THANK you very much for inviting me to be part of your annual conference. It’s an unusual context for an economist, perhaps highlighted by the fact that when I googled ‘“the economic value of parks’, it only turned up 42 discrete references, none of which was in the end particularly helpful in preparing this talk.

At the risk of over-simplifying things a bit, it seems to me that there are three broad rationales for the establishment and upkeep of parks:

• the first might be described as a ‘pure’ conservation motive – to set aside areas for the preservation of endangered species whose very existence may be otherwise be threatened, or to preserve important heritage assets;

• the second could be described as a ‘legacy’ motive – a desire on the part of the present generation to preserve from commercial development a particular area in its current condition (which may or may not be ‘pristine’) so that it can be appreciated, in that condition, by future generations who might not otherwise have the opportunity to do so;

• and the third I describe as an ‘experiential’ motive – to provide people with opportunities to have experiences (call them ‘encounters with nature’, if you like) that they would not otherwise be able to have.

These motives are not necessarily mutually exclusive. Individual national parks or reserves, and certainly a system of parks and reserves, can and have been established and maintained for two, or all three, of these purposes:

• in the Tasmanian context, the Truchanas Reserve on the Denison River, Mount William National Park and the recently created Savage River National Park would be clear examples of the first motive;

• most of Tasmania’s better-known parks, including Cradle Mountain-Lake St Clair, Freycinet, Franklin-Gordon Wild Rivers and the South-West National Park combine, to differing degrees, the second and third motives, as do other sites administered by the PWS such as Port Arthur and Maria Island.

It is almost impossible to assign a monetary or economic value to parks established for ‘pure’ conservation purposes. It might be possible to impute a financial value to the land – although such parks are never going to be sold, and are not intended to generate any revenue streams (for example by charging admission fees to visitors) such an exercise seems rather pointless.

The fact that one cannot assign an economic value to parks established for ‘pure’ conservation purposes is not an argument against their existence. Despite the popular perception of economists as people who ‘know the price of everything and the value of nothing’, very few economists (and none whom I know personally) believe that policy decisions should stand or fall by their dollar costs and benefits alone. I would hate to think that the fact that it was impossible to assign a dollar value to a reserve established for a ‘pure’ conservation motive and for none other would be used as a serious argument against its establishment.

Indeed it may be that, as people become increasingly conscious of the economic and other consequences of climate change, the perceived economic value of parks as ‘carbon sinks’ will increase – although the difficulty of quantifying that value is unlikely to lessen.

It may be more feasible to assign an economic value to parks established primarily for ‘legacy’ purposes, based on the revenue stream generated by visitors to them. However any valuation thus derived is unlikely to be particularly important to any assessment of the ‘worth’, in a broader sense, of such parks.
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If the ‘assets’ – be they natural or man-made – being preserved in such parks are considered of sufficient intrinsic importance that they should be preserved for future generations, then whether any members of the current generation want to visit them, and how much they are willing to pay for the privilege, is rather beside the point.

There would appear to be greater potential to assign an economic value to parks and reserves established for what I have labelled the ‘experiential’ motive – that is, to see and experience beautiful scenery; to undertake walks, canoeing or rafting, and other forms of physical activity; to observe animals, birds and plants; to ‘escape’ from urban environments; to enjoy the company of a small number of other people whilst engaging in some of these activities; or even to experience solitude. You will also have heard from Mardie Townsend yesterday about some of the other benefits that people may derive from parks, such as in aiding recovery from acquired brain injury or depression, or in providing opportunities for environmental volunteering.

I’ve no doubt that some people will see these diverse motives as being less important than the ‘pure’ conservation motive. However these ‘experiential’ motives are more likely to enjoy popular support – and hence government funding – than the conservation motive. And to the extent that people’s experience of parks and reserves enhances their awareness of conservation values, it may help to build support for the conservation motive for parks. Indeed, if one of the primary purposes of parks were ever to be portrayed as to ‘keep out’ everyone bar scientists, it is likely that public support for parks would be greatly diminished.

