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(0 (0 3 aL ro 2j PB 195 224 ECONOMIC ASPECTS OF OCEAN ACTIVITIES. VOLUME 11. ECONOMIC FACTORS IN THE DEVELOPMENT OF A COASTAL ZONE Massachusetts institute of Technology Cambridge, Massachusetts September 1970 CD g gO A!* 0 g g 00 01sl1lbuted . .'to foster, serve and promote the nation's economic development and technological advancement.' NATIONAL TECHNICAL INFORMATION SERVICE oi-070 @ 4, 00:3 0 000 U.S. DEPARTMENT OF COMMERCE 6:0 0 This document has been approved for pub!lc release and Sale.,., NAR Z 4 1957 P131952241 MASSACHUSETTS INSTITUTE OF TECHNOLOGY 16. Abstracts "Economic Factors ij2 the Development of a Coastal Zone" (Z) The redevelopment of the coastal town of Hull, Massachusetts; (3) The location of a nuclear power plant near Plymouth Massachusetts; and (4) The establishment and location of a refinery complex in Maine and the accociated oil distribution problem. ECONOMIC FACTORS IN The Report identifies the possibility that project-by-project analysis can result in significantly inefficient suboptimization, unless such piecemeal analysis is THE DEVELOPMENT OF A COASTAL ZONE integrated into region-wide coastal zone development. and discuss alternative zoning and taxation plans for implementing region-wide development strategies. A bibliography of 58 references is included. 'CH U t.,3: Dr. (-n NT -0 (J.) -OF 0 (D cf) 0 NA1,104'AL T"ECIHNICAL C) INFORMATION SERVICE En M V. 2m, 0 C-n M r\ (D f 0 M tA report prepared for the National Council 4_1 :)> =) -- on Marine Resources and Engineering Developmenq (-n rri -4 M CA-" C> D- September 1970 NATIO'NAL TEC""MCAL jUA 3. R- N- STOMDARD TITL PAU F01 T C"1c1,L%1EP0RTS @BC-71-67 5. R,P,., TI- "Economic I-actors in the DeveJopment of a Coastal Zone" 6. P,ff@-& 11,F ......... r-d, 7. A.h,e Org.-...- F(,V- N.. 9. P-i-.g t N@j; -d Ad'u-, 10. Lln,, N.. itute o Massaeh e tts S11 f Technolugy Carnbridge, Nfassachus Iettzi G21 39 11. C....... /G.- N.. "This study was financed by a contrac:t with the National 12. Ap-@ , N.- ..d Add@@ I , I. , , , , " 8 & F'_ - "d Council on Marine Re3cjurces. arid Engineering Development, National Council on Marine Resources and Engineering C.-d Executive Office of the Precident. However, the findings, Development, Executive Office of the President re corrimendat ions, and opinfons in the report are those F'OBh,#7 17th&HStreets, N.W. 14. Agen,y Cod, I of the contractor arid not necessarily those of the Council, a . .,I.n, D.C. 20500 nor do they Imply any future cc,urjoii stijiy, oecornmenda, ion, 15, NL.- or po-.1tion. It Is hoped thaL thi@, study will contributF- to the full discussion of problem areas and issues in marine science arfairs." The Lore rif this Report outlines the econumics of the coastal zone in the ab- stract, defines the concept of economic efficiency, points out the mechanisms by which the private market can fail to allocate the coa@tal zone efficiently, introduces the concept of parochial benefits, uutlines how local control can sometimes operate to produce allocations which are more inefficient than the private market, considers problems introduced by the fact that a decision-making body cari almost never predict ihe future with certainty, and introduces tech- niques for incorporating this unzertainty into cost-benefit analysis. @A The practical problems, as well as the limitations, involved in the. application of cost-benefit analysis to the coastal zone are explored in some detail in four @pecific examples, e pru,,isiun of a recreation facility in Bo%ton Harbor:: 17. @@y W-d. -d D. 17b. 17- COSATI F,@Id/(-.p 11S. Di-ib-.. Public 19. Se-ky Ci... (Th,-, 21. N f P.g- Releasable to the AvVAL from.- NTIS 1@ -1- TABLE OF roNTENTO EcoNOMIC A@@PE(T@_! tiF ()@'EAIJ ACTIVITIF@, VOLUME TI Thi-_ ECONOMIC! FACTOR@ IN THF DEVELOPMENT OF on Marine Rp!@,,urr%.@-. @ind Enrineerinr Devel,:,prnent azi part A CQASTAL @,oNE of a 7roject s@tudvlnv tht- F-1,-,j),rj,j@: rif ocear, activities. The M.I.T. ',.as;-, E're_,iq) gjDtPful1:; acknowletiges ' the onn- tinuour, stream of -upport ari(i direr-tion rec-elved from Dr. Robert Kay or Mnrille the Chapter Page pr.-Ijeet.'E; directOll. This report was prepared b ,v @in M.I.T. intr,it-partmental. I. INTRODUCTION AND :@IIMMARY tasl< grollp uyloer th@- @Ilrectir,i) ,I T,r. , H,:-oi of THE j,F.NjE1,,.J,ME]!T OF A the Department of Maval ArrhiteCtdr& P(@A,@TAL. @jNE T-r!hniral E-Upprvic.11or, waz pruvide,j hv tet:,rin.c c c, n s 1 -, ting r-,f, Prc,fez@zc,r R.@ . Ecl,h--_u7@, Prl,[email protected],r C. L.. Wilson, C,.,@T-BRNETIT ANALYSIS and T@. C. qnnd. 11rincir',1 authc,rz@ were PrnfeFzor J. W. ric,vanney !I@, Mr. William _`@,if-r7 TV. L,EVE.L,,)TT4E!JT _-THATEGIE-L aT io M r @i rc,nTr!r-, oriz. b:: 'J-f@ZSor E. FrankEl, Prol'en@ol, L.. Thurow, aric! Mr. P. Taborca. @-ve-rr'JM@@-Ij@ r,j acmjcii@ Fil tit ne? 1 t ie2@ havc- r-?@,Iew@@i Jraf's nr,,.,! ant 1 - :if Hull 'I Appen@ix A Pkll@rrj@lt iv- inf@3_ ble to J,jr @MC commen. Althrii,i-h it. would b -1 _them a] I , we would be If we failed to ac-know@Edgt .1 . Appendix B 7h, Pllgrlm Pcwer F'I:jnt the help of Col. W. Mcr;,)ir,,--, A.--my Corps of Engineer-, Mr. Garfield of' the Bureau i,f 01it.door Recreation, and Dr. Appendix C Sti-ategles for Harialing, the Dem@Lnd Milton Johnson of E.@@.2.A. for Dia In New Englvid We would alsc like- tr) avkrjowl-lz@ --h@ h@lv Of the st.aff r,f, the 11-w Frig.1rintl Program at the University o'@' @hode Isaarid. Tni@@ it not. to imply that thes:(- individuals or the organizations they represent are nevessaril%, in agreemeni with t'iF- results of tr)ls study for which we aloijt Ltre re-_porlsiblP. i-,i A PTL R 1 3. Tn argue that the fact thnt t hr- progerit. r@Ysf em can be expected to c,peratc I ,@ ff I Ci erit I v In many 0,1',Ft 31 z of' INTRUDIWTD@N AND SUMMARY r-,itii%tIc,ns i-r, a rjecessally but not iiff1clent. condition for the establirhment of rri,-Drra Fr_n_aj--baFr:@,-j,1ecicjon -making PrRamble bodies . The proponents of such measures muFt not only argue that the pres-nt systrm Is ineCfJr.Ient--an argu- Currently befoi- the Congress, there are a number merit which tJ,Is r@-port atteiript.-. tc@ iriake precise--hut also of bills relating tc, the mariagement nf the coastal zone.* that the decisIcins e cLriatirij- frorn Ulf' T1101-0 11rcad brised Recently proposed legIslation meeting this description body will be more corisist@iiy' with thc- f-r-nnomy's. desires includes S2802, S3183, S-1,554, S-@46o, HR13247, and Hr,,14845. than the presen'. decl:,Ions, dc-pItp thr- f',,-ic1' that this body These bills are in p-3rt .11 manifestation of the Increasing I--, riceessarilY furrhei remov@cl iron, thp linciplInp of the aissatisfaction with th, pucserit means of alloc-ating rrjavk@t arid frrm th@ whioh @qlll t@e mc@st affected rne coastal zzoric which optl@,Lt:-- es-,@,--Iitiallv through by its declsions. The latt.,,r r-int !S@ ITILJI-h more diffIcult tn@ prIvate market rrii:AJI'i,@d by local zoning cind taxation to make then the forn,F-r- arid the Pep(11-f SLAspends judg- PL_,liCies. The m%jorit%, thEse bills provide for federal merit on its gc-neral vallriltv. sup vort for the est ab I I ShMetit, Of state a I zone with brr@,td ranred decision-mF4i-,i,@: p,:,wers The repc@rt doe,l tu7 dr,w,i ocan, or-Inciples bY which meezing fedei-al _-.tan,).%r,1,_. The bills differ primari2y 5@uch a hou 'v n-,oula opera@e. @11@ r-r-rt emphasl-s that witri respect Lc. th- rejeval a@,.ericy to whloh thp federal the resporinibilil-Y nf f7LIC11 a h0dY L] 110t. to impute rnr t-,ill bE a5sigriE-d. Its (-i-, -.f h@ ir!d1vidual- nn that body) to ccmisTal --.ie it-cinion '-, t-tlt rather to attemnt lues of the p,.-ariomY served arre t,' inic report 1-. not. t@, Evaluate ti-,e to discover i-,ha@. t1- va -1 and then tc, 'Lle cariFistent with _LhesE- VaILIES.. The v@ mc ri t s r f t r,P o@ tj I I I o or even o f' r r. ate r-oast a I hl no h., C, au-@:orltie- p,r .-1,L, t,,jt to make three furi,j,@m,2iit ally practlz:@@jl 7..eans for lriplemErjt@n@: @hlE- p 1 cl p y @ ost -ints fC, thE FLAture benefit rjr-1E-!'1v outlirien .,roi ito :ipplicatir,n z., @7,1 -one: to ricastr 7 r, de - - - 1 D explnre'a 1r, det.ail. 1. 7,c, rtev@lco the reasnnz, for antl th- oituation2. 1r, ThiS ano @xpl_)ratir,n raken. place in wnicri the privatt- )ar@,.et wIla operate to allocate the part tl@irough the investiizatloii ol' folir specific examplPo coazta2 z-,nL- In a T,@a,,rier which iz inconsistent with the of' r!oaota. zone nrorlems: values Of the wconr)v. (a) The rirc-vislon c@@' a recreation Vacli!LY in Boston Harbor , To develn;7 t@-,t, r-asnns for, and the ,Ituatiorjc@ (b) The i@:,val corjt@,,a wIli jrjerate to allocate the ccjas-,.al ( C. ) Th- location of' -- nuclear power p2ant near Plymouth, zf,rir- i:i a manner Lriconsistent with the values of the economy. Massachusetts, T_Tc_@r TFre-purposess of this report, thc term "coastal zone" (d 'i The establishment and location of a refinery complex refers rc, the land/sea interfrace rtot only the Iii a tnd t-l-,r [email protected]@eia,EJ r-i! filo-,r-11@Lition pronlern. riarro-..; Ttrlp ori either -icip of' the t,@.)t alsr, A22 thece are taker, fr,@m the ccl-i.- cd' New England th,z hIn7erlario aroi tht offshore waters I ri r, !, I as thev riorth of' C11rip 7f)-j, Lr, are., ej- tia.E, termed the Northern [email protected] aff-cf, each other,. Thl, JEFiriition in ui.@@afiFl'aotori ly New Erip.2pnd Cnaslal @. _,ne . ms, -:@ j@1il'it-ic'n n,-Lsar!2,., '--0111-@'__ @J I Yialluyl to partc, C In a ct 1j ', i .-I I t 1 ,iL prob I P C, 7 Z, and wha", A r, T. tht uc,a"t.al ZrA,F- I nnt! r]E@,:t th, 13Y. thc r,@nblenF,. :-;)ar, a r-pj@oeijtatlve e t t rum -a- - I c)r i s j I ld - j p i tt.e probl m Pt r,:a ri @, I ' he prob ev; is the py-rivinion zper cl f' c Z a 2 a 11 o, . i oi i J & o I _: I . , wt belleve o I' a recreational beaoh, ther, a rat-tier narrow definition that the principles developed through these Investigations, rl@.,- @.e us-'. If t@,e Prrit-IPTT, is trj@ est-at,lisr,ment J' r, df' not ric ir@su tF-, tir@ on -1':@rpopt, the r@lrvant hiriterlarifi inav extenol a th,:,u@ancj F 2eE7 1 find the more dE.Fir-jitiono 'gi thi@@ reucirt i@ airned at i@ n 1 ar,d. While tie It should be em n I i.,j --e-i that SUC.'; a2 ':nose L]St(l by the Committee on Nlultdplp OFc-'7 of coastal zone decision-makerc , whether fedr-ral, rt;ute, or "orle (thP -.,ritirieritai slope tc. ,, 11rie joiriing. I o "a I many of whom wl 11 have had li ttle or- no exposure t e neads of estuaries) as uclerui guideline@ , in an a (, t ua I t`o thZI prl6ciples of efficiency in resour,:P allocation. ar,', I'vsis they must necessarily bP violated and reference Experl -enced1practitioners of coot-benefit analysis will made to the above general principle. f@nd. ll'ttle of, methodological or- theoretical interest herein. t - They may note with ihter@st: Chapters 2 'arid 3 are based on a project by project a. Our emphasis -on the explicit inclusion of.un- @type of analysis. Chapter 4 attempts to illustrate how sing subjective -region- certainty within the analysis u Such piecemeal.analysis might be Integrated into probabilities; Widecoastal zone development, pointing out that project -by-project analysis can result in significantly inefficient b. Our uncompromi@ing position with respect to sub9ptimization unle@la such integration isimposed. Chapter secondary (our term is "Parochial") benefits, 4 also discusses-alternative zoning and taxation plans especially from the point of view of the framer for implem Ienting r egiothwide development strategies. of federal policy toward the coastal zone. A guiding philo'sophy of this,effort has been that The core of this report consists of Chapters 2,3, it is impossible to develop useful economics in a vacuum. and 4. Chapter 2 outlines the economics of the coastal Therefore, we have investigated a number of specific coastal t-ra't defiries the concept of economic zone problems in addition.to our exemplary Cost-benefit zone in the, abs c analysis. Three of these investigations,are outlined efficiency (makes precise the sense in which an invest ment or allocation can be said to be corsistent with the in Appendices A,B,.and'C. onomy),points out the mechanisms by values of the ec can fail to allocate the @Appendix A is the study of recent decisions made which the private market coastal zone efficiently and their relative importance, by the coastal town of Hull, Massachusetts,.which occupies introduces the concept of parochial benefits,* and, a-peninsula jutting into Boston Harbor and contains outlines how local control can someti-mes onerate to one of the best beaches on the northern New England produce allocations which are more Inefficient than coast. This study is not really a cost-benefit analysis. the private market by overcounting of benefits to tne It is a case history of how coastal zone decisions are locality which are balanced by disbenefits accruing@ actually made rather than a normative example of how authority. Finally, they should be made. This study illustrates how coastal outs'de the purview of the local he fact that Chap@er 2 considers problems introduced by t zone decisions are viewed from the locality involved, the decision-making body can almost never predict the indicating that the decisions which are made generally future upon which the desirability of their alterhative have nothing to do with economic efficiency, private investments depends with certainty, and introduces market or otherwise, but are based almost entirely on. methods for Incorporating this uncertaintv within the the marginal effects of the proposed hew development on cost7benefit analysis. the property taxes of the present residents. Hull is a unique piece of geography whose optimal development C" s the practical problems the social welfare of the ,apter 3 illustrate could materially affect eastern Massachusetts region as a whole. This example invo've- ir, "he application of cozt-bene"t analysis mitations through Indicates how decisions of this importance are being made to the coastal zone and some of its li the investigation in some detail of a particular coastal and will continue to be,made under the present system. zone problem, the development of a particular island in Boston Harbor for recreation. This.alternative is analyzed The second example problem given in the appendices, from start to finish (with the help of some heroic assump- addresses itself to the wisdom of.the location of the device to illustrate tions about cost) both as a pedagogic Pilgrim Power Plant, a 655 megawatt nuclear installatinn cost-benefit analysis to those unfamiliar with it and as. presently under construction on lightly-developed shore- a means for developing the limitations of' this method line south of Plymouth, Massachusetts. This effort e combined with judgment attempts to assay the external costs or benefits associa- ant, shcwinp how i t must b in actual decision-making. ted with the plant's thermal discharge, and the effect of an industrial development on surrounding residential T -Inthe ii t s which w Ie te rm"pa.rochial properties. This example was chosen because projections erature,.effect indicate.that power generation will place rapidly-escala- ndary bLnefits. ting demands on the shoreline in the not too distant future. benefits" are generally called "seco@ hat However, our concept of parochial benefits is somew more limited than that ordinarily connoted by secondary benefits, hence the introduction of a new.term. Parochial benefits refer to the Ibenefits associated with the ex- penditures on the inputs to in investment and the respending of these expenditures. 4- -3- Our on-site investigation of the external effects associated with-the plant immediately brought, out the .1. The basic premise of this report is that economics Importance of@@$_4rochial benefits to the local residents, - in a'sense wide enough.to cover all significantly important pointing out once again that geographic localiza- values, both market and nonmarket, can be usefully applied tion of transfer payments is a major determinant of to coastal zone allocation, that is, to.the problem of present coastal-'zone "d1locations. At the same time, determining that i,:ix of uses of a particular coastal our analysis.-bf-the effects on the marine ecology, zone which is most consistent with the value@; of the Indicate@,.that these latter effects are unlikely to e conomy which uses that coastal zone. be signi?fcant in this case. We caution against generali- zation of this r 'esult for it In part depends on some 2. We take the view point that the amount a rather unique characteristics of Cape Cod Bay, but person values a good, whether it be a market or nonmarket the anal@sis-does serve to indicate that industrial commodity, can--at least conceptually--be measured by uses will be part of an efficient allocation of the the amount that he is willing to pay for that good.under coastal zone even when nonmarket effects are included a postulated income distribution. Given this premise inthe analysis. the report equates consistency with these values with an allocation of the coastal zone such.that there is The final example offered is a study of future no change in allocation Lo which everybody would agree. oil processing and distribution systems for the Such an allocation is said to be economically efficient. northern New England coastal zone which is given in Appendix C. The question of the establishment and 3. This report, after siGudying the private market location of a refinery complex in northern New England as a means of coastal zone allocation, concludes that is perhaps the single most important decision under market mechahisms will result in an allocation of the active consideration with respect to the northern coastal zone which is seriously inconsistent with these New England coastal zone. Appendix C points out that, values. The reasons fo- this misallocation are all if a refinery is to be built, its location should depend the standard ma@rket imi)erfections: transaction costs; almost entirely on locational differentials in these undervaluing of collective goods, sDillovers* nonmarket disbenefits. We believe that the refin'ery and goods subject to decreasing cos@s; but t' hey all ,question deserves tie most intensive sort of cost-benefit seem to apply with sDecial force to the coastal zone analysis in view of its critical effect on the overall and they all systematically result in overallocation development,.of the northern New England coast. However, of the coastal zone to private uses and underallocation no such an analysis 'is undertaken herefn. Appendix C of the zone to public uses. concludes with a comnarison of alternative oil distri- bution systems fornorthern,N6w England with and.without 4. This report then examines the political organi@ .a refinery, zation which has evolved in part to correct the inefficiencies of the private market with respect to the coastal zone. While Appendices A,B, and C are, strictly speaking, For the most part, this consists oflocal zoning and taxa- logically Independent of the core argument developed In tion policies under the control of the shoreline communities. Chapters 2,3, and 4. we regard them as integral parts The report then points out that this is an inefficient means of the report and as Important as the core -in developing of.allocating-the shoreline for, even if each community an understanding of the practical allocation problems operates opt;imally,within its own confines, the total facing the, coastal zone. shoreline allocation will be subortimal, due to lack of consideration of atives in which onecommunity CONCLUSIONS AND RECOMMENDATIONS altern' specializes in a certain shoreline function.while another specializes, in scme.other. After studying the economics of.the coastal zone, this The report goes, on to argue I. that not only will report concludes,that,conscientious, effective, long-range o result in those corrections to the local planning fail t planning and control of the coastal zone at the state and private market results which would make the coastal zone federal levels will be required if serious misuse of the allocation efficient, but, even more importantly,, they shoreline is to be avoided. 