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Saving Species Dilemma Management

Please answer the 5 questions below:

Saving Species

There is a dilemma in wildlife-habitat management: is the correct course to keep timber cutting to an absolute minimum thereby saving all the endangered creatures, or to allow some cutting with the result that a few of the species are sacrificed?

The increasingly common approach is to use the compromise plan. This is called a habitat-conservation plan or HCP. An amendment in 1982 to the Endangered Species Act of 1973 allowed HCPs to be established. The HCPs were intended to curb both the severe restrictions on logging and the flood of litigation that resulted with the signing of the 1973 law. Since then HCPs have emerged as the timber industry's and the Clinton administration's preferred technique of forestry management.

Interior Secretary Bruce Babbitt called HCPs "a practical compromise in the long-running battle between government and big timber." Environmentalists are less sanguine. The Sierra Club considers them a license to kill endangered species. Environmental groups are particularly incensed over the length of HCP contracts, some lasting as long as 100 years, as well as provisions for monitoring and amending the agreements.

OUT OF HARM'S WAY?
[Company] [ Year] [State] [Size(1,000 acres)[Protected Species]

Murray Pacific 1993 Washington 54 Spotted owl, marbled murrelet

Weyerhaeuser 1995 Oregon 209 Spotted owl

Plumb Creek Timber 1996 Washington 169 Grizzly bear, gray wolf, marbled murrelet

Pacific Lumber 1999 California 211 Coho salmon, marbled murrelet

International Paper 1999 Texas, Arkansas, Louisiana, Georgia, Alabama, North and South Carolina 5,000 Red-cockaded woodpecker

After Pacific Lumber had their HCP approved, its CEO said: "This gives us a certainty of operations going into the future." An Earth First executive commented: "The HCP locks in the bad stuff and leaves open to change any good things that may be in there."

Source: Jim Carlton, "An Imperfect Truce in Wildlife Battles," The Wall Street Journal, March 23, 1999; Jon Chrisstensen, "Environmentalists Hail the Ranchers: Howdy Partners!" New York Times, September 10, 2002; and Ron Harris, "Feds Propose Protecting 1.7M Acres," New York Times, September 24, 2002.

****** In 250 words please answer the 5 questions below:
(if applicable, please add reference(s) )
Questions:
1. Do HCPs create any negative externalities?
2. Do they create any positive externalities?
3. This is an example of what type of method of dealing with externalities discussed in the text?
4. Would voluntary reductions in timber cutting work in these cases?
5. Is this a government or a market failure?

Solution Preview

1. Do HCPs create any negative externalities?
Yes, HCPs creates negative externalities. A negative externality occurs when the entity that is making the decision does not have to pay the full cost of the decision. In this case the timber companies will not have to pay the full cost of their decision to cut trees. For example, if Murray Timber cuts trees in Washington and the population of the spotted owls decreases, the company is not fully responsible for the depletion of a threatened species. The company does not have to bear the cost of depletion of rare birds or even their extinction. The company simply incurs the cost of cutting the trees, the fees that the company has to pay the government and it does not pay for the birds that die. In other words HCFs creates negative externalities.
HCF is a government mediated compromise that gives timber companies opportunities to exploit protected areas. The HCF will not only lead to the death of a few birds but will also disturb the ecology of the area. .The HCF will lead to timber companies cut down trees that have been the mainstay of vegetation in these protected areas. The cutting down of trees means the depredation of the area and its wildlife. Often the timber companies are known to cut more timber than what they have been contracted for. This will increase the pressure on the HCF areas. Normally, there is no exhaustive list of trees in the area and the timber companies get the opportunity of over harvesting. The HCF will lead to large negative externalities. .
2. Do they create any positive externalities?
Positive externalities are created when the marginal social benefit far exceeds that of the marginal private benefit. From this perspective, the HCF will not cause any positive externalities. Consider the effect of allowing companies to cut trees in the protected zone. There is depletion of trees. The birds in the area will decrease. These are protected birds and it is responsibility of the government to protect the birds.
One positive benefit that the timber companies may claim is that low cost wood or even paper will be available in the ...

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