The economic value generated by parks established and maintained at least partially for ‘experiential’ purposes can be interpreted quite broadly. Such parks attract visitors who are willing to pay for the experience; who spend money on transport, accommodation, sustenance and souvenirs; and who thereby create jobs in providing those services and goods.
PWS figures, which Ben Clark kindly provided to me, show that around 715-720,000 people have visited eight of Tasmania’s more important parks for which reliable figures are available (Cradle Mountain-Lake St Clair, Freycinet, Maria Island, Narawntapu, Mt Field, and Hastings and Mole Creek Caves) in each of the past three years.

That’s down by about 5% from 2004-05, when these parks attracted over 750,000 visitors. The decline may reflect the impact of higher petrol prices, which obviously add to the cost of visiting these parks (and would be consistent with other evidence indicating that rising petrol prices had adversely affected the popularity of ‘driving holidays’ in most parts of Australia). It could also reflect the greater availability of cheaper airfares to the mainland, and the impact of the stronger Australian dollar on the relative attractiveness of overseas versus domestic holidays to Australians (and of Australian holidays to international visitors). The demise of the ferry service has also had a pronounced impact on the number of visitors to Maria Island.

Although they are not directly comparable with your own data, figures from Tourism Tasmania’s Tasmanian Visitor Survey suggest that tourists from outside Tasmania have accounted for between 580,000 and 660,000 of the number of visits to these eight parks. I suspect that for a large proportion of these visitors, Tasmania’s parks were a primary drawcard for their visit. I should acknowledge that this is simply my impression, and I haven’t been able to verify it by referring to ‘hard’ data.

But to the extent that it is true, then a significant proportion of the nearly $2bn per annum spent by interstate and international visitors to Tasmania could be ascribed to Tasmania’s parks.

To estimate exactly what proportion of this amount should be attributed to parks would require more time than I’ve had to prepare these remarks. It may be worth your while to commission some work which would lead to more precise figures being put on this economic value. I mention it here simply by way of encouraging you to take a broad view of the value of your work.

In that spirit, I want to devote the remainder of my remarks to thinking about the role of parks in Tasmania’s economy from another perspective.

As some of you may be aware, for many years I have been making the assertion that Tasmania’s economic future cannot lie predominantly in the volume production of essentially undifferentiated commodities competing primarily on the basis of low prices against others with better access to larger and cheaper resource bases, labour and capital, and better access to markets by virtue of geographical proximity or membership of preferential trade blocs; but will instead increasingly depend on its ability to produce highly differentiated goods and services embodying a relatively high intellectual content and for which customers are willing to pay premium prices.

It was thus gratifying to read that, Premier David Bartlett has, according to a speech he gave in July, had this ‘pinned to his office wall for a few years’.

Let me emphasize, in passing, that the first part of this assertion states that Tasmania’s economic future ‘cannot lie predominantly in the volume production of essentially undifferentiated commodities’.

The use of the word ‘predominantly’ – which one serial critic of this assertion repeatedly chooses to omit when citing it (Barns 2008) – is deliberate.
It is meant to indicate that I do not see Tasmania’s traditional commodity-producing industries (agriculture, forestry, mining and minerals processing) as having no role in Tasmania’s future.

I have never said that the production of commodities has no future in Tasmania, or that all existing commodity production activities should be consciously phased down.

Where it is possible to produce commodities in Tasmania at prices which enable good wages to be paid, high environmental standards to be upheld, and good profits to be earned – as for example at the Henty gold or Avebury nickel mines on the West Coast – then that is very much to be welcomed.

And I readily acknowledge, as I have done on other occasions, that some of Tasmania’s traditional commodity-based industries have spawned a number of highly creative, value-adding businesses which do produce highly differentiated goods or services for which customers are willing to pay premium prices. And this is much to be welcomed.

But I also believe that in the absence of successful efforts to create value-adding businesses competing on the basis of the qualities of their products rather than the prices charged (or, more accurately, taken) for them, Tasmania’s traditional commodity-based industries will contribute little to future growth in the State’s economy.