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ID "1 -1 ID01- 1IT .0 ll -1 @D zi :1 r@Dq 7, ID I C, @!i 11 'IL 3-SC), @3- ---7 l-' :3n0 ,:@ IllW1:300(D V 1 1) :Ec <ID 'cw<L,z;:L .11 -- rDCi, "D 110ID .D 11,ZQTZ3 pi toI ': @. :7.; 'D 10a0 0. -3 to :3 rD ItICL 'I 0IT, 71 -1zj'D C, a'D nr-'D0C)M a-11 @: .0 -T '1 110 0LY 'D 'F: 'D< c to ID ll :3 (n :3 -3 7- rv -j P) C, c-1 ID W(D In ID 0ZYI C, II C, ID ID 'A zs out how much of other goods he would be willing to forego to obtain the good in question. Note that this valuation productive.of only negative results (e.g. the intransi- scheme applies to collective goods as well as private tivity of.democratic choice).(2) This report will goods. Thus, if someone claims he values a certain , attempt no such analysis of the political structure of decrease in air pollution more than a TV, yet a group either the representative process in general or the is formed.which with the.aid of $100 from him could rather unique politicql structure of the.Northern achieve the increased 'air quality and the man spends, New England Coastal Zone in particular; but rather his $100 on the TV, we regard his claim as, at best, .take as obvious: meaningless. a) The political structure we are dealing with.does Given that one accept s this valuation scheme, the have the ability to take substantial discre- problem is-to find that public policy which tend Itoward tionary-action--to commit resourcesregulate that "configuration of' the coastal zone which is in Markets, and transferincome, some sense consistent with the values so measured.. We shall put off for just a moment discussion of what b) This political structure wishes to make those we mean by '!consistent with willingness-to-pay" to decisions which-are somehow consistent with discuss a'very important limitation on rhis-valuation the values of the society it represents. sche@me. c) And.that this political structure needs help In order to use this@scheme, one must accept or in determining.which of its alternatives merit assume a distribution of income, for willingness-to- implementation under the above criteria. pay clearly depends on income. Every change in the In short, this report is going to accept the re- distribution of income will, in general, alter the AT presentative consensus Iview of life in some ill-defined amounts that people are willing to pay for various goods and, however we define consistency, if we are sense and to be concerned with making this definition to be consistent with the new set of values, the more precise onlyA In so far as resource allocation is allocation must change accordingly. Thus, if one does concerned. not regard the present distribution of Income as ' desirable, onecannot be expected to be happy with 4) This brings us to the fourth valuation scheme the allocation consistent with the present "wil@ingnesS7 which we will call 'willingness-t6-pay'. Under this to-pay". dge set up, each individual is regarded as the sole ju of his own welfare. Furthermore, each individual. The acceptance of an income distribution then is is assigned control (private property rights) to a a critical enabling hypothesis underlying all the certain amount of resources (land, capital and labor) analysis that follows. Therefore, it bears some inves@ and he is free to exchange these resources for any of tion. Fi-rst of all, it is patently clear that society the goods produced by the society according to any. is not completely satisfied with the present distri- mutually agreeable bargain with the controllers of bution of income. The existence of charitable organi- these'goods. Generally, this exchange is facilitated zations, a progressive income tax, Social Security and b,y a surrogate good called.money,which has the adv .an- welfare, publi -c housing, and,myriad other exi sting and tages of being universally accepted, divisable, proposed progr .ams areImanifestations of the societ I III easily transferable, etc. in which case the indivi- y s dual's control over his set of resources translates dissatisfaction with the present, income distribution. itself into income. On the other-hand, if one doesn't accept the present income distribution, thenone is faced with the problem of choosing society's desired income distribution on the Given this setup one can rank a person's preferences. Thus, if a person basis @of very little Anformation, if indeed the concept according to-his willingness to pay. has existential meaning. is willing to pay $1:00 of his incom e for a hamburger and 50 ce@ts for an,o*bject d1art,,then by this scheme Generally, our approach will be to work,with the we presume he values the hamburger more than the piece present distribution of income, not withstanding:the of art, and that he obtains thehamburger he is above mentioned clear indications that society does.. better off than if he obtains the work of art. Thus, not.regard this distribution with complete favor,.on we are assuming that all the values a man has fora, the following,grounds: good whether it be a material good, an esthetic.good,_ or a psychological"good can be quantified by finding 16@ _15@ d CO w4) 4- ca 10 LO r> Q) a) 4@ a)r 'X W Q)0r a) Q,1 4)rC, C.: cli E, 0S-: :I -H0(D C13 5-:>0Q) a) @:0F., (L) (D F@ (1) cd r:0 0 4@ tL 000 a-)0a) CO 'ri U) PAD 4@"Q)IWUr00r-l 4@ co 4) u -104@ 4a) gal -C I--E2 Q) 04 4-W>() 0La Cd 0 Id (d ;, I @ @4 0 r, bD 0 0 5D4 4@ Ili CrJ Co @Q00-H U) '-100:@ L,<F-@Sl 5@; :3: 0@p 01 W(1) 4104- Id E0 C(5 a) CQ 0 4@ Lm tD Q) Cbf) U)W0U) 0V) CO V)0w0 E,0P1 Cd Ili 1 0cri0 @Q 04@0@3 -H -ri-r-00T04 -H U) F:l U) ol -H"0 a) 4- Q) C@ 0a] -11 a.,C: 41 .0 r-i I-, HC, OlO -r I>@-l 12., cdEC) 004. -P (D01,fi Ij -;@ c0r-l E, COA'o bop(D -H @4W0 (U0Q, 1@ Ca. 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(DEF: M4- a) 0 @C 41>W W0W@:: U)0@j 'C', x cd ul C) bo -H a; 4@ IIJ 'D 1-0Lr QlW00-li r10Q) :3 -H -r-f -rl co I- Irl04- 0U) :1W 01' v5-: @:: (D @(- 5Fw rlo@ (I) a)wa) U) ;@>-1 @Qwr-A 0-0 0tl@0El a@. c 0 0a)mE0) ca Q) a)0 44r2.0 (u 6. @mvH41 Q;,,ro 0WE, Cd 0) -@-00 :5 'm9Q) C) co09@0f-, a) 0.,v0SDI U) F: II E-,W Q) 4@ 910-wCH0 0Q)0(1) a) U@ 4@ 9D@ F,> 4@ 0, a) '0VU) EQ C) @r Q) -ri oj Cd @11zf]Q (U 41 @r_ cu r.,"HF F@ bO 4@>rl0H C4-HbO a) E@r9@Q) 0 4@M4- a)0 (1)zca r-i 1:5 >1 Q) 1., 0) 10 9@zc:cr- (u a) @clr @4 -HC.,i 0TC.; >Cd 4- M Q)D4C)0 F: a >,C0WbD Cd @r0a)0bo @4,o @fl >1 @Q0 ;@ 4@ V) a-6"CO CrV) C) '41 @O (1) CO @O -1 @9: 'cr4@VQ).F-1 -ri cd -'1 0<C, Q Q) C@0:1 a) a < 0(L) @r@ 1c: ro (V0C-) -ri CC Q) @3. 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C@ @:: 91 HI=@4 4- Cd -1 0(D0bo r-i 10c S-.0>a) 4@ -rlrd 4. mc) E-, z -H C) C', 0 (D 1-1 V) Cd tko a cd P, -rl00 0:7: V)0 m c: In Z,Q) -ri. 4- CO cd a I e,, a)0co 4>@ arl r@00-H @-L0W@4 -i 9@ 141 @Z Cd P,H 0Cd 4) 4@ LOEU)0C@ (DcF@>1- @:l rri -a)041 H0, a) 10 1 @7- @-i E@ a)w 04) a, (U44- r-i 4@F@C 9@ 0 :J041 9OQ () CdW1:50@o ro@H H@c 01-15 >- 0 ra 0 v 4-@ 0) @-, V)0-H 4@ -H IQ 41 .11 @owQ)o(1) 41 @4 1.1 05-: ca 11 @j Cd 4) r. 1-, 0)0 r- '41>>@V'0 r: 4- 0CF- IHCD F-10 41 0) rO EQ @i @r F@0r-i041 :R: 0)-=S -H F@cr-l r-l -H00 m4@z 11 4-W 0r- r. 5,: 0-H0ID ;@,0a r-i>a) Z: -14 ct "I >@0lc@ cu 1. :3 zC@ a) 4@ 110 U) .1< v;@ Z0 aj 4@ Q-1 co a)wa) 'o cd '14WEr:J > W 0 0 0.9-1 Q) @c r. a, El 0Q) tQ 0 "4@ CO0 CO [email protected] -H 004 CO -H EQW.0 41 V) @t -H Z:3: C) li Q, 4@ 41w4) (Dm a) a) CO (U -,A 0>>E-:4 41 4@W0Q) M4 0r- -rl CO04@ r-i 4@ 4@ V)."zc " .1i Ed 0 4J Q)WWC"C 0a) 75 a) @Q Q, V-H CO CO CO -H 41W 0(U 0, to a) C) -i V,We,, @c @iHlc@x H9.0z-H LO M@rcS-0H(D lc@C 'r Q)0 w0) C: -H 4- 4- 0 bD @P r-@004- Q) V) Q@ bo U) Q)r;@ IA>4@041 (V 4@QSZ@ 0-HW041 0Q) V) C) (D 41 -H -H 'I) a) a) -4 -q co0 C@ (Dw4104@ @1: W0 10 41 ca -1 C),-H H 0-1 4@ >1 -P 4- a0to LOrIn4 uw @.0 a@ -H C: :3 04, co 't 4-,M0to C:Hz0m 05Z: 41 @30 @-i -Hr Q-1m ID 0$04 ul0aj @r. 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Q S:@ C, 10 >1 Ic 41M@771 bo 41 -rA00 WcdE 0C) 4- -HM-H-11 @Q 101-riour(L) .,Iq 41 5:4 CQa) -H -) 4- U, a) C: -P '1 0.,1 co 0 F@--H041ohoo@c *r, (D (L) co - @7, 4- JQMF@ r: 41 CO tor 04D 4@00@C 4@ r.rEIn U) :3 J-.: @11 0--H 4- @9 a) r @r. -H w'C@0cd u-1@ (1)0-1 li 0.0 @> (V () 0 (V C.4 411W4a) Xa) >@0a)V9, 710-H Q) -H 4"F co q, H0@iW05 -,1 (1) F4@ 0'o -rl 4, Q) 41 41 '0M(1)w co 71 @p (D I- co -P C: .,1 9., C@, @4, -10+@ a) IV>W-1V-@:"S@, o= 0(U 1- a) r- 4@ tlo 0 0@o @p CL IE U)" 0rIn-cd 1,,r0ai00 041Q V) 4@ 41 r@ C" r- Cd :j0 4, -HWM0 @@g F@ a)r0Q) 1@ 0)W>-,i a)WQ) 4@0V-,1 (1) Q) -rl a)00 @l Q)0 U) 4@ @--: 4100::1 >@ V) -H ,i>cu r- (D0m@: B .U)Er- 4@ ,Hp r- -H (1)oF-, @1: u 4, 4@ F, o.=3 (1) E,0co If, 113w4)0-3 r- a),0'-H @P (1)00CO CO041 a) 41 4@0 0A:i E'D .0 r- a)rV) 0-H ;L@ LO liH0"-1 () 0 VV-,i -,I= 'C', -,I to '0 C3 113 Cd U) q,p !H r- cli Q5 cdo>r- r- (d 03 -1 C) (D0U) 41 41 4@0@ .-H- V. 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C@ cn & - -@w @t @3' clD-(DWV CD0 It ItP(D IS0'J OQ @_j (D @Sm0n(D (D TJWCAz(_l (D =P. tlj F@ oq r_ (n (D -S P. @@l0C00 cl<P)wC@saCZV 0 o (D rA uq n(D PCw() 1-1 @5 P. "0oq wP. ItW:3 (D Cr ZI (D 0 -,:@ 0p0iz:oP) "m't.@5 0, o It ct (D-1)M0It C:T ,M:7rNw@lzH. ot(D oil, ca 0 0(Dz0:D' F- w0@j (D '0 1- '1 P) oq P- (D @l C-pi@ cq 0(DM CA0@_l 11)10 't CD00r) so 0 IS wrEn P) f@0 FjM:E (D 1+ z 't Cl rD I- En 'TJ w 1@ 1@ @l 11 ".N:I CD0 Q-CO. -3' (D @y H.0(b I(D @lv @4 P) GQ P) rnaz 'S yq0(b @s 0"ali CY 0f:,.N (D (D 0@0s11) @5 (D C)0 nw00@_ C* :1@ F@ 0 Lr 110F-@ CD P. @-l P. oq @sLal (L (D (D Z: @11 P)0(D < 00o P) -t (D0t(D P-0(D 'D (D (Tq (D ID :5 si)0r N 00 M"o @o 0,0 0 (D P- 'AMIS 0 ol c@ W(D 'ZI ::r6(D-11I- , V :C). "0" CD Ito n(D0-S P)0P) @lrwlria@-@ a0 (D xl a,@, a.0 11 cn cn _I, mr @t Wo :f:Dr :03 It 1:,0 ID101 P3 r 't m=r :x ::r -S (D WCD cn :n@ 0@l CL0mn, (D (D @3' (D @S 0 m&az(D w(Do(D , k C: (D z<Wta0'1 C: 'I 'D (DMw (D 14 -)0 0(D -(D 0 &mct It CA :5 "1 (D T In so doing, we ,:hall find it useful to adopt the in addition to g ,oods which are pure @olle,@tive goods, following definition. The cost of a unit of particular i.e. exclusion Is impossible, everyone must consume the good Is the maximum amount @Fh_epeople in that society same quantity, there is a more general arid much more would be willing to pay for the goods foregone by,the numerous class of goods for which exclusion is technically society in order to obtain that unit of the good in possible but for which the amount of resources (the cost) question. In terms oP this definition conditions B of obtaining this eyclusion is quite high, or society has and C can be restated: (B) The cost of a unit of a good must not decrease with increased level of pro- not found a politically feasible means of Implementing duction of that good. (C) this exclusion.' Examples Include radio and television The consumer(s) of a parti- entertainment', highways, and access roads. cular unit of a good should bear the full cost of . I the production of that unit. The private market can also fail on the input or resource side due to difficulties in exclusion. One of Notice that this is a technical definition of the the most glaring examples of this kind of failure relates word cost which need not correspond to the common directly to the coastal zone. Society. has barely begun usage meaning, roughly, the monetary outlay required to evolve a workable form of property rights to certa-7 -n to obtain a good. It just so happens that, under willini-ness-to-pay, offshore resources such as the seabed. It has yet to in a perfectly functioning begin to establish any workable form of control of.the price system, the monetary outlay required to obtain resources In the water column. This leads to the so- a good and the value of the goods foregone due to called common pool problemmith respect to, for example, the consumption of this good are the same. Thus, fisheries. At present private property rights can net in so -far as our economy is not a perfectly functioning be established on fish'until the fish are caught. competitive economy, In so far as the above conditions are not met, a situation known as private market failure, In this situation, there is no incentive to husband the we will have to be carefu@ to distinguish between the crop. Fishermen operating individually wll@ mine the two different usages of the word cost. In the sequel, resources at a higher rate than would be rational if the when the meaning is not made clear by the context,, fish were privately controlled, for each will reason we shall use the term social cost when we are referring that if he doesn't catch the fish someone else will. to the first definition and private costs when we In extreme cases, this leads to rapid depletion of a are referring to the second meaning. fish stock and the establishment of piecemeal, generally, We shall now consider each of the above conditions ineffective, and almost always wasteful attempts.at re- in turn. gulating the fishery in question.( 4 Collective Goods In general, then the unaided price mechanism cannot be expected to operate toward a Pareto-efficient con.figura- tion when prices in cases where private property rights The Drice mechanism will fail to operate in a (exclusion) cannot be.established efficiently. On the manner wh@ch is consistent with willingness-to-pay when goods (output) side this leads to underprovision of dealing with collective goods. Collective goods differ collective goods by the private market, and on the re- from private goods in that individuals do not obtain source (input) side it leads to overexploitation of those exclusive possession of the goods they purchase; they resources for which private property rights cannot or have are not able to excludeothers from the use of these goods. not been established. The prototypical example is national defense. If one cannot exclude or be excluded from a particular good, -,Goods Subject to Decreasing Costs then it is rational for each citizen operating indivi- dually to refuse to buy a good he desires, forcing others There is a'technical situation which pres@ents a very to purchase the good which he then enjoys without cost difficult problem for the private market. @Ihen it works, to himself. of course, others reason.similarly and the price mechanism owes its successat establishing the good, for which the group as-a whole may be willing Pareto-efficiency in part to the fact that each person to pay a great deal, will not be provided. Thus, is forced to give Lip the social costs of his consumption collective action either through regulation or public investment will be required if t 'he Pareto-efficient allocation is to be obtained in this situation. -22- 21- of a unit of a good in order to obtain the use of that Lighthouse services should be supplied if, and only if, unit.. This assures that all goods for which the value the total amountall the users would be,willinr to pay for of the use is greater to somebody than the value of the lighthouse (total savings due to smaller number the resources used in the provision of that unit of a of shipwreaks and collisions, less delays, etc) is good elsewhere is supplied. A market system also re- greater than the social cost of constructing and operating quires that everybody 6e charged the same price.for the the lighthouse. At the same time, the. charge to users same good. (Obviously, all buyers are going to go to should, be zero since the cost of the additional use is the low price source of the good.) Now consider these zero. If not, a potential user whose savings resulting two facts and the following sort of situation. Let Lis from the use of the service is just barelv positive would suppose we have a good in which, given the pres6nt,set be dissuaded from using the service. Then we would be of-investrnents@-,_the_costs Of Supplying an extra unit of in a situation where one person (this us er) could be that good to a,consumer Is quite low. These additional made better off (by allowing him to use the service free) costs are called the marginal costs of the unit of the while making no one worse off, But no private investor good. It will pay the producer to supply this unit couldbe expected to.devote resources to the,construction at any price above its marginal cost and in a competi- of the lighthouse if the price of his product must be tive market the price will be drivendown to the mar- zero. ... Hence, collectiv e action is indicated. ginal cost and all units of the good (not just the The pervasiveness of goods subject to decreasing additional unit) will be sold at this price. If N units of the good are sold, the revenue to the producer average costs is often underemphasized. They include not will be M(N)-N where M(N) is the marginal cost...Unless only almost all goods requiring lar.-e -Indivis-ible, investments M(N)-N is greater than T(N)the total cost to the producer up to capacity, almost all transportation and distribution of supplying all the.N units of the good including In- services up to congestion, and almost all communication vestment costs, then the supplier will not make the Invest- and information transfer services. With respect to the ment required to supply this good. None of the good will coastal- zone, obvious examples,are navi@_tlon and recreation be produced. This can happen despite the fact that the facilities up to capacity, scheduled shipping services and the prevision of terminals for marine transtortation, power total amount that society is willing to pay for this good is greater than the social costs of producing it13 generation,and undersea oil production. in short, a some of the buyers may.be willing to pay much more.than substantial proportion of the uses to which the coastal ,marginal costs for a particular unit of the good.. zone may be put are subject to decreasing costs which oods will be provided inefficiently (through monopolies' 9 1 This dilemma can also be expressed in terms of,average or cartels), if at all, by Ia,n.unregulated free market. costs. The average cost of producing N units is defined Mover Costs and 7@enefits to be TM/N. Thus, the condition that M(N) x N be greater Sul than or equal to the total costs will not be met if,tbe marginal costs are less than average costs at the lev 1 of Perhaps the@ single moot Important reason for the e production called for by the market. It is easy to. rising dissatisfaction with the private mar,@:e@; as a nniearf@ show that, average costs will be less than marginal of allocating the coastal zone has to do with spillover effects. Sbillovers refer to the effects of one person's costs if and only if average costs decrease with increased good on Leople other than output. consumption of a particular , those doing the actual consumption. The private market, In short, Pareto-efficiency requires that all consumers conceives of a series of buyer-seller transactions in be charged the marginal cost of producing a unit of the which no one other, than the buyer-and the seller are good in question. However, if a private investor charges affected by the agreement that this pair reacl@es. in marginal costs in a situation where marginal costs.are actual fact, there are few'important economic transac- less than average costs (average costs are decreasing) he tiqns which can be made.today which do not affect a large cannot recover his investment and the project loses money. number of peo le, albeit often in a diffuSe @anner, Elbow p If average costs are charged, the project breaVs even but room is scarce both because of the increase-i-r-population the proj@!ct is underutilized and resources are inefficiently in general and because our elbows, riiagnified and mult iipl.ied distributed. by modern technology, are bigger and sharper than ever. Before 1900 a man chose to buy and ride a horse and the only third party effects werean occasional dirty shoe. The textbook.example of this sort of market failure also occurs in the coastal zone. Consider a-lighthouse-@ Once -it is.buila and its light is flashing, additional ships may "e the service without adding to the cost of operations-- _24- t.