In a recent Land and Environment hearing in regard to a Rio Tinto subsidiary’s plans to extend the Warkworth Coal Project into areas of native vegetation in the Hunter Valley, including areas of threatened Warkworth Sands Woodland. Professor Jeff Bennett and Mr Rob Gillespie for the applicants stated that the methodology used by Curtis NRA to value native vegetation “has no basis in Welfare Economics and is therefore incompatible with Benefit Cost Analysis”.
Clearly they did not think it through, as the median land value in a bioregion is a ‘revealed preference’, derived from an empirical database and is thus a much stronger reference point than a ‘stated preference’ from a random group of ill-informed and possibly biased respondents!
Moreover, no cognisance is given of the opportunity cost nature of the valuation, nor of the extensive support from the literature. The ecosystem goods and services provided by the forest annually are the Usus Fructus per annum, which is quite rightly derived from the capital value of the land by the use of market capitalisation rates.
Valuer General for Ireland, member of the Royal Society and founder of Political Arithmetric, Sir William Petty (1623 – 1687) was first credited with capitalisation of the Usus Fructus per annum or productivity function of the land (Murray 1954, 1969; Roll 1961).
Clearly, this historical reference predates modern welfare economics and environmental economics by over 300 years!! Yet the eminent professor and Mr Gillespie are LOST in their paradigms, failing to recognise the roots of their own professions.
Moreover, citing Melbourne-based ‘Economists at Large’, who prepared a response to Jeff Bennett and Gillespie Economics’ claims:
“We suggest it is beyond the expertise of Gillespie Economics to adjudicate in these debates between physical scientists. The allocation of zero values to these external costs is just such a judgement. When the necessary revisions are made to the Socio-Economic Assessment, we also recommend the proponents take note of Curtis (2011), who estimates the value of the ecosystem goods and services lost due to the clearing of the Leard State Forest at some $490,000 per annum. Curtis also urges
analysis of land values to consider losses of amenity and social value to the community. Curtis’s background as a physical scientist, land economist and ecological economist gives his findings considerable weight”.