Indeed recent experience highlights this point. Tasmania’s economy has done remarkably well in recent years. Over the five years ended August, some 34,200 new jobs have been created in Tasmania, more than in any five-year period in at least 25 years. That’s equivalent to employment growth at an average annual rate of 3.1%, faster than in any other State except for the resources-boom States of Queensland and Western Australia. As a result, in the past two months, for the first time in nearly 30 years, Tasmania’s unemployment rate has been below the national average. Tasmania’s unemployment rate is lower than those of New South Wales, Victoria and South Australia.

And yet, as Kevin Rudd would say, ‘do you know something’? Of the 34,200 new jobs which have been created in Tasmania over the past five years, just 725 have been in the agricultural, forestry, fishing and mining sectors; and a further 890 in manufacturing (not all of which would have been in minerals or food processing). These five sectors account for 17% of total Tasmanian employment; yet they have contributed less than 5% of the growth in Tasmanian employment over the past five years.

Let me again emphasize that I am not being at all critical of these industries. I am simply saying that they have not been, and are not likely to be, the source of much new job creation.

By contrast, 21% of the new jobs created over the past five years have been in construction; 17% in health and community services; 15% in property and business services; 11% in education; 8% in wholesale trade; 7% in retail trade; 6% in finance and insurance; and 5% in ‘hospitality’ industries (accommodation, cafes and restaurants).

I do not want to suggest for a moment that all of the jobs created in these sectors call for high-order skills. And some of them (for example, in construction or property services) are a by-product of cycles which have begun to, or are likely to, turn down.

But I think they do illustrate the general point that, if during a period when Tasmania’s, and the Australian, economy have been doing particularly well, the traditional commodity-based industries have ‘punched below their weight’ in terms of driving economic and employment growth, it is a tall order to argue that they will be significant drivers of economic growth over the longer term.

Another illustration of the same point was made by the Tasmanian Treasury in this year’s State Budget Papers. It’s worth quoting in full:

“A decade ago, a delay in a major project, or the closure of a major employer, would have had a measurable impact on consumer and business confidence, and in some cases would have affected some major economic indicators. By contrast, economic activity and employment growth in Tasmania have remained strong in Tasmania over the past year, despite closures such as the Telstra call centre in Launceston and the Blundstone boot factory in Moonah, which altogether have shed 500 jobs. This reflects the high demand for labour, and for skilled workers in particular, and provides evidence that Tasmania’s economic performance is likely to remain strong, even if some major projects do not proceed as currently expected” (Treasury & Finance 2008: 2.5, emphasis added).

There now appears to be rather more uncertainty around the ‘major project’ which would have been uppermost in the minds of those who drafted this passage than when they wrote it.

And yet, despite that, business confidence in Tasmania has held up remarkably well, especially bearing in mind the heightened nervousness surrounding the global financial system and the clear signs of a slowing in the Australian economy which have emerged since the State Budget was brought down more than three months ago.
According to the most recent NAB business survey, Tasmanian businesses are more confident about the outlook for business conditions than those in any other State except Western Australia.

And according to the Sensis Business Index survey for August, Tasmania is the only State or Territory where optimists among small and medium enterprises outweigh pessimists, and the only State or Territory where the ‘net balance’ between optimists and pessimists has declined by less than 10 percentage points since the beginning of the year.
Three other themes that have formed the core of my analysis of the Tasmanian economy over the past decade has been that, in order to ensure that Tasmania does improve its capacity to produce and market highly differentiated goods embodying a relatively high intellectual content and for which customers are willing to pay premium prices, Tasmania has to do three things:


• improve its overall productivity performance, currently some 7% below the national average;

• lift its investment in the skills and educational attainment of its people – what economists refer to as ‘human capital’, by lifting the retention rate of students to year 12 (currently more than 10 percentage points below the national average), improving the quality of what is taught and learned in classrooms (which judging – to the extent that one can – from standardized test scores is below the national average, although one very recent set of test scores does point to some recent improvement), and by increasing the proportion of the work force with post-secondary qualifications (currently some 5 percentage points below the national average).

•  become more successful in attracting and retaining people with creative skills and aptitudes – using ‘creativity’ in this context to refer not only to skills associated with ‘the arts’ (broadly defined) but also science and engineering, architecture and design, education, business and finance, law, health care and so on.