-Ie marginal cost of.an additional shipis sensibly zer@, - 71@ Now a man in a car canadd to the d1scomfort of an entire ThO qUOStiOn ILI, WOUI the public., actin-, town. And things promise to become Increasingly difficu -it. prodding. demand the i Iiumher of smog .individually, -control devices The number of possible social contacts and hence occasions for third party conflicts grows combinatorially with consistent with its own willingness to pay for air. population. As for technology, an agreement between quality? The answer is no. For a person who was con- an airline and a passeng(@r may soon have the ability sidering whether or.nct to orde@ a smog control device. to inflict discomfort on a person on the seasurface tens on his car would reason, quite rationally, as follows. of miles away from the plane. If I purchase the device andeveryone else does likewise, then we will have-less smog in'the city. On the other Some of the most important of these uncompensated. hand, my individual car can add only a negl.ipible amount third party effects have to do with our use of the en- @o the smog problem so that if everyone else purchases vironment as a sink for the material and energy flows and I do not, I will enjoy sensibly the same air quality generated by an industrial society. Ayers and Kneese and have save '&the price of the device. Thus, if-everyone else purchases,a device, I will be better off If I have pointed" 'out that even our use of the term con- do not get one., On the otherhand, if no one else other sumption is misleading.( 5) In actual fact, relativis- tic considerations aside, matter is conserved and not than myself, purchases a device there will be a bad c 3 smog problem. However, If I purchase a device the on umed.. Material goods are at most altered by our problem will not be noticeabl-y different, since my "consumption" of them. Their material substance remains individual car contributes a verv small Dart of the and must either be reused or discharged to the environment. overall smog and I will be out t:"e mcnev 1 paid for The same thing is true of energy. Generally speaking, the device. Thus, if no one else Durchases*1 I shouldn' t the discharge of the residuals to the environment either. Obviously, the analysis is -the same if some takes place without any compensation to those who are peoDle ourcha@se and some do not. Tn each ,ase, the adversely affected by this discharge. This would cause amount the individual would be will-in., to Day for no great problem if the adverse effects were small, as the cUfference in the smog due to the i)urchas6 ob- perhaps,they were in the past. However, cases are rapidly tains from his own smog control device is less than multiplying which indicate that in many situations our the price oFth@@ device. dischargp:@.are exceeding the assimilitive capabilities of the environment. Is this happens, the adverse effects Since all potential car buyers will reason in. b simila ecome very large very fast, especially in view of the a r rational manner, theresult is that there fact that many ecological systems exhibit decreasing will be zero demand for smog control devices. The ability to handle effluents when overloaded. This can automobile m ,anufacturers will have no motivation to lead to,an@exDlosively unstable situation. develoo and market such a device. This ccnc-lusion Given the magnitude and growth of our material flows holds even if--and it is an if--collectively the and the fact that we are beginning to overload natural Dublic would be willing to pay the cost of smog con- systems in many situations,it is clear that we can no trol devices for all cars in order to obtain the resulting air quality. The point it that each pros- longer regard these third party effects as "somewhat i)ective buyer of a d@vice suffers on'v a small rart of freakish anomalies" in an otherwise smoothly functioning economic system ( 6 @he pollution cost of his decisfnn not to buy the device. If he.is one man in a million man city, he We will I suffers, very roughly speaking, one-one millionth of the llustrate by several examples taken from pollution cost. Once again private costs do not equal reference (7),.how these third party effects can prevent social costs. A third party (the rest of the community) thelmarket mechanism from functioningin such a manner as -to y or n to ead the society to a Pareto-efficient economic con- is affected by the decision - bu ot the device figuration, that is, to get us into a situation where but is not party to the exchange.* (Please see ne@t page) everybody wou .Id be made better off in terms of willingness- For a third 4@ampie, consider th .e p of pol .lution, to-pay by properinterference with the market ,mechanism., of an e_@tua@ E,,i `s'@ @i a' anatinp, from. a number of munici- ge eT. Consider the problem of the heating of large buildings. palitie'i.s' located on the-estuary. 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Analysis Since any Individual will base his private decisions on The problem then Is to develop a methodology which his private benefits and costs, the private market ill, result in an allocation of resources which is cOllsis7 will not produce enough of these goods. Finally, ent with the willingness-to-pay.6f the individuals in problems with respect tp informational and organizational society in the face of.,these.market imperfections or, difficulties in reaching contracts and.collective decisions ore concisely, a methodology which will indicate the will result in certain Dossibly superior alternativesnot, areto-efficient allocation of resources associated being considered. ith a specified (generally, the present) distribution It should be clear from our discussion that the If,incom.e. above categories are far from mutually exclusive. In Actually,, given.our previous rather lengthly spade- fact, a close relationship existsbetween difficulties ork and development, or rather assumption, ofthe de- in exclusion, decreasing costs, spillovers and contracting inition of what is socially optimal the indicated costs*. We shall not examine this relationship nor 6thodology is rather obvious in fact, it hardly attempt to establish that all private market failures eserves the title Panalysis". can arise from a smaller, more general set of causes. It is more important to note that all the above type Definition: of failures are biased in the same direction. THE GROSS BEINIFFIT OF A PARTICULAR IWIEST'MIENT Although the market may inefficiently distribute TO AN INDIVIDUAL IS THE MAXIMUM AMOUNT T,`AT coastalareas, it is not randomly inefficient. Basically, THAT INDIVIDUAL WOULD PAY FOR THE OUTPUT@ the market wild allocate too little of the coastline OF THAT INVESTMENT. to recreational and other tublic uses because it does not reflect real preferences concerning collective oods, Thus, cost-benefit analysis assumes that all the because they are often sublect to decreasing_costs and alues a manhas for a particular good, whether it be because nosItive spillovers are not considered. The material good, an aesthetic--good, or a ps1chological market will allocate too many resources to those uses ood, can be quantified by finding out how.much of with negative spillovers because the social costs of ther goods he would be willing to forego to-obtain these spillovers are not considered. Generally, this he good in question. In a market economy we can means too many resources will go to industrial uses. easure the value of the goods foregone in money Market allocation mechanisms systematically result in erms or dollars which can be thought of as a generalized the, undernroduction of public goods and a corresponding laim on other goods, from bread to yachts, weighted over production of private goods. In Galbraithian terms, y their prices. In the words of Dupuit, who first this is the crisis.of social balance ' Reliance on the uggested-this valuation scheme, "Unless. there is will- market will yield too many private goods.and too few ngness to pay, there is no utility (value)." (12) public goods ore formally, this valuation scheme is simply an xtension of classical co nsumer theory broadened'to For all of these reasons, some method must be found nclude non-market good.s. to supplement marketallocation mechanisms. Market results must be modified on the basis of furtherconsidera- This is not to imply that one can discover how tions. in so far as the allocation of resources can be uch people are willing to pay for a good by asking them. accomplished on a project by project.basis, the technique or it is the nature of public goods that it is often for doing this is cost-benefit analysis. ational for an individual to misrepresent his desires. f someone is asked how much he is willing to pay,for Demsetz argues that all market failures are explainable ir pollution abatement and he feels that his answer in terms of contracting costs. (11) Ill not affect the amount he is actually charged, it 111 pay him to over-state his desires to make air pollu@ ion abatement more likely. On the other hand, if the _32- -33- Our second definition In derived from the basic question is aimed at dptermining how much lie is to@be observation that resotireeq, lncluding@ the taxed, It will pay him to understate his value knowing zone, are scarce; that Is, in using a resource for that differentials in his individual contribution will a partict .ilar activity, we alle giving tip iils use in have almost no effect on the quality of' the air. One any other activity. of the problems then, in estimating the benefits of a public investment, will be to determine the real Definition: amounts a person would pay despite this systematic misrepresentation. THE COST OF ANY ACTIVITY IS THE BENEFIT, AS DEFINED ABOVE, ASSOCIATED WITH THE OPPORTUNITIES In the collective good type of investment with FOREGONE DUE TO OUR ALLOCATION Or RESOURCES TO which we will often be dealing, one wn's enjoyment THIS ACTIVITY. WHERE MORE THAN ONE OPPORTUNITY of a particular good does not prevent another from OR SET OF OPPORTUNITIES IS FOREGONE, THE COST enjoying-it. In.such cases, it is necessary to extend IS THE HIGHEST VALUED OPPORTUNITY OR ATTAINABLE our basic definition to: SET OF OPPORTUNITIES FOREGONE. THE TOTAL GROSS BENEFIT ASSOCIATED WITH AN IN- In the literature, this concept is generally called VESTMENT IN A COLLECTIVE GOOD IS I= AGC,REGATE the opportunity or social cost to distinguish itfrom OF THE MAXIMUM AMOUNTS @_@HAT EACH INDIVIDUAL USER the monetary outlays required.to purchase this activity..* OF THAT INVESTMENT WOULD PAY FOR ITS OUTPUTS The basic principle of cost-benefit analysis This is straightforward generalization of the follows directly from the definition of benefit, cost, basic premise, to the case where more than one person and Pareto-efficiency. In fact, it is merel 'v a restate- can use a particular unit of good; however, it emphasizes ment of the condition for Pareto-efficiency. the dependence on our valuation scheme on the income distribution assumed. Someone earning t30,OOO may be willing to pay more for some f,ivoliou-, luxury than two -HEECONOMY WILL BE OPERATING PARETO-EFFICIENTLY or three people who earn $5,000 a Ipiece ii- agSregate IF IT PURSUES ALL THOSE ACTIVITIES FOF WHICH THE TOTAL.GROSS BENEFIT IS GREATER THAN, T-FTE TOTAL are willing to pay for medical care. yet, it would be SOCIAL COST. a barren ethical or mcral system which held that a rich man's values are worth several poor peoples!. The ethical Or, in other words, only if all r esources are and moral problems entailed in our valuation scheme are devoted to their highest valued use in terms of willing--: obvious.* ness to pay is it impossible to improve the . situation in such a way that everybody will be made better off.** The adjective "social" in this sentence has no politi- cal implications. It connotes that we wish to include Another problem, raised by Galbraith, is that in a:modern the costs to all individuals in soc_iety'@`f an activity economy peoples' willingresses-to-Day can be changed in our calculations. -4 more neutral synonym would be by the purveyors of various commodIt "total". I _ies.. -_ Taking -the position,.-that peoples' willingness-opay, a variable demonstrably and seriously influenced by advertising We would be'the last to argue-that the above outline represent-- in some sense, a .persons @;nderlying pre- I represents a complete justification of the foundations ferences is more than a little uncomfortable. it re- of cost-benefit analysis. The purpose of this report presen@s-aclear bias toward those Foods with the is to apply rather than to.describe a cost-benefit most effective control over communications media. We analysis. Those readers who are interested in'a shall return to this problem in.Chapter IV. through. 'discussion and justification of cost@benefit analysis erather than the bare outline nresented in this section are referred to in references (.13),(14), ard@- (15-@'- Z -34- -35- Our problem then is conceptually simple: Find out how much people are willing to pay for an parttcularl, use or mix of complementary uses of a resource in each The proper technique for handlinEthis effect of of the years during which the resource is committed time Is to evaluate all the benefits and costs which will to this use, find out the social cost through tim@.. be experienced in year t, weight themby the factor of each of these uses and allot that resource to the- t highest-valued use. Dt _@ l/ V (1+i M. ) where.im,is the interest rate in year m Unfortunately, the probleff of determining how much m=0 e economy's which interest rate simultaneously represents th people are willing to .pay is usually anything but.,simple, feelings abput.the relative value of consumption a .t the requiring in many cases a great deal of ingenuity, while. beginning and end of year.m and the marginal opportunity- in others,is so difficult that it is not worthwhile. costof capital during yo@ar m.- This weighting procedure In which case it may be quite useful to perform that s known as discounting. After discounting, all the . analyses over a range of postulated benefits to discover discounted benefits and the discounted costs are summed s which alternatives are consistent with which assumptions @'over time to -yield what is known a. the net present abe.ut people's values and to screen out projects which @,al.ue of the project. In symbols the present value are notefficient.under any reasonable set of assump-- equals: tions,about values. N N .Ir Z B D C V= D Usually, the,problem of determining the opportunity 0 1 t t 0 t t costs of an activity is somewhat simpler for, even in a partially competitive economy, the market price of a where: resource being employed in a particular use can be a reliable mea@ure of its social costs. Ho-wever, we shall v net present value t see that we will have to tread carefully in this regard =J/T1 + also., Present Value Dt= discount factor for year t: M=G _m The above base outline of cost-benefit analysis @Bt= value of benefits experienced in year t must be modified to take into account people's pre- Ct= -incurred in yesr t. Costs should ferences toward time. The existence of an interest value of costs rate indicates that people prefer consumotion of a be.measured on a net cash flow basis, capital benefit now to consumptionof the same benefit later; expenses be-Ing realized in the period when they, for unless people preferred a $1.00's worth of consump- actually occur. The discounting procedure - automatically takes care of amorization and interest ti@n now to ($1.00 + i)ls worth of consumption a year from now, it would be iMDOSsible to maintain an I% charges. interest rate.* On the cost side, if we delay an in- vestment in, say, a beach for a year, we will be able N =.Lifetime of project to use the resources that would have gone into a beach elsewhere fora year. Therefore, the social cost By an extrapolation of the argument for our basic of building the same beach a year from now less than principle it can be shown that, if an economy wishes the social cost of building the beach now. to operate Pareto-efficiently, projects with apositive net present value should be undertaken; projects with. a negative net present value should not be undertaken. If this rule were.followed.for all poss-ble sets of projects, the country would be achieving economic Tnis section assumes no price changes with time, efficiency. no inflation or deflation. Thus, the interest rate referred to is the inflation-free interest rate. Inflation does not substantially change the following argument, although it does present some problems in determining what the actual interest rate in an economy. -36- -37- It would be maximizing. the size. of the economic pie,, given its limited set of resources,* There would be bastc principle is that the interest.rate no alternative development pattern that everybody in public project evaluation must be the sameas would feel happier with given.the postulated dis- that assigned by the prIvate market to the resources tribution of income, and in Implementing each of the and benefits which will be.used in and accrue from this projects indicated, it would be conceptually.pos 'sible. project. If@a higher rateis.used by government, to compensate thosp, people who are affected negatively then public projects will.fail to be adopted which. by the project sufficiently so that they judge them- are more.highly valued than the private uses of selves no worse off than before. Proofs for this the resources required for tl,.Is.project. if a lower thesis are given'in references(13) and (14). rate is used, public projects will be aoopted where,' the capital could be used for purposes of private Choice of Interest Rates investment or consumption that are highly more valued by the economy. As Baumol puts it,,"The correct discount rate for the evaluation of a government In a perfectly functioning, risk free economy project is the percentage rate of return.that the de.terminationof the Interest rate to be used in, resources utilized would otherwise provide in the assessing projects would be no problem since such private market." (18) The rate of return referred an econn-ty would be able to support only one interest. to,is the before tax @rate of return, for taxes rate which would simultaneously measure peoples' are merely transfer payments from the owners of the attitudes about consumption now as opposed to con- resourceto society in general. sumption in the future and the value of the oppor-- turilties for'investment in the private sector..(16) Now due to differing patterns of taxation, legal In an imperfectly competitive economy such as ours restrictions, lags in adjustment,, differing access a whole range of interest rates can exist. In such to opportunities, resources can earn a different rate a situation, the problem of choosing an interest of return in different parts of the economy, rate becomes difficult and sometimies a critically important decision. Baumol shows thati n this case one should use the weighted average of the rate of return for the various sectors of the economy from which the public In less prosaic, but considerably more fanciful project would draw its resources..(18) Thus, the,appro.