was very scary. In some parts of the country, bat populations have really been decimated. The people who study bats and love them most are sad about this, but we also worry because bats play important roles in nature and for people — because they're out there eating our pests. They eat bugs that eat crops. Now, there are things we can do to help bats not get sick, but they’re expensive. They involve people trudging through bat caves full of guano [bat poop]. They come at a cost, both in dollar value and human labor. So are these efforts worth doing? If you’re the government, is this an investment that’s worth making? Our job was to try to quantify, in ways that matter to the government and the public, the benefit that bats are having [to know if the cost of helping them outweighs the cost of not]. Benji Jones How do you figure this out? How do you put a price on a bat? Amy Ando We didn’t put a price on a bat but on its work. Nature has intrinsic [inherent] value, but it also has practical value to people. We call that value ecosystem services. The ecosystem service of bats, the job that we put a dollar value on, is pest control, which is a substitute for pesticide use. We couldn’t ask the bats how many bugs they ate. Instead, we had to ask ourselves how bat pest control services manifested in markets — specifically, the market for farmland. If you're a farmer thinking about how much land to rent, you’re going to want to know how profitable that land is going to be. What’s the price of crops? What’s the price of my inputs? That includes how much they’re likely to spend on pesticides. All of that goes into the calculation of farmland profitability and the demand for farmland. When there are not a lot of bats and farmers are having to spend a lot of money on pesticides, farming is less profitable. They're going to lease fewer acres. And that will cause the price of farmland to go down. We’re also going to see fewer acres being farmed. Benji Jones So farmland should be more expensive if there are more bats in the area because you’ll spend less on pesticides? Amy Ando Exactly. We used USDA data on acres farmed by county and the average cropland rental rates. We also needed data about what’s up with the bats. We used data that showed which counties had white-nose syndrome in each year. So we were able to track over time the spread of white-nose syndrome to see what impact that had on acres planted and the rental price of farmland. Benji Jones What did you find? Amy Ando We found that losing bats in a county caused land prices, land rental rates, to fall by almost $3 an acre. There were also spillover effects. Prices didn’t just fall in the county that had white-nose syndrome. The neighboring counties also experienced some effects, which makes sense because bats fly. That ends up being a lot of money. The bottom line is that the cost to [US] society of white-nose syndrome, in total, was between $420 and $500 million a year. That’s a pretty conservative number, and it’s very large. If farmers are having to substitute free pest control with an input-based pest control [i.e., pesticides], that means that farming is more expensive, and that will tend to drive up the cost of the product. Benji Jones What do numbers like this miss? Amy Ando Every economic study can only capture one thing. Here we captured the value of one “use value,” as we call it, for bats. Use values are things like pest control, pollination, flood control, nutrient cycle, food — practical things. People also have “non-use values” for animals — intrinsic values, spiritual values. Bats are cool. Bats are cute. Bats are really interesting. Non-use values are the intangibles. This is especially relevant for animals that people don't interact with at all, such as species that are far away like whales. Most people don't benefit very directly from whales, but they're super cool. That’s why we see people donating money to funds to save species that they will never interact with on an individual basis. Benji Jones How do you study the non-use value of animals, given that it’s so intangible? Amy Ando Estimating non-use values is harder because you can't just look at market data. We have to use surveys. One approach is to estimate people's “willingness to pay” for nature. It’s a way to capture the value that somebody has for a thing. That is relatively conservative because it’s a budget-constrained concept. You cannot be willing to pay more money than you have. A different concept is “willingness to accept.” I live in a world that has polar bears. I live in a world that has the monarch butterfly. What would you have to pay me to make me whole — to compensate me — if either of those species were to go extinct? Estimates for willingness to accept can be very large, especially if you’re talking about things that are sacred, although some cultures view putting dollar values on nature to be just unacceptable. Benji Jones You did a study looking at the non-use value of grasslands. Can you tell us about that? Amy Ando This was in Illinois and we were asking people about tallgrass prairie restoration. Tallgrass prairie is beautiful. It's full of wildflowers. And there's not a lot of it. So we were surveying people and asking them about their willingness to pay for restoring a grassland near them. We found that people were willing to pay more for grasslands if they had a great variety of birds. They were also willing to pay more if some of those birds were endangered. People expressing genuine willingness to pay for things makes me happy when I think about civic government and the future of the world. Benji Jones I understand how this information is useful. At the same time, it's tough to think about the wonder of nature — something so intangible — put into dollars and cents. I worry that this approach is degrading. How do you grapple with the ethics of it? Amy Ando Estimating dollar values is critically important for protecting nature when government policies require cost-benefit analyses. If you don't have a dollar value, then those values don't get counted. We always try to be clear that this is the estimate of one value. There are other ways to make decisions. You won't find an environmental economist saying, “No, we should never make decisions unless there's a cost-benefit analysis.” Countries can just decide that protecting something is non-negotiable. A couple of years ago, I worked with a whole team of ecologists on a paper estimating the [financial] benefits to the world of preventing the next pandemic by doing things to protect forests and species. Forest conservation makes it less likely that we're going to have a crossover of zoonotic diseases from species to people. It's a huge amount of money. And that speaks to governments, and it helps convince people to do something. You can convince some people with moral stories. Other people need to see the dollar values.