What has all this got to do with parks? In short, parks – particularly those established for what I have described here as ‘experiential’ motives - can be part of what attracts and retains people with creative skills and aptitudes. The work of Richard Florida, who these days is Professor of Business and Creativity at the University of Toronto in Canada, highlights the importance of ‘place’ as one of the attractors for members of what he terms the ‘creative classes’.

‘Place’ has many dimensions, of course, but one of them which Florida emphasizes, for example in his book The Rise of the Creative Class, is the opportunity to engage in ‘outdoor pursuits’ such as ‘climbing, hiking and a host of similar sports’ which allow you to ‘enter some other world, and explore it and experience it while performing a task that is often challenging in itself’ (Florida 2002: 180). Tasmania’s parks, which offer such an incredible variety of such opportunities within such a short distance (by mainland or international standards) of where people live and work, have enormous potential to be part of what identifies Tasmania as an authentic ‘place’ in which creative people will want to live and work.

For that potential to be realized, the stewards of Tasmania’s parks have to work and partner with other ‘attractors’ for creative people. The arts constitute one such set of attractors – and the residency programs which the Parks and Wildlife Service and Arts Tasmania have combined to provide, enabling artists from Tasmania and overseas to seek inspiration from some of Tasmania’s special places are an excellent example of how such collaboration can work.

Higher education provides another set of attractors. As a generalization (to which I readily acknowledge there are exceptions), the more education people have, the more likely they are to value ‘nature’ and specifically the services provided by national parks, whether they are personally regular users of them or not.

And national parks can provide an immensely rewarding opportunities for educational and scholarly endeavours, particularly in fields such as botany, zoology, geology, and ecology. An outstanding example of the potential for collaboration in this sphere is provided by the recently-launched Bookend Trust, which has been established by Dr Niall Doran of the University of Tasmania’s School of Zoology to raise funds for scholarships and projects dedicated towards solving Tasmanian environmental problems.

The first three scholarships funded by the Bookend Trust – two for work on injured and orphaned wildlife, and the other for a project trialling new marine filming techniques on great white sharks – were launched earlier this month.

And of course parks need to be an integral part of efforts to strengthen and promote Tasmania’s ‘brand’ – not only with tourism promotion, as you already do, but with Brand Tasmania and other similar endeavours.

To conclude, the ‘economic value’ of Tasmania’s parks – in the sense of what they would represent on a financial statement purporting to show their ‘realizable dollar value’ or their contribution to the State’s annual GDP - is hard to pin down with any precision, and I haven’t really attempted to so today. Even if that economic value could be established credibly, it would represent only a part of the ‘value’ more broadly defined that Tasmania’s parks provide and generate.

And the value of parks to Tasmania’s economy is more than simply the tourist dollars which they bring in, or the jobs which they create. They are also an integral part of creating the vision of a Tasmania producing highly differentiated goods and services embodying a high intellectual content and for which customers are willing to pay premium prices.

References:
Bartlett, Hon. David, MP (2008), ‘A New Economic Direction for Tasmania’, Address to Tasmanian Chamber of Commerce & Industry (29 July).
Barns, Greg (2008), ‘Visionary Ideals on the Right Track, The Mercury (1 August).
Florida, Richard (2002), The Rise of the Creative Class (Basic Books, New York).
Tasmanian Department of Treasury and Finance (2008), The Budget, Budget Paper No. 1 (Hobart, June).

Note: The opinions expressed herein are entirely those of the author and should not be interpreted as representing the views of his employer or any of its other employees, or of any other entity with which he is associated.

This talk was given at the Ulverstone Civic Centre
25th September 2008

Saul Eslake Chief Economist, ANZ Bank. Talk to the Tasmania Parks & Wildlife Service Annual Conference

As some of you may be aware, for many years I have been making the assertion that Tasmania’s economic future cannot lie predominantly in the volume production of essentially undifferentiated commodities competing primarily on the basis of low prices against others with better access to larger and cheaper resource bases, labour and capital, and better access to markets by virtue of geographical proximity or membership of preferential trade blocs; but will instead increasingly depend on its ability to produce highly differentiated goods and services embodying a relatively high intellectual content and for which customers are willing to pay premium prices.