- terms, the economy would also be maximizing a priate interest rate would be lower if a public project, .variable we might call net national social product for tome reason drew all its resources from consumers, w of than from the production:sector of the economy, reflecting ihich would 'differ from the standard descriptions the fact that consumers generally have a lower! oppor-. national accounts in that (a) it incorporates and tunity rate of return than industrial concerns. If, values the spillover.costs and benefits associated with the resulting'allocation. (-b) it incorporates as ls.generally the, casei the project draws resource from both sectors than a weighted average should be the values that people place.on--the amounts they used. are willing to pay for--public goods which'may or may no:t.be brovided free of user charge. We do not mean to imply by this digression that the state of The foregoing discussion ignores two problems, the art.in cost benefit analysis has presently so- inflation and risk. Inflation is fairly easily dis- vanced to the stage where an at Itempt to actually posed of. If inflation is expected to occur during the measure the n ,et social product of the economy wou .ld 1-ifetime,of the investment, one has-the option of be a useful .exercIise. It has not. However, con- .,adding the inflation rate to the inte.rest.rate '(,as the private market does) 'and inflating-future costs sideration of- such a concept is useful in clarifying and benefits according to this inflation rate. Alter- our, thinkirfg about what is wrong 'With present 'nationsl' one can attempt to determine the inflatipn accoun@ts'as descriptions of standard of living. They leave out spillover costsand undervalue public goods. freb interest rate, these, called real It also says somethi,ng.about the design"of "social indicators" a subject that has recently received some attention. (17Y. -38- -39- rate of return, and use constant prices and values in evaluating the costs and benefits th,roughout projects overa range of interest rate and display the life of the project@, The results. .will be, the sensitivity of the alternatives to this parameter. identical whichever method is used. We will For after, all, even If one can determine exactly generally follow the second course, what the present opportunity cost is of the capital being employed in.the project-generally not true- the future intereAt rates are random variables which The effect of risk on interest rates Is the t be predicted with certainty. subject of some controversy in the economic litera- canno. ture at present. It has been observed that risky investment generally demands a nominally higher Past government application of cost-benefit analysis rate of return. In the sequel, it is argued that has tended to make the mistake of using too low an the bulk of this excess is required in order to interest rate, an interest rate cont3iderably lower to give risky investment the same.expected rate of than the risk-free opportunity cost of capital in return as riskless investments and thus,.in con- the private.market. In the past, interest rates sonance with Baumol's prJ,nc.iple ennunciated above, as low as 2-1/2% :were used.. However, it is easy it is this average rate of return which should be to go too far-in the opposite direction.. In any used. In so far, as risky investments demand a event, the special nature of public goods should higher expected rate of return than riskfree(such not be reflected in a low.interest rate, but in a difference would be required if investors are the measure of benefits. Benefits should be correctly risk adverse), there may be,an argument for not measured and private market evaluations shoul@ be using the higher expected rate of return as the augmented. Interest rates should not be lowered.* interest rate in evaluating public projects on the Interest rates should only be lowered if society grounds that, even ifindividual investors are risk adverse, society as a whole should be an decides that'it is consuming too much and investing expected value decisionmaker. We shall talk about too little in both the private and public sector this more later. But for now we merely note that in which case effort should be made to increase this difference betweenthe expected rate of. both public and private investments to bring the return required by investors on risky investments rates of return in both areas down. Thus, it is and the rate of return on riskfree investments, possible to argue that the interest rate reflects the so-called risk premium,is much smaller than the too high a rate of.time preference, but this argument difference between the nominal rate of return on must be applied to both private and public investment. risky Investment and the riskfree rate of return. The corollary is that the society ought to lower . If this is true, the weighted average return will the uercen4lage of its output that goes to all current be approximated by the riskfree rate of return. consumption (public or priva@e) and raise the Der- In this report we will be using constant-base centage of its output that goes to all future con- (1970) prices rather than current prices, thus sumption (investment, public or private). we require the real, pretax rate of return. Since there is almost no evidence that society With corporate rates of return averaging wants to radically shift its investment.-consumption 10-12% and riskfree private investment opportunities of 8-9%; assuming a 4% inflation rate, leads to Low interest rates for public projects have been appropriate real interest rates of the order of 5 to defended in the past on grounds that government 8%. has a special responsibility to unborn generations which the private market does not. This may be It is not the purpose of this section to pick true, but,if so, it should be reflected In the an interest rate but only to outline the principles future benefits of the project which, properly by which it,should be chosen. We will use 511 in our calculated, will Include where applicable, the amounts that presently unborn people will be exemplary calculations. Often it-will pay the,analvst illing to pay some time in the fultur@_-_ Thus, to calculate the net present value of the alternative w our choice of an interest rate is not biased against future generations. 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H. <t +0 D@ n@0(D @5 t- rb rD r) @rIF@ E-50P. It- ou (D P' 0 <-I' 0cV, @5 1-t It -co -S 1@" (Do ID @-, mN, 0) ct (D Q> (b 14 :51 rA 0 (D In using parochial. benefits in this manner, the developer is employing transfer payments from the enough so that the bulk of the parochial benefits, entire society to the locale of the development as a For lever. lie is not creating any net values. Ile is are a wash within its political boundaries. decisions concerning the. location of a gas station, simply transferring income Crom one diffuse group to the local zoning board is quite cognizant of the a much more localized one.**. fact that approximately the same employment.and taxes will occur wherever the gas station is located and Examples.of the misallocations thatcan occur Will properly concentrate on the spillovers asso-.- through this mechanism are numerous. ciated With the station. For*decisions concerning the location of a large refinery complex, even a Their are two possible remedies: statewide decisionmaking body.may not be sufficiently broadbased to bargain with the develope= on the formatibn-of political bodies (formal basis of outputs rather'.than inputs.' We will.-return and informal) which have the power,to affect to this issue fn Chapter iv;but,,clearly,accountabi- development decisions, that is return to a lity andresponsiveness argue that in any situation, strictly private market'.situation. This would, the decisions should be made by-the smallest political. prevent-the operational expression of parochial unit for which-the net parochial benefits associated benefits. It.would also exacerbate all the with this'decision are unimportant. private market failures outlined earlier, which were, at least in part, the reasons for the For now, the two basic points with.respect to formation of most of these bodies. We do not parochial benefits are: consider this an alternative worth considering in general, although there may be some cases in 1) Given full employment or evenly distributed under-, which forbiddinG political control over certain employment, the effects of shoreline investments types of decisions results in more efficient on the suppliers of the resources enabling these allocation of the coastal zone. investments should not be counted in net present value calculations,.if we are to efficiently allo-, 2) Make sure that the political.body affecting any cate the coastal zone particular sort of development i@ broadly based 2) Parochial benefits are benefits on.net to the locali- ties involved, and a political body representing The Litton Westbank shipyard in Pascagoula, Mis .:sissippi -these localities rationally considers these effects may be a case in point. in representing its constituents. As a result, decisions emanating from these bodies will not, Parochial benefits can also arise on the output side, in general, be efficient. In.some coastal zone developments; that is, some develop_ ments have the property of localizing payments for I . i @Unemployment the.outputs of a development in the same way that construction and oDeration necessarily localizes if there is wides ent, then the above pread unemploym payments for the inputs. Recreation facilities are statements will have to be altered slightly. Unemploy- often of this category. The money people spend ment is a situation in which the private market over- vity, say'a World's Fair, and estimates the social cost of labor. Technically, un-, on a recreational acti the Irespending of these expenditures are localized employment is the situation where, at the market.wage -the area of that activity for which localization rate, the supply of labor is greater than the demand. I In*. jn the-commu@ity7@'as opposed to the recreators-in:.@ a perfectly functioning@competitive economy, this would question may be willing'to pay a great deal. This be a temporary'situation@,' Th@-wage rate would quickly is the basis for state and local tourist bureaus. drop to the rate at which supply would equal demand, w@i. It sbouid be 'clear that the Same argument applies lower rate we will.call the Ishadow price of.labor. to these benefits as.to parochial benefits arising on the cost side. In general, they are not net The shadow price of labor will be the point at which benefits to the economy as a whole. any further decrease in the wage rate wiil result in the person's finding employment elsewhere at which alternate _46- employment his wageis worth the shadow price. @47- In short, the shadow price of labor is the social cost thus trading, off the benefits versus risks of different of labor. If there. is a significant difference between development alternatives are available, arid to point . the market wage rate.and the shadow price of labor- out some.of the practical difficulties Involved in the (if there Is substantial. unemployment), their the cost- Implementation of these techniques. benefit analyst should use the shadow price rather than the wage rate, if we are to allocate resources according For example, consider.the possibledevelopment of to Pareto-efficiency. a marsh. Let us assunte for simplicity of exposition that there are only two time periods and two possible In other words unemployment should be handled not, outcomes relevant to this problem. Call the times by postulating a secondary set of benefits and Now and In the--Future. The decision Now is whether including them in the analysis, but by adjusting the or-not.'to develop the marsh. WhateveF 7ve do In the costs of labor on the project to reflect the social Future we will become,aware of the value of the marsh cost to the economy of the employment of said labor and,'again for simplicity, we.will assume that, with on the project being analyzed. Thus,increasing respect to the-value of the undeveloped marsh, there unemployment will decrease the social costs of labor are only two possible outcomes: which will increase the,number of projects, which have positive.present value. Certain prollects which 1) In the Future the undeveloped marsh is revealed were Inefficient under full employment will become to be valuable. efficient with a rise in unemp! .oyment. Since the U *S. economy is at sensibly full employment, we do not feel 2) In the Future the-undeveloped marsh turns out that there is any great need to a'ttempt to develop to be not so valuable. shadow prices for labor in evaluating coastal zone Projects at present, unless this coastal zone project Let us assume that the present value of the gross intends to make substantial use of groups which have ecological, scenic, and other nonmarket benefits of the much higher-than-average unemployment rates, s ,uch as undeveloned marsh in the first case is 15 units, while the ghgtto.poor. No such examples are considered in in the s@ccnd case it is 2 units. Let us assume that the sequel of the report. Therefore, we will value the net benefits, exclusive of these nonmarket labor costs at the market rate for the remaInder of values, which will be derived from development NoW and this.-volume. valued at 12 units and, further, that the present value of these market benefits, given that we develop Uncertainty the marsh In the Future, is 8 units. We will also assume that,once the marsh is developed@ the costs of restoring this marsh are higher than the benefits from A dommon demominator of almost all major shoreline - restoration, even if the marsh is shown to be valuable. development alternatives is uncertainty. This is especially This is the typical case and-what is usually meant when true wit 'h,respect to the,development of biologically people say a development is irreversible. active ar4a's, for the impact of development on the marine and coastal ecology is very poorly understood. Another Given this hypothetical situation, the po .ssible basis,of uncertainty.which is at.least as important and, consequences of our present choice can be illustrated on the basis of past performance, even more likely to be by the decision tree shown in Figure 2.2. The boxes overlooked arises from the fact that I in order to effect in this diagran represent decision points,and the circles, cost-benefit analysis,-we must predict , how people outcomes determined by chance. The break lines indicate will value various ecological effects in the future. alternatives which we have assumed have been ruled out Obviously we cannot do this with certainty.. For example, by earlier analyses. Thus, the top branch in the tree it would Lve taken a prescient individual indeed to predict in 1940 that the American people would pass indicates that, if we develop Now and the marsh is re- a law in 1966 which showed that th'ey were willi-ng to pay vealed to be not so valuable, we will receive the net market benefits of the development and lose the non- $3.00 per ton.of garbage to reduce the air pollution due market benefits of a not-so-valuable marsh for a present to garba .ge incineration. valued gain of twelve and a loss of two, or a final net present value of ten. Similarly, the net benefits In past economic analyses, uncertainties have been given Tip service at best. This is a-crucial oversight in such areas as conservation, where the costs of guessing. wrong can be high indeed, for many-dev,elopment alternatives are essentially irreversible. 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Z0F@ CD 1-41CL @,3 wtr @l PD0(D0M0Fl tC*,(D r- C: (D F@ 00@J'M 14, 91 to0:w), to F-I @j0@t o@3' & 0rF_3@j0:51C: (D MP(D @lt k@ 0r (D003 :5@ tZM(D0W-cl' ctIc+ tn :3 (D rD co 09 CD (D analysis in a meaningful way. if they are Allowed to communicate, they will reach a distribution tbey.can all agree upon. If not h the The,Problem.of Finding Society's Probabilities@ eommunit@ or its.representati7e must weight tAe differing opinions and generate a distribution in this ma n r. Given that one is'prepared to assum thats In the ne situation under analysis, society is an expectedvalue As Inelegant as this method is, it is in our opinion decisionmaker, then one is still. faced with the problem far superior to the usual alternatives of: of coming up with society's probabilities on the possible consequences which can emanate from each a) Ignoring uncertainty and proceeding with cost- alternative. If the community were an individual,'.this benefit analysis as outlined above. This can, would be no great hurdle. In the hypothetical marsh lead to.kravely,inefficient allocations of the example given above, one would simply ask the relevant shoreline. individual whether he would prefer a 50/50 chance at $1,000 or a lottery ticket which gave him $1,000 if b) In the face of uncertainty, .throwing up one's the marsh were valuable. If he prefers the former, that hands and turning the 91location problem back Individual's subjective probability on the marsh being to the market. valuable Is less than one-half. One might then ask this individual whether he would prefer a 25% chance In the exemplary problem in Chapter 3, we will attempt at $1,000 or the marsh lottery ticket, and so on, to substantiate this Iviewpoint. until one obtained the point where the individual was indifferent between x% chance at $1,000 and the $1,000 if the marsh is valuable. If.one accepts a very small Budget Constraints set of Intuitively appealing axioms about rational Ideally, investment projects (public and private) behavior under uncertainty (see reference 21 ) x is this person's probability that.the marsh will'be will be'undertaken in such a way that the real (money plus non7monetary benefits) rate of return on each valuable. In general, of course,%there will be many project is equal to the society's opportunity cost of more than two possible outcomes relevant to a shore- capital. Often In government agencies there may be line development. In fact, there will often be a' certain budget restraints imposed even.though the continuum of Possible outcomes, but this method can real rate of return on some government projects exceeds be extended to these cases with no conceptual difficulties. the economy's opportunity cost of capital. There just may not be enough budgetary resources of-a certain The problem rather is specifying a-probability agency to undertake all of the investment projects that distribution over the relevant outcomes for a community. ought to be undertaken by the agency. Given our interrrogation method, one citizen can have an entirely different set of probabilities over the In this second-best situation,a method must be same set of outcomes than another citizen. In the found to find an efficient allocation system, given the vernacular, this is what makes a horse race. artificial budget constraint. Benefit-cost analysis can still be,used but it must be modified. The opportunity At present, there has been no satisfactory analyti- cost of capital ishigher for that agencythan for the cal attack on the problem of communal probability distri- society. (This implies its budget should be increased.) butions. The best advice that can be given now is that In order to pick from its alternatives, given this budget the community approach an expert or group of experts on, constraint, the agency should increase its:intere8t rate say, marsh value and ask them to come up with the possible until it finds that set of projects with positive net outcomestand relevant probabilities of these outcomes. present value, given-this increased interest rate,.which This approach has been.s.uccessfully followed in a number J"t use up the amount of available money. of Industry problems. In .practice, one finds that the.. ,.'experts will start out with somewhat differing probability distributions on the random variables in question, but, -57- -56- W4FS oq 0 v 110(D4ct ct Ct @d J-6 01Ct 10 0Ho C@ a, ct, o- co 0 93 :T 0 (D to (D @-Z ""P) W."P 03 VV I- H wlbQ0 -SIC 0 -1 It 0o@ r_ V0) Ct (a (D @3 ca 1. 