Why natural and environmental resources are so valuable to our economy

Hidden values.

Economists typically focus on aspects of our society that we attribute clear financial values to, but environmental and natural resources have hidden values that are also economically significant.

What kind of value do we ascribe to green spaces around our homes, and the public parks in the communities that we live in, for example?

These ‘non-market values’ are of particular interest to Professor Darla Hatton MacDonald, an expert on the economics of resources and the environment at the Tasmanian School of Business and Economics.

“The bulk of my research focuses on an individual’s willingness to pay for the environment, and is framed in various ways. I design surveys to elicit a willingness to pay for novel products or public initiatives relating to the environment,” Professor Hatton MacDonald explains.

“Benefit-cost analysis generally focuses on financial costs and benefits, and it can be difficult to trace the value of environmental quality improvement through market transactions.”

Information that comes from this kind of work can be invaluable for setting policy and decision-making.

Professor Hatton MacDonald has sought public perceptions on the value of the Murray-Darling Basin wetlands and Australia’s reef and marine ecosystems, finding that Australians are prepared to accept surprisingly significant chunks of their tax expenditure going towards protecting these vital assets.

Professor Hatton MacDonald’s goal is to use her expertise in economics to help assign values to these ecosystems, which can be useful in national debates, while also contributing to informed and effective decision-making on conservation issues.

One recent topic of interest is the Murray-Darling Basin Plan, and whether government spending on irrigation efficiency projects aligns with public expectations for conservation outcomes.

Other projects have looked at the restoration of water flows for the cultural uses of traditional owners in the Murray-Darling Basin, and to what extent people would be prepared to share the renewable energy they store in their own homes after batteries are rolled out to households across South Australia.

“As we move towards more renewable energy, we need to think about the reliability of the system,” says Professor Hatton MacDonald.

“I think it’s interesting to look at ways of sharing energy to improve the overall stability of the system. We need to think about the consumer and what is acceptable to the household in terms of putting energy back into the grid, as well as the technical aspects of managing a system.”

Looking towards the future, she says her research may focus more on Tasmania, looking at the value for people of better soil stewardship.

Food production depends on good soil, and in the long-term, sustainably managing the land will become increasingly important, Professor Hatton MacDonald notes, but “are consumers willing to pay for better land management practices?”

Only time will tell.

Research that makes a difference