Private and social returns from wetland preservation versus those from wetland conversion to agriculture

Abstract

Private and social net benefits from wetland preservation as well as from wetland conversion to agricultural use are derived in this study. The case study method is used for marshes on the east shore of Lake St. Clair in southwestern Ontario, Canada. Lake St. Clair is located between Lake Huron and Lake Erie and is part of the Great Lakes, the largest freshwater body in the world. The study's intent is to determine the most beneficial economic use of these wetlands: preservation or conversion to agriculture. Social benefits are additions to the real national output value regardless of recipient. Conversely, social costs are subtractions from the same national output value regardless of payer. Private benefits and costs are incident on the owner who makes the production or preservation decisions. All agricultural benefits are evaluated, while preservation benefits include only hunting, angling and trapping. The most beneficial use of wetlands for society differs from that for owners. Social net benefits from preservation exceed those from conversion, while private net benefits from conversion to agriculture exceed those from preservation. This difference between social and private net benefits is due to drainage subsidies and property taxes, inability of wetland owners to extract payment for all preservation benefits originating from their preserved wetlands but occuring outside their boundaries, and inability of owners to extract consumer surplus created on such land. The dichotomy between social and private most beneficial use is at the root of the controversy about wetland conversion.