09 cl, @4 !It 1-1 @' 0A) 0(D a ro 010 ct @j 0aIa. 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Further, other beach areas are within day-trip recreation consumed an trips of a day or less versus that consumed distance of the metropolitan region, including Duxbury, ch of the water- -lated sports 26)'-. Plymouth,,and western Cape Cod on the south, the Cape. away on overnielt trips for ea rL Ann beaches, Plum Island and Hampton Beach to.the'nort 'h. However, the first set of beaches, those within an Home Away hourl.s@drive of the CBD are presently used to capacity Boating .46 .52 on.a summer weekend day and the latter set imply large tr.,Ivel: costs for the one-and-a-half'million residents Waterskiing of Boston Proper and the close-in cities of Cambridge, Fishing .38 .62 Brookline, Somerville, Malden and Everett. Therefore, it appears reasonable to assume that, if beach facili- Campirg 0 1. 00 ties comparable to those presently available could be swimming ...55 _45 supplied In the'harbor at approximately the same total cost to the consumer, these facilities could expect That is, rougily half the water-related recreation is consumed on to.attract almost all the increase in demand for day day trips. This is the market at which a recreational development trio ocean swimmLng arising in this close-in region. in the Harbor would be aimed. This increase amounts to 1.3 million swimmer days by 1980 and 4.2 million swimmer days by 2000, according Dividing the New a-gland participation rates on page 63 by to our projections. two to reflect this split and using the Arthur D. Little projection of real. incom for New England we obtain the following projections The Massachusetts Outdoor Recreation Plan has made of per capita participation rates in@water-related, day trip,. outdoor. studies of the use of the Greater Boston beaches and recreation for the next 30 years (27 concludes that, on the.basis of a 90-day season ' 2.2% of the use occurs on the average summer day.(29) Com- 1965 1980 2000 bini;g this with the above figures indicat .es that, given recreational qualities and access and use costs similar ocean swiund-ng 1.65 3.48 to those presently available, one could expect 30,000. bathers on a typical summer weekend day in 1980 and Power boating 1.35 2.10 .2.84 90,000 in 2000. At the B.O.R.@s suggested standard Sailing. .3 .48 .65 of.75 square feet per person, this demand could be .Waterskiing .38 .59 .61 handled by two miles of beaches .In 1.980 and six miles in 2000. This table assumes that the per capita supply of recreation remains THE AMOUNT PEOPLE ARE WILLING TO PAY FOR A DAY AT THE BEACH unchanged. it is only one point on the demand curve. If the quantity and quality of recreation deteriorate or it becomes more expensive e amount of recrea- in real term to enjoy this recreation, then th The above section Is a typical example of a classical, tional activity,will, of course, decrease. IIf, on the other hand if very roughhewn, projection. One assumes that the supply'. more and better or cheaper recreational opportunities are supplied, -ion will be similar to that existing at present* situat then the participation rate will increase. measures the present per capital consumption by income, The .harbor serves as the focal point for.a region containing group; obtains estimates of future population broken'down some two-and-one-half million people. According to the ADL projec- by income distribution and, in more extensive studies, by tion3 by. 1980 the population of this area will increase to'about educati -on, lei:sure time, vocation, etc.; and applies the P 1980 and 4.4 rdl-lion in 2000 ( 2 8 ). Of course, this present consumpt'lon rates to.these figures. Such analysis 3.3 million in is useful for obtaining a-feel for the magnitude of the population is served by marine recreational facilities other than demand, but it can hardly be called a determination of the harbor. The harbor is flanked on both the north an.dsouth by the demand, which determination involves how peopi6.will react in a number of supply situations. The purpose of this section is to review the Dresent state of the art with respect to determination of the demand'curves for -64@ recreation and, in particular, the determination,of how much peopleare willing to pay for a day of outdoor recreation. Three.methods-fo 'r- me@Lsuring the amount: geople would be willing to pay for outdoor:recreation ha,@ebeen suggested in the literature. a @2 @3 0 x C' C, o 19 @ -1 1- @, D I ID ID C, (,D I@t F@ 5 1 re .1 - Ra @ E@ ::r :IV (D :3 La @t :@p " 4 "1 DOI -07 Z, (Dn ro ID ct Z,w CD ID 'D 0 <ID P., tf -0 (D (D (D n. T 0 0 0'wo C, C, C+ cc L" S P. 0 co @j 0 It @, � mF, D - IL. It ct Z, c ID 'D 7,- @:r f j www <(D Ct =r 11 ID ru , .W@l 0 13p ID D(D F C. -1 cb+, ar 0 A 0R, nl: D 0 C@ 51 .q,, d (D�jW z, Cc; ID 0) 0 Lmw ID 'o 25 Nz 0 C+ C) C, o @-D zr ID 0 ID CD -3 -_3_ p @D C+ zr :7 . .-, W ID o 71 C+ q @@ 't =r :E t. 4r u @6 -D L, 1@1) 'D WIw -Fj -D n7(1 D (D 0 0-7, C@ 21 ID T + SICDI C, < ct r, lp 'D W :03 L 0 0 c a rD 0 o CD 0 (D :3 C+ 0cr cM:5z 01 -,u z C-) w A cr c? -Y :E@ CL r-0 0 (1) -ly w @Q (DwML (D :3 DCD :1 ZI U) p) 00 Tj Vm & P) (D rj) FD C@ ID JE C, rD C@0 0 C. 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CL -Y a v-T cl (D :5 e<D @4 otn rD -3+ol 0ul :3,M ID r (D 0. -D -:: OV Ct 0't C: 11 w 0 0fD 0 w = fD oq WT01ID 0- :C ID0 <ri)0:1 :3 ID :x '.a 0:3 co 11 En LQ rL,wCt P-- :7 "D<0-9 -k@ c:r Ea C+ C@ 0 En (D 0 0rD (Dn:7nZr :3�lDxC=r n0, L, En C: 'D 0P.)nIDWID Ll LO < 0" Z S: C+0A) IDIII C,,IDMID 11 ID -1 DQ (D C, 'IS 23 :,_ =0- -S < 0:5 'o ED 2@3 fD 14 cta C@ @-j 0 cq ID ID 'D (D 0 ct Cl 'D cr w0 El0El (Dn,- < co 9 0 -:3j r- @ - " .IqZ+0X. ;D CcWM F- 0fD M C: En :1 0=@:f3f@ P-'@40'A 00Fl Cl ct (D rD P. !@ ,0 :EJ @3 (D r; Zr 14 cl ct W C* L .0<-C:L e, .1 :3 C+ < :r CL 930(D C, WC+ In 0 cD 0 . .m0 ct (Dx cil E33-- +@: C:w 0 C@ 0 0 a Lq0-1 I OD (D :r'O :Ea C@ 0 0 cl (D v C: wM0:E :5 (D a- H. c., w0-M rn 0 oq ol C: [a ct C:,0 (D :@ @, %4 C cl ID 11 ID CD ;r CT.0-c c0 0 9: rl Or (D fb 00 .3M(D 11 C+ @S - 0 a) *0 @34 :30E? 010 :3 0. :3 ID 010Tjt0A)0 :3 C+ V oq -1 Woqn_3 11 D) 23 =10 0:03'1C+ L@ Mr cl 3 01 0DeDm `3 @E 0fD 02@ 91 0 cr0m m oq eD a::1 :3 ID0Wr- fD CD 0 CL0j rar Q.iM0 0 En V) C+ 1 0 F@ =r -3 C+ 0=r 'I (D 'D -r< czrm@n 3E (DW C+ C, fD0n CDI3C0=r C, 0)0 .410m(D0(D 0 (a 0:3v@+ :r M:30 Lj r1i C) 5-m 10 Jr 'DWID0a m C, wgo Mct ol -31::3 (D0 0 CD C). rl C@0 not only by travel costs, but also by incoire, and other socioeconomic characteristics and then making the standard assimpti on that each subpopulation. places the same value on the visit. This observation applies equally well to the Hotelling method and thus, through it, we aould obtain increasingly narrower bounds on the aggregate value 6 at considerable expense in data collection and reduction.* 5 Mack and Myers express considerable doubt as to the possibility of determining the aggregate value ofa recreation activity and suggest ratber the concept of merit-weighted users' days ( 33).- 4 'Ibis latter is a distributional rreasure which has no relation to individual values as used in this report. As such, it is useful only in choosing between. alternate recreation investments of about the same social cost. Themerit refers to.a means for.consis- 3 tently implere nting distributional judgments rather than to the (D quality of t1he recreation. However, they do discuss in sow detail dollar values derived by corrbining national data on total dollar 2 expenditures on outdoor recreation with the total hours spent in lation outdoor recreation in several ways. All these calcu s lead to the fact that, in 1960, people spent an average of approximately $2.50/day (1960 dollar-s) on outdoor recreation. Cbviously, on the average, the value they placed.on this recreation must have been higher. Thus, -this figure serves as a quickly-arnived-at lower bound -mount people are willing to pay for recreation. It on the average . .2 ;0 would be useful to subdivide the aggregate data by type of outdoor recr-e-Ation and by socioeconomic characteristics of the population in t-he sa-.i-- m@nner as above to derive lower bound on the average FIG 3.2 Participation Rate (Visits Per Thousand Population) amount each subpopulation is willing to pav for each activity. Joint activities would undoubtedly cause difficult problems with this approach- We have followed up none of these approaches Rather oonsis- 3 tent with our comments in Chapter II we will calculate the net its of our recreational facility fora range present value gross benef' of user values, leaving to the political process the final comparison. However, we hope that the above discussion indicates that with some thought and ingenuity it should be possible to at least estimate the amount that various population groups would be willing to pay for a recreational experience., INCREASE IN. REAL BENEFTTS WITH TIDE Given that we have chosen a particular individual- user benefft for a day at the beach, say, 12-50 1960 dollars, we will need ameans of escalating this value throug;n the next 40 years to reflect the Cc projected increase in the real amounts that people are willing to *9he fineness of such subdivision would be limited by available data. 2 4 10 12 14 16 18 20 22 -69- FIG-3-3 Demand In Thousands of. 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CD In a real study, of course, substudies would be required to Annual nunber of.nkiss. transit users 33,000 predict trip length and trip modes. Annual cost ofmass transit use 50@. round-trip fLu@- The relevant costs are-the marginal costs associated with this Annual number of wee kday care = 33,000 particular trip. On the weekdays, the marginal cost associated with Annual cost of weekday car trips 9 360t 119,000 the off-peak mass transportation users will be quite small, in many em is not Cases zero, given that the operation of the transit syst Annual nuirber of weekend cars 58,500 a. function of this particular type of trip. On the other hand, those Annual cost of weekend car trips 2 @ 72t 42,000 ,recreationists who use the system during the rush hour will impose congestion costs on all other peak users . As a first approxima@: TotalAnnual Cost 445,000 tion, we have decided to balance these by assuming that the average Present value of ,shoreside transportation marginal- cost is equal to the present fare which currently is about 20 costs 5% for.40 years $7,74o,ooo % less thari the average cost per user of operating the mass @transit,. system. With respect to weekday car trippers, we will estimate their marginal costs at three cents per mile (approximately fuel, SUMMARY OF ODSTS and oil. We are tacitly assuming no car purchase decision isbased on this Dotential trip) and the storage costs at $3.00 per--day'(the Beach fil Iling and protection $ 3,4oo,ooo cur---nt @arket rate of parking downtown), for the parking system is currently fully utilized during the week and operates in a reason- Physical facilities 3,495,000 ably competitive market. Thus, the decision of our car user to take Island transportation 16,500,000 his car implies that someone else cannot use this space. Shoreside transportation 7,74o,ooo On the weekend, the mass transit users will impose no conges- Total t-,-on costs on the rest of the community. However, it is quite $3111003000 lik-ely that some additional service will have to be scheduled to serve 'this demand with resultant differentials in the transit system INTERIM SUMMARY labor costs. Therefore, despite the fact that the system as a whole is x-4erutilized on the weekends, the marginal costs an- not.zero. We have estimated that the present value of the costs of Once again, as a first approximation, we will assume them equal to prov iding and utilizing the postulated recreational activity on the fare. This is probably an overestimation. With respect to the Lovell Island for.the next 40 v ars to be $31,100,000 1970 dollars, car users,, once again we will estimate the matjo-nal cost of the trip at three cents per mile. However, downtown paricing lots are- If this figure is correct,. it inulies that, in order for the provision rather severely underutilized on a summer weekend day. Hence, the of this facility to be a more economic uce of the island than its rtunity costs of their use by the island users will be quite- present use, the consumers of this r-ecreatJc-n will have to value oppo the benefits of a day at the island, including the trip, at $1.80 small, probably amounting to no more than the hiring of several per visit or more. If the average visitor values the trip to this ar4' - a first approximationi p -ng lot attendants for weekend duty. A. island and his stay there at more than $1.80, then the postulated we will value this cost at zero. recreational investment should be built rather than leaving the island as it is. If the average visitor values the tr-*,p and stay at. Thus, the downtown parking case is a classic example of a less than this value, the resources needed to provide this recreation situation where the same use, the storage of a car for a day, can are more hi:gnly valued by society in other uses. impose very different demands on the economy, depending on differ@ ences in competing demands. Note that at present the private market The $1.80 figure asswres th corztm)er places the same real does not reflect this difference. There is little difference in ..e weekend and weekday parking rates in downtown Boston, even outside (1970 dollars) value on a trip in 1971 as he does an a trip in 2010. the central retail district. We have suggested earlier that the real amount that the people would be willing to pay for recreation can be expected to rise proportion- ally with increases in real income If th's is the case, and using Given all these assumptions, we have the following estimate of the income projections on pagge 70 then , if people are presently the shoreside costs in constant value dollars: I I willing to pay $1.30 for a t@ip and visit, this value will escalate 76- -77- (D 0 !N0, (n It CD 5r 6 @ ;,i F @ g r '0 t@ g @ a I i i i . 0 a C) CD 8) 11 ID ID I Z, w j j 000 w ls@ L, @@ L" @, @D @n b , P, :1 cr @t "I - I t 5' R , .. 5-t It @, 04 o,o o C) V) 54@ 'n N) Irv 5 't 5 @p 0, 5,= , q & CD cf) t3 ct @3 0 @n 0 C. 10 't p (D C- En M (D (D I - <* 8 '-, @ ct C@ 0 0 @:r ct 11 cr -D' ID lr 1( ll-D @.l ID 5 " a cq ct H- ED co '(D -5 P' ct c@ + J) LO 0' w rQ cy w ri 1-j F@ C, p F, 5" A,' P, S@ x @4 x x cn P. 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CD (D 0 (D @A P. nr m 0, ca &(D (D te. o, 0 @ozCtm@A ct < 0It @30a0 pn100(Dz:j0 PD @jiEn (D CA (D (D el ffected at,the project level, efficiency has a number other than the postulated beach facility and implicitly of important things to say about how the project should leaving the island as it is at zero net benefit, we cannot be.financed.* make any judgments about whether or hot the beach facility is the best use of this island, only that In these cases it In fact, it is not possible to be consistent with is better than leaving the island alone. A full-scale our basic principles unless the user is charged at analysis of the island would include a representative least the marginal 'soqial.cost of his trip to Lovell. spectrum of different alternative employments and mixes in this sense the. provision of public.projects and of these employments. For example, by postulating a. their.financing 6annot be separated. (43) Failure to high-rise residential develbpment.as well as a beach, charge the user thE marginal cost of.his trip Kill we may be able to take advantage of substantial economies lead.to Pareto-inefficient 'congestion, and public of scale with respect to the island-mainland transportation pressure for,expanded.facilities which would notbe system,.espccially since the residential travel will generally demanded at marginal costs-inefficient use of a flow in the opposite direction'to the recreational.flow. project whose justification was.econ.omic efficiency-, In making comparisons of the present alternative,with Now a f *loor on,the marginal social cost of an other possible developments, displays such as Table 111.4 individual trip is the'value of the added'resources will be useful in comparing the beach facility with. required by the marginal user which, as.in the case other developments which will be less sensitive to water above,.can be quite.small.. If the beach is there quality, such as a pure high-rise residence or almost and the ferri.es,running and if there is room for an completely insensitive to water quality, such as an additional passenger and an additional beach blanket, oil terminal. the addition of one more beach user implies:that the rest of society foregoes almost nothing. Therefore, FINANCING THE PROJECT it appears we are back in the now@familiar- decreasing costs bind--efficiency requires price equal to mar- Let us assume for the moment that the community's ginal cost and the revenues thus generated will not decisionmaker(s) decide that the present gross benefit cover the total costs of-the project. Financing per visit is $2.00 and some escalation of this value remains a problem. is In order and that providing the beach and leaving the island as it is are the only two feasible alterna- This is true. However, there are several ameliora- tives, in which cas,2 our analysis indicates that, if the ting circumstances which point to user charges above community is going to operate in a manner consistent, the cost of the extra resources-implied.by the marginal. with its values, the beach should be built. The question' trip., that immediately arises is who is going to pay for it 1) and how? From whom are we going to transfer the,resources In situations where alternate goods (say, an required to implement this project? This question,is, inland swimmlng,pool) are charging above marginal costs explicitly distributional in nature and hence our complete then one. can.argue for a charge above marginal cost to concentration.on economic efficiency in this report becomes .prevent,over-utilization of the subject project at the more than a little bit uncomfortable at this point. However,. expense of underutilization of the competitive project.(.44). If we are prepared to be indifferent to the haphazard and rather small scale transfers of income which can be, To the extent that the nation opts to perform any desired income redistribution through taxation at the national,level, the easier it will be to be indifferent to-Income transfers, (continued) and the knowledge it has at the time of- at the project level-an important by-product of Income the de . Given that it,does so,'it is quite possiblew redistribution at-the national level. cision that trajecto3@y C will obtain,,in which case*the-project- loses money. .This does not imply that the wrongdecision was made. One of the most basic differences between decision@ making under certainty and decisi6n-making under uncertainty is that in the latter case one cannot judge the correctness of,the decision by the outcome. -8,7- -86- Shutting low income groups off from.public projects The marginal costs the user should be charged Just whenthe demand forthese projects is at apeak should include not only the market costs implied by his may seem to be an awfully high price to pay for resource -use but any extra non-market costs such as pollution efficiency. -However, as weshall see, application which result. This consideration is unlikely to be of these principles can be a two-edged sword working important in the case'at hand @ut might be critical for. as well as against low income groups, Consider in the 'case of say, industrial use*of a publicly the case of public project, like our proposed beach, provided navigation facility. which is subject to time-varying demands. The demand for the project on a weekend will In general be much 3) The fact that the difference between the total higher than the demand.on a weekday. Consequently, of the user charges and the total of the costs of the user charges should be' higher-quite possibly much project.will have to be made up by taxation which Itself higher on weekends than,on weekdays. One may find implies a distortion of the economy argues that user, that on a weekend one has to charge $4.00 per person charges should be set somewhat above marginal costs. per day to prevent congesti.on.while on a weekday one See reference(45). is forced to reduce the charge to 25@ per head to fill the beach. Under the assumptions, made earlier, 4) Most importantly, in cases where the project this combination of charges would make the project is being used at or near capacity, the costs of.the self-supporting. Furthermore, the consequences with extra resources required by a marginal user are no respect to income distribution are obvious. The week- measure of the social cost of the use for one person's end userwould be the middle income citizen whose use of the facility will be preventing or decreasing Job both forces him and allows him to pay the premium. the value (through congestion) of someone elses use. for weekend use. The week'day user would be middle The amount the other users actual and potential including and lower income children who have the freedom to take. the potential user shut out would be willing to pay advantage of the beach while their more fortunate to not have him use the facility is the social cost brethrenare working. In short, there are many of this trip.