BRSF Index | Steward Index | WebMerchants Index | Search

Watershed Economics

Agribusiness versus Recreation

by Susan Baker and Jesse Gordon

This article summarizes a socio-economic study on the BNR watershed. The next issue of The Steward will include some of the study's updated pollution trends and recreational use trends. This study was released in June and formed part of the theoretical basis for the establishment of the BRSF.

The Buffalo National River is the destination for over a million recreational visitors per year. The recreational quality of the BNR is threatened by ranching, farming, and logging activity in the surrounding watershed. This study outlines the scope of the problem, analyzes how environmental quality degradation reduces recreational visitation, and recommends what to do about it.

The counties adjacent to the BNR are some of the poorest in Arkansas. Unemployment is high, education levels are low, and the population is aging as young people move out. The local residents are predominantly cattle ranchers. The current tax structure provides an incentive for clearing forests for cattle pasture, since clearing acreage is tax-deductible while re-growing forest is not. The current price structure, with beef prices high and timber prices low, temporarily provides an additional incentive.

While causes of pollution are difficult to disaggregate, a complex combination of activities is resulting in higher pollution in the river. Runoff of soil from deforestation, cattle manure, and agricultural fertilizer are primary sources of river pollution [see "Potential Pollution Sources"]. Pollution-control regulations, promulgated by ADPC&E, are difficult to enforce since doing so could cause severe financial hardship [See article by ADPC&E]. The Forest Service still clear-cuts acreage and fails to implement other best management practices in the watershed. The National Park Service does not extend its pollution-control power beyond its borders, in order to maintain good relations with local residents.

Table 1: Economic Comparison of Agribusiness Use vs. Recreational Use of BNR

Watershed Net Watershed Net

Annual Income Per Acre

Farming - net financial $31,815,000 $73.80

Forestry - net financial $4,479,000 $5.21

Agribusiness financial $36,294,000 avg. $28.13

Farming - intrinsic value $0 $0.00

Forestry - intrinsic value $0 $0.00

Agribusiness economic total $36,294,000 avg. $28.13

Tourism - net financial $3,871,600 $11.26

Recreation - non-financial $37,594,800 $109.37

BNR intrinsic value $5,986,000 $17.41

Recreational use economic total $47,452,400 avg. $138.05

Table 2: Trends in Recreational Use of the BNR Watershed

Average Annual Trend (Change Percentage

1989-93 in days per year) Change per year

Total Visitation 1,031,000 +45,500 +4.40%

Overnight stays 122,900 +18,900 +15.40%

Boating Days 91,900 -5,400 -5.90%

Fishing Days 19,100 -1,100 -5.80%

Hunting Days 9,650 -1,200 -12.40%

Hiking Days 31,100 +4,400 +14.10%

In financial terms, farming, ranching, and logging ("agribusinesses") provide substantially more income and jobs to the region than do recreational activities and tourism. Agribusiness yields $36 million in annual net benefits, and 1,800 jobs, while tourism yields $4 million annually and only 550 jobs. But in economic terms, where the external costs and benefits are taken into account, preservation of the river and its recreational opportunities equal the financial benefits of agriculture and forestry. The "recreational value" which people enjoy, beyond what they actually pay for tourism, is estimated at $38 million annually. The "intrinsic value" of preservation of the BNR also yields $6 million annually in economic benefits. The total economic benefit of maintaining the BNR as a pollution-free recreation site is about $48 million per year. Table 1 summarizes these findings.

The "non-financial recreation" benefits are calculated by estimating people's willingness to pay based on their actual costs spent travelling to the BNR. The "intrinsic value" is based on the number of people in the BNR and surrounding areas who contribute to environmental groups. Their dues, which go to environmental causes, are an estimate of their value of the BNR beyond its value as a recreation source. We also estimated "intrinsic value" for the agribusiness way of life. We compared the actual prices of farming and logging acreage to the land's financial value based solely on its income potential. Those numbers were approximately the same, indicating that people value agribusiness only for its actual income. We did not investigate intrinsic values for the agribusiness way of life further, and hence we estimate the intrinsic value for both farming and forestry as zero.

Arkansas legislators do not focus on the economic benefits because the recipients of those benefits are often visitors from outside of their constituency (and often are from out of state). The recipients of the financial benefits are the local residents, who are on average poorer than visitors to the BNR. Hence, distributional issues focus attention on the financial benefits over the economic benefits. The recipients of the financial benefits (local residents) are the voting constituency of the region, while the recipients of the economic benefits are outsiders.

Recreational visits to the BNR are increasing by about 46,000 per year. The focus of recreational activity is switching from water-based activities to land-based activities. Boating (primarily canoeing), fishing, and hunting are decreasing, while overnight stays (camping) and hiking are increasing in popularity. Table 2 summarizes annual trends. While we cannot definitively identify a trend in boating and fishing, there is a clear and strong trend in the other areas.

We analyzed the trends in levels of four pollutants. Turbidity measures the effect of soil runoff. Fecal coliform measures the effect of cattle manure contamination. Dissolved oxygen (DO) and acidity (pH) provide other measures of river health. The trends in pollution levels are much more ambiguous than the recreation trends. The only pollutant trend we can state with fair confidence is that fecal coliform levels are increasing, by 46% annually.

We then analyzed the effect of the four pollutants on recreational activity. Turbidity has an effect on the amount of fishing activity (as turbidity increases, fishing days decrease). Acidity levels have a lesser effect on fishing. Dissolved oxygen has some effect on both boating and on total visitation. Overall, the effect of pollution levels on recreation is not great - although there may be a greater effect above an undetermined threshold.

We next analyzed the effects of potential increases in pollution levels. The "plausible worst case" assumes that the pollution level of the worst month of the year occurs in every month. At that pollution level (all of which have actually been measured, but only in one month of the year), visitation would decrease by 77,000 visits per year, costing $12.5 million in gross revenues and costing 200 jobs in travel-related industries. In a more conservative contrast, the "possible worst case" assumes that the worst pollution level within each month occurs (e.g., the worst January of the five years studied were to occur along with the worst February and so on). That represents a lower overall pollution level, since there are strong annual cycles. At the "possible" pollution level, visitation would decrease by 44,000 visits per year, costing $7.1 million in gross revenues and costing 110 jobs in travel-related industries.

To ensure that our recommendations were feasible, we based them on assessments of the political and economic situation in the watershed. We made our assessments based on interviews with various agency representatives as well as individuals in the area.

In this context, we determined that the community would be more supportive of private or voluntary projects than government projects or policies. Given the importance of economic development in this low-income area, representatives of the predominant agribusiness sector should be included in all decision making. Moreover, all policies and programs should emphasize their economic benefit to the local residents. Local residents believe in environmental stewardship, but in the past have rejected environmental groups which have ignored the economic situation of the people in the region. Policy choices should address distributional impacts (which here means lowering the burden on the relatively poor local residents while raising the burden on the relatively rich visitors) because of the prevalent recognition of income disparity and a need for burden-sharing.

We set out a framework for analyzing available policy options. We address:

We recommend action for six policy options within that framework, bearing in mind the economic realities and political limitations of the region. If any policy option fails to meet one of the framework criteria completely, we recommend against that policy. Those that pass all criteria are recommended in terms that emphasize their strengths within our framework.

Based on this analysis, we would recommend the following:

Susan Baker was born and raised in Arkansas, and holds a Master's degree in Economic Development Policy from Harvard University. She works for the Harvard Institute of International Development. Jesse Gordon is the Stewardship Foundation's environmental economist; he holds a Master's degree in Environmental Policy from Harvard University.