Review of Hardner and McKenney’s “The U.S. National Park System: An Economic Asset at Risk.” By Matthew Rousu and Kyle DeShong.
The study, completed for the National Park Conservation Association is attempting to show that the National Park System is an economic asset and severely underfunded. The study attempts to estimate the consumer surplus from National Parks, the costs for National Parks, and the economic impact of National Parks. We’ll examine all three aspects separately:
There are major issues with the consumer surplus estimates provided in this study. Recall that consumer surplus is the difference between what a consumer is willing to pay and what they have to pay to enjoy a good or service. For example, if a family of four takes a day trip to a local national park and they would have paid $40 total, but get free admission, that family of four would receive a consumer surplus of $40, or $10/person.
The authors use a consumer surplus estimate of $51 a visit for two-thirds of the visitors, and $9 for 1/3 of the visitors to estimate a total surplus benefit of over $10 billion. These estimates were from outside sources, and the $50 estimate seems high to me, although I can’t verify either the $9 per person or $51 estimate per person. The authors then multiply the consumer surplus per person by the number of visitors to come up with an estimate of $10 billion dollars in consumer surplus. They compare this to their estimate of government spending on parks of $2.6 billion to claim that it’s a great investment. This is a flawed approach.
This approach is flawed for two reasons. First, the $10 billion dollar estimate of consumer surplus may be too high. It likely is, but even if it isn’t, the approach is still flawed. The better estimate is the amount of consumer surplus above and beyond the consumer surplus the visitors receive over the next best alternative. People who visit a national park may be deciding between visiting a national park, going to a movie, seeing a Broadway show, going to Disney World, etc. Those other activities also give visitors a consumer surplus. The reason people visit Disney World, for example, is that the value of going exceeds the price, or consumers receive consumer surplus. The National Parks also see a consumer surplus, and the reason visitors will visit the park is the consumer surplus of visiting the park exceeds the consumer surplus of visiting the next best alternative. The actual amount of consumer surplus per person above and beyond the next best alternative for visitors is probably well under $5/visitor.
Economic Impact of National Parks
The authors use economic impact estimates that are similar to Stynes (2012), which we review here. Our review of Stynes found the values entirely too high and completely misleading. This is because you can’t aggregate local economic impacts for an entire economy. These economic impact figures would therefore be overstated.
Costs of National Parks
The authors estimate the costs of running the park as the amount the federal government pays for park operations plus any admissions/fees that are collected. The only issue we have with this part is that they ignore opportunity cost. They acknowledge that they’re ignoring this in footnote 5, at least, but the costs of the national parks are likely higher than their estimates.
When graded on our “best practices,” list – How does this study do?
Things they do well:
3.) This study bases its economic impact on whether or not the park is open to the public or not, effectively establishing a counterfactual.
5.) This study did have outside reviews prior to publication.
6.) This study’s methods are quite clearly laid out.
8.) The study clearly discloses that it was funded by and completed for the National Park Conservation Association.
Things they do not do well:
1.) This study states both a monetary impact and a jobs impact that may mislead readers into thinking there is both a monetary impact plus an additional jobs impact.
7.) This study does not make clear how this study looks in comparison to any other studies.
There is consumer surplus from entering the parks – but this study’s approach is flawed. This study also follows an approach to estimate the economic impact that is flawed. There are too many flaws in this paper for us to place any credibility in this study’s estimates.