* In short, the basic purpose of pricing situations in which efficient pricing of public goods egalitarian tastes about is to ration out the existing facilities to those users will coincide with the most .who value it most highly (given the present inc ome dis- income distribution.* tribution). Efficiency requires that prices should All the above notwith tanding,'in many cases, be raised to the point where this rationing is effective. @s This can imply users charges which are muchlarger than efficiency will call for the provision of public even the average cost of the use.. projects for which the efficient user charges will not cover the total costs of the project. Cost-benefit analysis is almost completely silent on how the differen- tial should be collected. All we really know after this analysis is that, given the postulated values (average benefit of $2.00 or more per trip) there exists a scheme In accordance with our basic definition of social cost, (a set of payments and compensations) for paying for this is an either-or situation. If the actual users this facility suchthat, after such payments and are willing to pay more for one less person on the beach then potential users are willing to pay This idea works better when the groups involved are low to take the place of thelmarginal user, then the income and middle income than when they are middle income actualusers determine the social cost of the marginal andhigh income. Commuter train charges should peak users. Otherwise, the potential user's bid is the, social.. at rush hour. High income people nay find it easier, cost. 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Viewed In this regard individual projects 3 do nothing with A are interdependent and in a sense mutually exclusive. and nothing else. @r this were the complete set of In a properly functioning market this interdependency alternatives, we should allocate A to the plant as indi- would be taken care of by the price of land. Consider cated. However, the actual set of alternatives are: the following simple example. Suppose we have only two locations: location I is on the shore, location 2 1 allocate plant to A, recreation facility to B inland, and only two pos-sible uses of these locations. 2 allocate recreation facility to A,plant to Ei Use A is an industrial plant which after all spill- 3 allocate plant to A,do nothing with B overs are properly accounted for has a net present 4 allocate recreation facility to A,do nothing value (exclusive r,f' the cost of land) of 10 in location with-B 1 and 9 in location 2. Use F3 is a recreation facility 5 allocate plant to B,do nothing with A which has a net present valuc of 4 An location I and 6 allocate recreation facility to B,do nothing 1 In location 2 also exclusive of the cost of the land. with A Thus, we have the rollowing table. 7 do nothing with either location LOCATIONS U 1 2 In summary, cost benefit analysis will not lead one 01A 10 9 wrong if one evaluates the total net present value.of E the full range of alternatives.* However, the number I B 4 1 of alternatives Increase combinatorially with the The first thing to notice is that even if the above number or posnible locations. This then is the basic figures correctly represent the net social benefits of conceptual limitation on cost-7benefit analysis: if one doesn't evaluate the full range of altprnati-ves, the respective proiects we should not allocate the plant to I and the recreEtion facility to 2, for this would then one can be led astray,but the evaluation of give a total net social benefit of 10 + 1 = 11 while the full range or alternativesiss generally completely the opposite allocation would yield a total of 13. lt infeasible. This limitation is in a real sense more costs the plant less to move to Its second best location confining then the more-often-mentioned difficulties than it does the recreation facility. in measuring non-market benerits,for as Indicated in Chapter 3 this latter, problem can be ameliorated by Given a properly functioning market for land the performing the analyses over a range of' values for desired allocation would be achieved for the recreation the non-market, benefits. facility could afford to bid up to 3 units for location This is not to imply that we believe project analysis A while It sould pay the plant to bid no more than I unit. The market value of location A would be something to be useless. Far frorn it, there are dozens of projects in excess of unit More t1je market value f suggested for the Northern New Englaild Coastal Zone deserving onet r than 0 location of searching cost-benefit analysAs-projer:ts for which B and the recrea ion acility would obtain the property.* one can usefully hold the rest of thp coastal zone fixed Note, however, that even if we deducted the market while performing the evaluations, projects for which although value of the land In our cost benefit analysis, the results naerowly Interpreted would be misleading. Sa .y. the land cost is 1.5 units and we examine location A In A famous v@rfent on this kind of error is to.trim the isolation. The net present value Including land costs set of alternatived down to acceptance or rejection .of a of the plant would bp 8.5 versus 2.5 for the recreation 'Master Plan.' in which the accounts of a vast number of facility and we would locate the plant at A. Apparently, projects are pooled and if the net present value of cost benefit analysis points to a demonstrably inferior the pooled project is positive all the component projects, allocation. some of which may be grossly inefficient, are accepted. This result presumes that the organization representing The Missouri River and Upper Colorado irrigation plans recreation Interests is financed in a manner consistent may be cases in point.(15) with society's desires. 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New Jersey: misusing our coastal zone, dispassionate analysis of why we are making the mistr-kes implied is required Natural HistoyPe. , 9 b9. before one can prescribe remedies. One must be aware (2) Arrow, K. Social Choice and Individual Values. of the basic resource constraints and the trade-offs New York: John Wiley & S-o-n-s-. involved before one can identify a particular change as desirable on net. One must be aware of the mechanism through which our present coastal zone management (3) Lancaster, K. Modern Mlcroecnnomics. Chicago: system makes mistakes before one can recommend insti- Rand McNally, 1969. tutional changes. 'A preliminary attempt at developing (4) Crutchfield, J. &-Pontecorvo, G. The Pacific. this awareness is the methodologically speculative Salmon Fisheries. Baltimore: Johns Hopkins and philosophically modest goal of this report. Press, 19b9. (5) Ayres, R. & Kneese, A. "Production, Consumption and Externalities." American Economic Review. June, 1969. (6) Kneese, A. & d'Arge, R. "Pervasive External Costs and the Response of Society." The Analysis and Evaluation of Public Expenditu es I. Washington: U.S. Government Printing Office, 1969. (7) Davis, 0. & Kamien, M. "Externalities, Information, & Alternative Collective Action." The Analysis and Evaluation of Public Expenditures. I. Washington: U.S. Government Printing 01'r1ce, 1969. (8) "Control of Sulphur Oxides." Report or the Executive Director_ Al r Pol lution Control Commission t o the City of. Bost on, 1969. (9) Hardin, G. "The Tradgedy of the Commons." In: The Environmental Handbook. deBell, 0. (ed.) New York: Ballantine, 1970. (10) Lynch, D. "The Possible City". In : _E_nv_t_r9j1M0= and Policy. the Next F if' Year s. Ewald (ed.) Indiana: Universl ty P reH , 19 68. (11) Demsetz, H. "Contracting Cost and Public Policy" The Analysis and Evaluation of! Public Expenditures Washington: U.S. Government Fr1nting UITIce, 1969. (12) Dupuit, J. 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At that point, the land swings.sharply The town of Hull was selected for study as an example to the westfor about two miles more, ending at Windmill of a long-established shoreline town*which has tradi- Point in Pemberton. Thus, the. town, is about seven miles tionally provided recreational opportunities for.its long.. Irregularities in configuration are such tbat,the year-'around residents, for summer visitors, and for the total shoreline length is about 21 miles, islands excluded. general public. There have been amusement parks and Yet the total.landlarea (including the. isiands).is only related activities as frequently foundin beach resorts 431 square miles.., since the latter part of the 19th century. In 1900 the Metropolitan Parks Commission acquired for general The.Pemberton section of the town in the north,. public use a substantial part of the magnificent.Nantasket originall an island, is-connected to the peninsula proper y beach on the Atlantic Ocean side of-town. Its holdings. at.Allerton by a causeway'. The 'Pemberton and Allerton now amount to 1.3 miles of ocean front,about one-third sections are hilly, with highest elevations of about 100 of the total. Hull has also been attractive to summer feet. There are also several small hills (507100 feet vacationers many of whom have owned their own seasonal high) on the western edge of the peninsula and in the homes, while others have rented cottages or rooms. The south'ern part.of the town. But most of the land is 1 'ow summer population has traditionally been much larger relief upland.(10-20 feet in elevation). There are also than the permanent population. However, Hull seems to Some,tracts of marshland on the Weir River estuary side be groping toward new development patterns. It seems @of town. But most of.the land is low relief upland (10-20_@. possible that governmen .tal action might help the town to feet In elevation). There,are also some tracts of marsh- accommodate itself to these patterns and at the same time lands on the Weir River estuary side of town. On the provide.,greater public access to Hull's recreational eastern (Atlantic Ocean) side of the town there is a mag- facilities for the general public in the Metrop6litan nificent beach about.31.5 miles long extending from Boston area. The object of this.particular study was Nantasket to Point Allerton. Several smaller beaches to to explore these possibilities. the south of this stretch bring the total ocean beach length to about four miles. A.2 Geography The geography of the town is such that almost any Geographic considerations affect the development point is within a short distance from the water. From of any community to some extent, but rarely are they as, ..much of, the to"wn.it is easy to walk to the Atlantic Ocean pervasive in their influence.as at Hull:. The town is beaches.. The hills.afford splendid water views of ocean, almost entirely surrounded by water. Excluding several harbor, bay, river, or salt pond. Hull is dominated,by.' islands un .der its jurisdiction (Bumkin Island, Peddock's water, a fac t that has played a large' part in its past island, and Hog Island) the town consists of Ia long narrow and present development and that will strongly influenc e peninsula. It is bounded on the east by the open waters its future. of the Atlantic Ocean3 on,the north by outer Boston Harbor3 on the west-by.Hingham Bay, and on the southwest by the. Second only to the dominance of water is the relative Weir River and Straits Pond. At its southern extremity, isolation:of the town from the mainland. From Pemb'erton where it borders on Cohasset by land,,it is tied to the tothe center,of Boston'is.only about seven miles as the mainland by's strip only afew hundred feet wide, barely crow flies,, while the airline distance from central Boston large enough to carry Atlantic Avenue, one of the three tothe Hull-Cohasset line is about 13 miles. But there roads leading out of town. The other two exits (George are only three roads leading from the town to the interior. Washington Boulevard and Nantasket Avenue) cross-the Weir Atlantic Avenue runs almost due east to join Jerusalem River on bridges to tie the peninsula to routes leading north through,Hingham and west through Cohasset. ,The map, A-1 A'- 2 Road, a scenic route along the Cohasset -shore. To go to Boston or to the interior of the state, Hull - residents in local'service industri a and in mercantile business, must travel in great arcs around Hingham Ba@#,@.Quinc@'Bay. meeting the nbeds of Hulle's own inhabitants and summer and Boston Harbor. The most direct route involves exiting visitors.,the people of Hul Iho have to work also have southwestward via George Washington Boulevard to Hingham, to go elsewhere to find it$. Since there Is little more and proceeding north'through Hingham, Weymouth, and to offer in the neigh@oring towns of Cohasset and Hingham, Quincy to pick up the Expressway into Boston at the most of those who leave town to work have to travel con- Neponset River. This involves a trip of something like sider .able.distances--to Quincy, or to 'Boston, or even twenty-five miles, much of it through heavily built-up farther.@, areas. The alternative is to proceed southeastward, south- ward, and.westward on Route 228 and finally northward on. A-3, Hull Developmental Patterns--l .900,1945 Route 3 and the Expressway. Total.route length is.about 33 miles, of which about 10 miles consists of winding Given this.combination of beach and water,..relative roads through Cohasset_Hingham,,and Norwell where high- closeness to the city combined with isolation from It_, speed driving is impossible. @and lack of features attractive to industrial developers, bhe would expect that Hull would be a natural resort area There is no rail or.rapid transit service to the town. catering both to day trippers and seasonal visitors. And, At one time it was possible to take a street railway from In fact, the town developed along just,such lines during Hull to Hingham where connections were made with the Old the period,fro-m the turn of the century to the end of Colony Railroad. Both have long since disappeared. There World War II. is a bus service from Hull to Hingham where connections can be made with other lines to Boston and neighboring BY 1900 Hull was already well along the road to towns. There is also a daily commuting service by boat development as a resort town. In that year the Metropoli- from Pemberton to Rowes Wharf which accommodates some 40- tan Par Iks Commission (later incorporated into the M6tropo-7 50 people daily. Departure is at 7:30 A.M. and returmt. litan District Commission) took over jurisdiction of,pairt, 6:30 P.M. This trip takes about 40 minutes each way.( of Nantasket Beachs opening it up to use by the general The inadequacies of public transportation are such that public. In that year also there were 892 houses in the most Hull residents must depend upon theirown cars to .get town and a permanent population of 1703.(6) The'latter paid them out of town whether for work or for other purposes. real estate taxes of about. $800,000 while nonresidents paid Traffic surveys indicate that, even though travel time to nearly four times as much (just, over $3,000,000). Ten 40 min- Boston by.private automobile must average between years later the population had.grown by about 25% while utes and an hour, 60 people drive to Boston to go to work the number of houses'had increased by about 75%. Nonre For non- -dents ow si- for every 1 travelling by public transportation. ned ab6ut-four times as much property.as.residen't.s.., work trips, where time and schedules are of lesser import and contributed about 77% of the realestate take-.(7) s ance, the ratio is less dramatic; but still the au omobile is preferred-to public transportation by 3.3 to 1-M This same pattern continued through 1930. The The third geographic factor of importance is that'Hull permanent population actually had declined by 1920. has little to offer industry or commerce. The original -,By 1930 it was almost back to the 1910 level.- By 1940, it had.barely passed that level.Nonresidential settlers engaged in fishing, but that no longer is an.. economically viable enterprise, save for a small amount of Construction continued to add to the. number of houses cl @mmjrjg.0) During the 17th, 18th and l9th centuries'there, up to.1930, but with the,onset of the Great Depression _Ei6doubt6dly some farming@@but there is none today. building came nearly to a standstill. As we sh all see, iWas Lacking rall facilities.and.deep water, with no usable Pu@ilding revived after the war, but nonetheless, sourceo of water power, andisolated from population centers, @asbt 1960, 73.5% of Hull's housing stock bad been: - the town was bypassed during the industrial expansion of built before 1939 (most.of that before.1930) and 45% New England in the 19th and 20th centuries. Moreover, there' before 1920, (8) Nonresidents were undoubtedly contri-, are no rtmources that can be mined._(4) Save for those engaged -buting between three and four dollars in real estate and@ personal property taxes for every.dollar paid by residents for the support of the town.Since the sumner'people made'tew demands on the town, chiefly police and fire protection,and paid A-3 A-4. -In 1960 about 17% of the families had incomes-over such a large share of the cost of schools ana general $10,000 as compared to 21.3% for the Boston Metropolitan government, Hull was a cheap place in which to live. Area. In that year, both the average family income ($7,350) and median family income ($6,318) were lower than for the A.4 Growth after World War II metropolitan area as,a whole. It is a young population, with 43.5% 19 or under in 1960 as compared to 35.2% for pattern of Hull's the Boston Metropolitan Area.- The median number of people Beginning with World War II, the nit was 3.4 in Hull, and 3 for the metropo- development underwent a radical change. While only a per dwelling u handful of new houses were built during the war years, litan area. Most Hull residents live in single-family the town'mopulation increased by about 56% between 1940 dwellings (89.2% in 1960); most own their own homes,.(72--.-3% and 1945.( This growth represented, for the most part, in 1960). Only 4.4% of these single-family homes wer-e-.- an influx of workers in the Bethlehem Steel Company ship- valued at $20,000 or more in 1960, as compared to 25% for yards in nearby Hingham and Quincy. Housing was provided the Boston Metropolitan Area as a whole. The median value by conversion of summer residences to year-round occu- of such units in Hull was.