Sunday, 29 October 2017

Reducing excess demand at the Great Barrier Reef

Late last year, I wrote a post about excess demand for New Zealand's Great Walks:
When a good or service has no monetary cost, there will almost always be excess demand for it - more consumers wanting to take advantage of the service than there is capacity to provide the service. Excess demand can be managed in various ways - one way is to raise the price (as suggested by Sanson). Another is to limit the quantity and use some form of waiting list (as is practiced in the health sector). A third alternative is to degrade the quality of the service until demand matches supply (because as the quality of the service degrades, fewer people will want to avail themselves of it).
The Great Walks are not the only tourist attractions that are subject to excess demand. As Michael Vardon (ANU) wrote recently in The Conversation, the Great Barrier Reef is another example:
The Great Barrier Reef is one of the world’s finest natural wonders. It’s also extraordinarily cheap to visit – perhaps too cheap.
While a visit to the reef can be part of an expensive holiday, the daily fee to enter the Great Barrier Reef Marine Park itself is a measly A$6.50. In contrast, earlier this year I was lucky enough to visit Rwanda’s mountain gorillas and paid a US$750 fee, and the charge has since been doubled to US$1,500...
I understand that some people instinctively object to the idea of trying to put monetary values on things like the Great Barrier Reef. But I think valuation helps, on balance, because it offers a way to assimilate environmental information into the economic processes through which most decisions are made. Money makes the world go around, after all.
However this should be done on the proviso that the valuation is systematic and based on sound environmental and economic data.
Vardon's article is mostly about environmental accounting (and is worth reading if you want to learn a little more about non-market valuation of natural resources). That is, it is about placing a value on the Great Barrier Reef to justify a higher visitor fee. However, it isn't necessary to estimate the Reef's value in order to reduce the tourist pressure on it. If you are worried about there being too many visitors, you simply need to raise the visitor fee. Higher prices reduce excess demand. It is really as simple as that, and if we want to protect these natural resources (Great Walks, Great Barrier Reef, or other natural resources with names that don't start with Great), then higher prices are a simple and reasonably effective way to do so.

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