$12,900 as comparedwith $15,900 pancy. By 1950 the population had declined a little as for the entire area. On the other hand, median rents. some of the war Deriod workers moved elsewhere with the tended to be higher ($97 per month) for Hull than for Boston dropping off of activity at the shipyards. But at about as a wholel($82).(14) The latter can be explained by the that time a new influx of population began with the re- relative shortage of multi-family dwellings and by the high sult that the number of permanent residents more than rentals obtainable for housing during the summer season; doubled between 1950 and 1960. -The 1969 population of property owners will demand a rental premium for year-round about 10,000 is nearly triple that of 1950 and more than occupancy because of the possibility-of obtaining relatively four times that of 1940.(10) large sums for summer use only. Perhaps 1000 new homes have.-been built since 1940, Hull's growth has not brou ght prosperity to the town.- most of them in the period 1945 to 196o.(11) Since 1960 Between 1958 and 1963 the number of retail establishments new construction has almost been balanced by demolitions decreased by 28%, their sales declined slightly,.sales per of existing structures. Accommodation for the newcomers, capita were off by 21%, and the number of employees had therefore, has largely been provided through conversion dropped by 25%. All business activity showed a decline of older summer places to permanent homes. Nor is this between 1963 and 1966. Payrolls were down by 12.5% and the process finished. In 19-50, 69% of the houses in town number of employees by 29%; average salaries were up were not occupied except during the summer; by 1960 this slightly from $3,340 to $4,140 (or 24% for those still em- had dropped to 479; today, summer homes probably still ployed).(15) make up 30-40% of the existing housing stock.(12) Hence3 even with little or no new construction there is consider- able potential for population growth by adaptation of At the same time, the cost of government., especially existing housing to permanent occupancy. of schools, has increased dramatically. As most suburban towns have discovered, even the addition to the.tax A-5 Characteristics of the Town base represented by new construction is not sufficient to cover the demands for services (especially schools) generated Hull is a working man's town. The lower middle class by new families. But in.the case of Hull the problem is population is almost entirely Caucasian, about 43.5% of particularly acute. Since 1960,new houses have meant, typically, foreign stock or foreign born. As compared with the Boston addition of from $15,000 to $17 000 per unit to the town tax base Metropolitan area, it has more than the average percentage During the same period, conversions of existing property to year- of laborers, service workers, private household workers, craftsmen and foremen, sales personnel, and managers, officers and proprietors. Compared to the same s tandard, --Hull contributes fewer than average numbers of professional and technical personnel, clerical workers, and operatives.(13) -A-5 round use have meant an average increase in taxable value of the pro@ertie- afferted of somethin6 like @2,000- Of cours@ -converted homez have been $3 OOU the newly heavy consumers of town services (again, especially A.6 Recent Trends schoolt'); before conversion they had helped pay these costs for others while making few demands on the town. Moreover, Most of Hull's residents have moved Into the town the personal property tax base, which has in recent years since World War II. '-'hey came to Hull because the town run at about 10% of the real estate base, Is also subject offered a combination of cheap housing and excellent sum- to erosion as eurner homes are converted to permanent mer recreational opportunities for adults and children residence. Save for boat owners and businessmen, few alike. Lack of local business and industry meant that permanent residents in Massachusetts towns pay personal most of the new Inhabitants had to face long daily commu- property tax because of a generous exemption afforded each tation stints. The town lacks modern shopping facilities. household. S'l.nce it is presumed that summer residents are During the summer season the residents of Hull muit put taking advantage of this exemption elsewhere, it is stan- up with crowding of the streets and beaches. As has been dard practice in resort communities to assess these prop- noted, the summer Population Climbs to about 40,000 people. erty owners for personal property as well as real estate This does not count the masses-who stream in by bus, pri- taxes. As summer homes pass into the hands of year-round vate automobile, and steamer to enjoy the public beach residents, therefore, trie personal property assessments at Nantasket and the nearby amusement park area. It has must drop off. Finally, the steady demoliton or older been estimated that on a hot summer weekend day this in- properties in recent years undoubtedly reflects the impact flux may amount to 60,000-80,ooo people. The resulting of con:5tantly Increasing taxes on owners of deteriorating traffic jams sometimes get so bad that the police are summer properties that might have been, under other circum- forced to impose a embargo on any further traffic into stances, patched up and kept on the tax rolls. town on such days.?21) But--considering the benefits--the inconveniences of long commuting trips, of going elsewhere Another problem needs to be taken into account. A few to shop, and of occasionally horrendous traffic snarls of t@ie hilly .-ectlons of Hull Installed c.ewers many years seemed a small price to pay. a,,.o which discharge untreated waste into Hingham Bay and tne Weir River. The rest of the town depend-- upon septic Moreover, there was no comparable alternative avail- t-nks and cesspools located on the building lot to take able to the newcomers. The nearby shore towns of Hingham cire of sewerage. The town Is now under order by the and CohasSet had much less to offer in terms of recreation, Commonwealth to Install sewers and a treatment plant to while real esta e ce. were perhaps double or triple stop the serious pollution of the bay and the river. Ulti- those for Hull%2@'iFarther to the south, Scituate and mately, It will be necessary to tie the homes now depending Marshfield did offer somewhat similar recreational oppor- tunities, but at an even greater distance from Boston in on domestic waste disposal systems into the municipal terms of road miles and probably of time as well until sewer. Even though most of the soil Is sandy, the domes- the opening of the Southeast Expressway. While these towns tic systems have always been hard-pressed because of the have also experienced rapid Population growth, partly heavy demands put upon them by the large summer popula- through conversion of existing summer homes, zoning regula- tion (eltimated at 40,000 people not countIng day visit- ors)(19 and the small lot sizes (mostly 5,000 square tIons have been tighter and lot size requirements greater. feet). Now, with constantly Increasing year-round occu- The result has been that real estate costs, while much pation of homes In the summer resident areas, problems lower than for Hingham and Cohasset, have tended to be from overflowing cesspools and septic tanks have become considerably higher than at Hull. of increasing concerti to local health officIals.(20) @ven with state aid, construction of the necessary sewers The problem facing the people of Hull has become one and treatmerit pla@t will represeht a heavy cost to Hulllz. of wondering if they will be able to stay there. 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CD CL, (D :r E, X, IsT0@j rr -S 0 1900liz13ac0CL M %1,1 (D 0 @j00w100I<'0to-C'aIt0,Cr CDMI-- Z 5FtoX -t v0w -(D :3- "'0 -S ILI.aI.11 Ll '0 C+ C, " cr Zr En @-l -4 F-R -Cr 1-1 1+ -0 IT, I'l CD0aWIV fD clr :E w.IC+ C@ Is0wto =3-14 (D 'I (D C+ Ir ,+ m0)Xr., En :3ZT1 9: rD Zl - ID ZY -X4ZTCL 00bi009 :1 @, -4 -T00wIc0,00" 0 P'0"I_3 to0 ItMID 'S0'1 W0-00ID CD0:5 F-` goz=5 :3 :3 :ruz01000 @O 0) to 0aetMID rDTWtoM-3 CL 11wI<<zr CO C@ CD c+ (D :1 @S El ct rt 0En to IEpCL=ct -S (D0P*0&- @-,,<0(D ctWto @s -3 0100(D 01 ID P' =r CD-Z:<-:3 :3 :3 zr :3 (D -1 ZY -V0.00:E 90 C+Z IT rD :3 iE 0. ::5MF-TI ID0cl@ 0.MOQ 03(D z 010 :j 11 C+ :r :9 1(Dw@t IV llq 0 0""s00) to 1:1 1 -0Mc@ Ll iD 0) l< A) nr :3 :50@-61511(D CL00 (D CD To summarize, Hull has exercised local initiative to payroll of about $600,000 for the summer season. Not all attempt to force new development patterns that will reverse of this would go to Hull residents, of course, but we can the recent trend of costs risingmuch more rapidly than assume that perhaps $4oo,ooo of it would. Hull ri3eives the supporting tax base. As the Chairman of the Hull about $40,000 a year from licenses and permits;(3 perhaps Planning Board put it'in urging eriactment of the new zoning $30,DDD of this Is attributable to summer business. regulations, all Hull has to sell is the water. This, he Parking meter fees adU up to about $2,000; these are wholiy said, is "liquid gold." The town owns "the firiest beach related to summer activities, since the meters are in from here to Florida." To expand the tax base it is neces- operation only during the summer months. Probably about sary to give developers an incentive to develop the water- $9,000 of the $12,500 received in fines and forfeitures front. Hull, he further noted, is at a "point of no return." from the Plymouth County Court are also derived from sum- "Look at your tax bill," tie cautioned. The rezoning was mer offenses, especially parking and motor vehicle designed as %1,11nVey proposition" to "make money for the violations. Town of Hull. 3 ) The same general line of argument underlies the urban renewal effort, though the techniques It is clear that the nonresidents provide a major employed are, of course, quite different. part of Hull's municipal income. What do the summer in- habitants add to the costs of running the town? Since But, in the last analysis, Hull's success or failure they own about half of the property, we will charge them In achieving its objectivez: will depend heavily upon for half the costs of the tax collector and th(- assessors, forces outside its control. If the necessary Federal or $21,700. Extra police hired for the summer cost $212500. funds from the Department of Housirig and Urban Development Police protection during the summer, and of their unoccu- are not forthcoming3 the urban renewal project will never pied property during the winter, should account for about get off the ground. If better transportation links with $50,000 out of the total of $268,ooo for the Police Depart- the interior arid with Bol-tori are not provided, there will ment. Marginal fire protection costs, summer and winter, be little inct@ntive ror private capital to take advantage are estimated at $17",,000 out of a total Fire Department of the new opportitnitie-c presented by the revision of the cost of $382,000. Beach Patrol and Harbormaster add up Zoning By-law. The recent expansion of tlie MDC area may to $11,000. Beach cleaning tacks on another $11.,000. Out lead to a modest Increase in public recreation u@age of of a total recreation and related Item budget of about Nantasket Beach, but Hull's plaris do not call for maximum $45,000, we will charge the summer residents with the usage of its assets In the general public interest. Rather, entire summer recreation budget of $11,000. Their pro rata they represent a blend of local and regional interests, share of the costs of trash col3ection amounts to $30,000 with the accent--naturally enough--on the local. out of a total of $71,000. This assumes no economies of in garbage lection. All of the above adds up to, $311.700.(3901 What are the parochial benefits and costs to Hull of the annual summer incursion of nonresident inhabitants and day-trippers? The following are at best crude esti- This figure represents less than 6% of the t -otal @agh mates but they are probably accurate within 10%. The budget for the year and less than 15% of the total raised chief contribution Is, or o-ourse, in tax payments. As by taxes on real and personal estates. But this group I late as 1968 nonresidents and businessmen whose chief probably paid about 51', of the real and personal taxes activity is related to summer trade probably accounted directly; if we add in the contributions from businesses for about $250,000 of the $1276,000 in personal property largely dependent upon their support, their contribution levy. The same groups probably contributed something like increases to about 59%. The nonresidents are still, ob- $1,6003000 of the total $2,878,000 real estate tax levy.(35) viously, a great asset. The one-day visitors may not be, In both cases, the chief contribution is derived from the though they certainly generate some Income to the local ononresidents, wIth relatively little attributable to residents arid some revenue to the town as noted.above. those catering wholly or primarily to day-trippers. Hull pays the MDC about $47,000 a year as its share The next big Item to be considered is summer emplo of supporting the Metropolitan Park System. In return, ment, which in July is twice as large as in November.(3 the MDC provides police services, lifeguard protection, Assuming the same general pay scales, this would mean a beach maintenance, and trash collection in its area. 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Any those facilities are already used to near c6pacity much further increase In the use of Hull by nonre@4idents of the time, and reach a saturation point on occasion. (Peddocks Island and Bumkin Island excepted) could only serve to lessen the alvantage of the town to the residents One possible exc'eption is to be found in the two without granting them any compensating benefits. The uninhabited islands in Hull bay. While Hull's new zoning townspeople and their elected officials could be expected ordinance contemplates development of these for commercial to resist any such plan strenuously and effectively. recreation, it may be that they could be put to better Through redevelopment and new zoning, Hull Is use as part of an Integrated public recreational develop- ment of the Harbor Islands. Should this be done, it would attempting to cope with a serious cost of services problem. be desirable to provide Hull with some compensation for The old character of the town as a bustling resort domi- the acquisition of these potentially valuable assets. nated by single-family summer houses and practically empty Also, it would seem only fair to plan the financing and in the winter is changing. The conversion of summer resi- operating of the project. in such a way that Hull was not dences to year-round homes increases the costs of services expected to pay a major contribution towards the costs much more than it does the tax base. Present residents simply because the lslandi@ lie within its political are asked to subsidize the education of incoming children. jurisdiction. Hull has instituted plans to attract high-Income, small- family household-- by encouraging apartment construction A.10 Conclusions and rezoning. It is not clear that these plans take sufficient advantage of Hull's geography or sufficient Hu22's potential is already being fully employed, cognizance of the importance of access to Boston. or nearly so, during much of the summer seacon. Or, hot weekends ttie bpact.es and roads become saturated to trip In summary, the decisions made by a locality such as extent that the local police have to embargo any further Hull are based almost entirly on parochial t-ffects. Th e y automobile travel Into the town. are divorced both from the discipline of trie private market and from considerations or regional welfare. Their value While more recreational facilities are badly needed and efficacy depend almost entirely on the imagination and In the general metropolitan area, It is not easy to see wisdom of a few town leaders who often represent special how these can be provided at Hull short of tearing the interests within the locality-Atself and rarely command whole town down and transforming it into a public reserva- the technical training or experience to see the locality tion. This would be politically impossit)le and economi- as part of the region nor trip financial powers tC1 1111pleTrient cally inefficient. Hull aready suffers a great deal of plans- based on such a viewpoint. inconvenience, and some costs, as a result of the summer invasion of hordes or day-trippers. While the nonresl- dent homeowners more than pay their way, it is not certain that the town receives compensation from those using the MDC beach commensurate with the inconvenience and other indirect costs incurred by the residents (both permanent and summer). It is always difficult to balance regional and local interests, perhaps especially so at Hull. It would be difficult indeed to convince the people who own property at Hull that measures to provide even greater public access to their resources would be to their benefit. Where such resources are so controlled by local private or public owners that they are grossly underutilized in terms of the larger need, good arguments can be made for taking the property with compensation. Since Hull's beaches,are already A-22 A-21 APPENDIX A FOOTNOTES 1. In'formation provided by Mr. John Tierney 13. Ibid. of HullRedevelbpment Authority staff, 14. School costs taken from Annu al Rer)orts 2. n 1968/1969 TrafZport t or' Facts - Boston er It r Region (4erea a Transportation 15. Assessment dtta from Annual Reports. F-ac-t 7s. 16. Based on analysis of building permits 3. At present Hull's clam flats are closed data in Annual Reports and interviews because of pollution. with Mr. John Tierney of Hull Redevelop- ment Authority. 4. There is sand on the beaches and offshore, 17. The 40,000 figure appears .In the report but any mining of this would be strongly resisted by the town, the metropolitan of the Board of Health - Health Agent (An?.ua ' Reports 1966).. Mr. John Bray District Commission, and the State De ngtime r..i partment of Natural Resources. dent and Executive Director of the Hull Redevelopment Authority, believes 5. "Land Utilization and Marketability Study, that the summer population Is more likely Town Center Project #1, Hull, Massachusetts," something less than 30,000 but that the day (9 October 1967), prepared by Giroux and trippers would easily raise It to more than Company for the Hull Redevelopment Authority. 40,0oo on an average weekday. (Hereafter cited as Giroux) 18. See reports of Board of Health in Annual 6. Data on number of houses Is to be found in Reports. For Instance, in 1968, 195 the assessors reports in the Annual Report overflow prob2ems and 28 drainage of thf-. Town of Hull for the year cited. of surface water problems were reported. Population data are from the Annex, unless In 1967, there were 288 and 30, respectively. otherwise noted. 19. Information supplied by Hull Police Department 7. Through 1910 the annual assessors reports and confirmed by MDC Police, Nantasket broke the assessments into resident and Division, and Messrs. Tierney and Bray of non-resident categories. Later estimates Hull Redevelopment Authority. based on numbers of houses, population, and (for 1920) examination of published 20. Giroux gives some data on comparable real list of value of properties which showed estate values. Additional information ob- about four timess a-, much property in the tained in personal Interview with Walter hands of non-residents as belonging Hall Realty Company personnel. to residents. 21. Tax levies based on assessments for the years 8. See Giroux. indicated. Education costs from Annual Report (1968). 9. 1969 population estimate from Hull Redevelop- ment Authority. 22. These estimates have deliberately been made on the high side. If past trends continued, 10... There.wpre 3106 houses in 1939 and 3163 in 1946. the new housing would not have such a high In 1968 there were 4076. There have beeri perhaps average value and the conversions would run 100-200 demolitions during this period as well. at about $3,000. As noted earlier, the actual trend in recent years has been one of decline, 11. See Giroux. not growth, as the population expanded. 22. Ibid. 23. The chief problem, of course, would be school costs. Low-cost housing would continue to attract young people with large and growing families as in the past. WwW Wrj RJ ri r@) --4 LIN 'JI != F',@o @u :., @h @n 'J Cr >>-3 C.]w :1 C, :3 :3T::S :1 P., ID D, cl1-3 :3 CD -0 ID -5 .7 ID -C-11-11=-:j ::j,eD rD 5w CD rDM -t 0 CD w(D01@ (D r- P., cm :3 7. > 0 0 cn Z, (D 10 >0 C:zII w 0c IDxCL, It.,D7L,xrD -3 - 0 :30m:9@ :7xICD 11) ID -9 -3 C,Tx'D ID 0 (D0 ID C@Z (D (D 0 ol zs (D 'ID '< R -4 ID cl :,0 < r (D Oq 0 0 ID CD WrD r, --S. 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F- to w1-3 ::7, :r N,<w:3, r_ CD " 0 0F@ 1-3 :@ 1- 91 CD Cl (D ILI (D rn 't. :@ " ic 10 ID 09 :E IV 1- .140mrl rD - zWI- CD 1-3 (D P) 00pjID0"1 02 ::r t N00I'D-If W 00'0 CA '13 F, 14C=S F_ D1w0 rD (D0=r -3 1- & v0v_j.O (D C:v(D P,&@_ !3 3C:01- C3 D)7ct ct @_ 1,jx9) 1-$0 't to -S :3"En ct0 n11 -3 (D -I zr to 0) M to In 0 (D I'D :3 0IT rL Zi rD ct :3 P. F. ILI"0) c+ c@ P) "t F@<@l (A (D (D CL tn ,twog0 PO :r P) 01 PD :3 (D 091(D 0.17:3 0w(D PC :3 1-, t5 (D (D (D q,0CL 14, and, therefore, is undoubtedly more sensitive than the B-3 Solid Wastes lobster. Once again, if we can assume that the rise must Table B.2 summariz the solid wastes discharged by be at least-.5* for any noticeable effect, then the M affected area will be a small percentage of the harvesting the plant into the bay. 3 area. Perhaps of more* importance will be the disturbance Sodium hypochlorlde is used as an antifouling agent to the plant population during construction of the break- in the salt water cooling system. It will be used at waters. This may be balanced by the additional sites for levels which will result in a residual concentration of growth provided by the completed breakwaters. In any free chlorine in the discharge waters of approximately .event, the owner of the industry has gone on record at 1 ppm. This is 5-10 times the lethal concentration for public hearings, that he does not disapprove of the plant. most bacteria and is close to the threshold for the major- ity of plants and plankton under continuous exposure. ln summary, the effects of thermal effluent on the The last column of Table B.1 indicates that little surface local marine ecology do not appear lare primarily because: cooling occurs In the high temperature waters, thus the decreases in temperature can be regarded as Indicating a) the waters into which the discharge takes place the amount of dilution of the effluent. For example, a are extremely cool even in the summer. temperature of 31 above ambient would indicate a dilution b) the thermal effects are limited to a very small factor of approximately 281/3' or 9. Thus, one can argue that toxic concentrations of chlorine will be confined portion not only of the overall area of the body to an area of tens of acres. of water, but even of the local fishing grounds. However, the long-term effects of less than Immedi- TABLE B.1 ately toxic levels of chlorine in marine organisms is not well known. It is known that low levels of chlorinated Dimensions of and Area within the Predicted 3 hydrocarbon have the ability to markedly decrease the Isotherms for Surface Temperature Hises above photosynthesizing napabilities of phytoplankton.. Thus, Ambient Temperatures for the Pilgrim Station this effect bears watching. Temperature Predicted Comparable Rise above Length of Width of Area Surface Coolijn In the effluent of estuaine power plants in the Ambient (OF) Area (ft) Area (ft) (Acres) (Acres) Che apeake significant greening of oysters has been ob- served and this phenomenon has bi-en traced to copper in the condenser tubes released by corrosion and concentrated 200 430 110 1.1 248 by the shellfish. There has been no analysis of this prob- 10, 1100 250 6.3 725 lem for Pilgrim. It can be expected to be less of a prob- 50 34oo goo 70.3 1203 lem because of the lack of oysters and clams in the dis- 30 5900 1300 176 1557 charge area and the greatr-r dilution. Nonetheless, the '0 84oo 2200 425 1834 heavy metal concentration in the local lobsters should be *This column is shown for purposes of comparison only, and monitored carefully. represents the area within the designated isotherms- wli ch The annual release of radioactivity into Cape Cod Bay would be required if the temperature reduction resulted is estimated to be between 7 arid 50 curies.(4) This radio- only from surface cooling. activity will be primarily in the form (if isotopes Of cobalt, manganese, Iron, chromium, and zinc. Assuming 50 curies/year, the radioactivity of the circulating. water will be on the average increased by go picocurles per i liter or about 2% of the maximum permissible concentration in potable water, according to the AEC. At present, the radioactivity of the coastal waters is about 300 picocuries per liter. B-4 B-5 TABLE B.2 The extent to which this added radioactivity will build up in the bay depends on the amount of interchange SUMMARY OF ESTIMATED ANNUAL STATION EFFLUENTS between the bay's waters and those of the open ocean. This interchange is a product of three forces: DISCHARGED TO CAPE COD BAY 1) tidal curr,:@bts; Annual 2) the counterclockwise rotation of waters in the Annual Radioactivity Chemical or bay due to coastal ex tension of the Labrador Type Volume Additions Heat Additions current; a. THERMALM 3) wind-induced currents. Circulating Water 1.5 x 10 11 gals Below limits of 4.3 x 109 Btu/hr The volume mean depth of.Cape Cod Bay Is about 100 10 CFR20(2) feet and the average tidal excursion 9.3 feet. Thus, the fractional change in volume of the bay during one Service Water 5.5 x 109 galc Below limM)of 7.8 x lo7 Btu/hr tida 1cycle Iss 9.3%. 10 CFR20 2 Pritchard indicates that 70-80% of the water which B. RADIOACTIVE leaves a co@s@al hay on an ebbtide returns on the next flood tide. 5 We feel that, due to the extremely wide Clean Radwastes Normally reused in station mouth of the bay and the fact that tidal actions move a unit of water only about 6 miles per cycle at the mouth, Chemical Radwastes 4.0 x 106 gals 7-50 curies 8.6 x lo5 lbs of a higher proportion of the ebbtide waters will return. Na2SO4 Therefore, we feel that perhaps 90% of the waters that leave the bay due to tidal action will return on the C. NON-RADIOACTIVE next tide. This implies that 2 x .09 x .1 = .0 .18, or 6 something less than 2% of the bay's volume will be inter- Make-up System 2.9 x 10 gals None 66,000 lbs of changed per day due to tidal action. dissolved soli4- and 2,200 lbs Of more Importance Is the counterclockwise flow of particulate3 described earlier. Integration of the velocity Asopleths of this current indicates a mean absolute flow of .3 ft/sec. The area of the mouth of the bay Is approxi- (1) Normal operation at rated load. mately 1.6 x lo7 ft2. If we assume that the one-way flow extends over 1/3 of the mouth then the volume of (2) Ocean cooling water is naturally radioactive. The water moved Is about 1.4 x loll ftl per day, whichils radioactive content of the station effluent will be about 9% of the volume',of@the bay. increased slightly during the controlled release of liquids from the rauioactive waste system. The liquid Calculations of the interchange due to the winds effluent from the radioactive waste system will be below requires wind current data as a function of-depth, which the limits specified in 10CPR20 after-mixing with the is presently unavailable.,@. However, surface currents cooling water. - - ---- generated by wind averages about 2% the wind speed a4 it Is well known that in the Cape Cod Bay area the wind (3) Addition of hypochlorite to thes6 systems is expected currents ar6 d1most-always considerably larger than tidal for about one hour each day resulting in residual currents. Further, winds-c-an persist-from the same direc- chlorine of approximately I ppm in the effluent during tion for several days. A 15-knot wind for-48 ho-urs-wil-l- this period. move surface waters 15 miles considerably further than the tidal .,excursions we,expect at the mouth. Therefore, we B-6 B-7 expect the winds to be at least as important an inter- change mechanism on the tidez. residences to the north of the plant from which the plant In summary, the net interchange of 10% per day can be seen. To the south of the plant, there is another shoulder placing the plant in a hollow. Further south of suggested by Pritchard does not seem unreasonable. This the plant the shore turns slightly westward. As a result implies that the mean residence time of any pollutant In the plant can be seen only from several hundred yards of the bay i's about Wdays. non-plant shoreline p'roperty. Interviews with seven of the twenty-two homeowners in the area Indicated that, in The amount of water processe through the plant in their opinion, the plant had had no effect on property a 10-day period is about 6.2 x 109 ft3 which is about values and that, in their view, the effects of the in- 1/2500 of the volume of the bay. Thus, it does not creased local payi,611-(during construction tbe plant em- appear that general radioactive build-up will be a prob- ploys 400 people and It will have a permanent payroll of lem. However, the ability of shellfish to concentrate 50 people) more than balanced any detrimental effects. radioactive metals is well known. Therefore, the con- Only one person, the owner of a cranberry bog surrounded centration of radioactivity w.111 have to be carefully by plant property, has expressed opposition to the plant, monitored In the local lobster. but she was unable to marshal any support from other local Interests. However, since the survey was taken In October, In summary, it doeo riot now appear that this plant no summer residents were included, who presurriably would will have any great effect on the neighboring marine place less value on parochial benefits. ecology. However, certain important uncertainties remain. We note with approval Boston Edison's funding of a $277,000 The land behind the plant rises to 300 fet within study of the ecological effects on the marine biology to a mile of the shore, placing the entire plant below the extend ver the two years preceding the start-up of the skyline and tlju-- decreasing the visual Impact to any off- plant a0rid the two years following. shore observer. We suggest that this -study could ufefully be tied Finally, an interi,-!@ting example of internalization Into the Marine Biology Laboratories' dotailed.biological has occurred in this problem. The owner of the prriperty survey of the entire Cape Cod Bay conducted over the abutting the plant to the south and thus most affected by last two years under O.N.R. sponsorship. We also feel it was the owner of the property upon which the plant is that provisions for long-term monitoring of the local presently building. Thus, in buying the property, the ecology should be made. Finally, we should emphasize power company had to compensate this individual for the that our tentative conclusions about the biological effects costs they would impose on him as a neighbor. of this plant are not generalIzable. By American stan- dards, Cape Cod bay is an unusually cold body of water In short., it appears that the perceived external with quite unique flushing characteristics. It is doubt- costs of the plant are sma2l and more than compensated, ful if su ch a combination exists In more than a handful in the neighbor's view, by the plant's effects on the of areas long the United @tate_ coaf t. local economy. E3.4 The Benefits and Costs Imposed on tne Suiroundirij-7 We must emphasiz@ that, from the rt-glon's [joint of Land Areas by the Plant view, ttils latter is a wash. The swne effect5 would bt- observed wherever tr,e plant was located. The only excep- The other ai-a where the plant can effect costs and tion to this statement is if there are differenti3ls In benefits not accounted for In the marketplace results unemployment in the region. If there are differentials from the introduction of an industrial operation into a in unemployment, the opportunity cost of labor to light-to-medium density residential area. it was thought, the economy will be lower in the hip,.h unemployment for example, that the plant could nave substantial effects area than in the low unemployment ai@E!as- Z@irice a pri- on surrounding summer property values. vate utility company operates on market wage ratez; rather than marginal social cost-- of labor, this can The property begins just south of Rocky Point, a result in inefficient plant location dn the face of 50-foot-high outcropping, north of which the shore turns variations in unemployment. However, these differentials sharply westward. As a result, there are no shoreline B4 B-9 4. are unlikely to be large in even a moderately free labor Massachusetts Department of Natural Resources, which market with a moderate amount of worker mobility. With licenses the plant to eject wastes into the bay, has shown no interest in the public development for recreation of the respect to the case at hand, Plymouth was suffering a land'upon which the plant stands. despite the fact that higher than regional unemployment rate due to the closing this department contaIns the Forest and Parks Division of the local cordage,industry. On the other hand, it which is ciarged with planning for outdoor recreation for would be interesting to know how many ex-ropemakers are the state. working on the plant. In summary, the parochial benefits to the economy of the neighborhood of the plant's location should rarely be an important consideration in plant loca- tion, since similar effects will be experienced wherever the plant is located. Similarly, with respect to the external disbenefits of the plant, given that a plant will be built, it is the differentials In these disbenefits with location that are important. Since an Important consideration In the value of shoreline land is its scenic beautY3 We expect there would be cases where substantial differences In these disbenefits between shoreline and non-shoreline locations might occur. This differential would have to be balanced against the added costs of the inland location which in- clude not only additional pipe and pumping CoStS3 but also additional transporting of equipment costs since present- day power generation equipment is so large that it must be transported by water. These costs will almost always dictate a shoreline location. As we have seen,.shoreline- locations do exist where the external cost of a plant can be kept small. But this example also indicates that almost anywhere a plant is suggested It will meet with local approval on grounds which, from the region's point of view, are a wash. Thus, local forces cannot be expected to generate opposition In proportion to the eiternal disbene- fits of the particular location. It is of more than passing interest that, while the plant occupies some ten acres of property, Boston Edison purchased over 500 acres. This is, In part, a response to AEC regulations and, in part,provision for future additions. However, it suggests that public recreational use of most of this land could be complementary to the power generation proper. Florida Power and Light's installation at Turkey Point Is an example. Boston Edison seems at least vaguely aiqare of thispossibility and is providing for public access to the breakwaters, including a footbridge from one break- water to the other. However, the possibility of more intensive recreational use of the uplaqd property should he inveatigated. 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Miles Co2t ner ton mile Y-ar tons In 1966 Dole, Bucksport 124 55? 428 37,500 DWT 1966 1,497,000 $1,025,000 [email protected] 69,8C.0 DWT 1080 1,975,000 i,n4,D00 1.@006 Ij',,7rI9 DWT 2900 2,935,000 1,256,CO@ t. ).' 05 Searsport 13@ @,J6 @7,50? DWT 1-,66 637,000 $ 414,ooo @:@,'@00 DWT 1),80 843,ooo 4jo,ooo 114,703 DWT 1-000 1,:'50,000 507,500 PortlanJ 158 4,11 z27 3-,,r(O DWT 1966 4,000,000 $2,100,000 1980 5,290,000 2,076,000 ll',,7'Q DWT 2000 7,850@000 -1,567,000 Portsmouth 203 452- 2555 3-,5)0 DWT 1966 1,6oo,ooo $653,000 @?,O)C DWT 1-080 2,110,000 646,ooo 11@,-oc UIWT 2000 3,340.000 801,000 Salem 32@ LZ6 2.,9 @7,CO) DIA"T 1966 945,000 $302,000 0,@00 Dur 1980 1,249,000 300,000 lih,700 DWT ?000 1,855,000 371,000 Boston 239 436 197 37,590 DWT 1966 17,000,000 $5,36o,ooo 59,800 DWT 1980 22,500,000 5,320,000 114,000 DWT 2000 33,400,000 6,58o,coo a 0 ct 0 Ca RUO @ZfD ctt@ -a, :E :3 C, 0 3 C- 0 Z @I ct 03 C, 0 U.:I. 0 ct w Sj = @-,Zro r E Z C, CD N =r wnr C = @ -@, 9 @@ w fb Z :3,M 0 " M 0 = @S (D w0 M 0 ge C. ID -6 W0 0 W 0'0 t n M0 'D @, -)$-, 0 wCD- T=5 Z) C- roI& ct go (DS a :r 0 0'-40M 0 0 (D @r -2 -IDa rD (D El CDM k: 0 0 MF' 71 " @-' fD (D :rC :j W(D -D 0 CD P 09 0 C, 2@ -C. 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In served by an associated terminal. fact, we feel that the Maine agencies Involved are placing too much emp4sis on Parochial benefits, which b) A more deve@oped phase In which the economies will occur wherever the refinery is located and thus are of scale associated with transshipment begin to operate not a function of location. Further, it appears that the and indicate initial consolidation of sets of the State of Maine is not driving as hard a bargain with individual terminals into large transshipment terminals potential builders as it might, in part because of over- which serve subregions. counting of parochial benefits and in part because of the relative ease with which public funds can be raised c) A mature phase In which, if the economies of through the refinery's monopoly powers. scale warrant, this consolidation process continues until the entire region is served by a single transship- In short, if there was ever a situation where detailed ment terminal.- This process appears to be well advanced cost-benefit analysis should be applied to a coastal zone in the Western Europe-Bantry Bay, Ireland @lituatlon. development, the problem of discovering that location, If any, for a New England refinery,which Is most consist- In this context, the question then becomes one of ent with the values of all of New England, is such a determining the degree to which New England has progressed situation. Needless to say, in the time framp of the through this saquence. present study any attempt at such analysis would have been irresponsible. C.4.2 Assumptions 0.4 Distribution Policiec f'or New England Oil For the purpooeo of this study, demand is referred to as total tons of oil products without making arty C.4.1 Introduction effort at d.1saggrevat.1-iri. The reLsons behind thl-.- azcuntp- tlon are: This section surveys some or the economic'.- of the distribution of the refined petroleum products to New a) Determination of marine terminal characteris- England. It seems clear that the bulk of' this distribu- ties and size is dependent on total throughput, tion will continue to be by water. The following three questions then arise: b) Demand by product for the New England area Is 1) Should the pi-oduct tankers service directly the not readily available, six or seven ports which presently receive significant C) The differences in specific gravity of differ- quantities of oil? ent products can he disregarded in a general survey of the type being attempted here, given the preponderance 2) Should the product tankers ship only to a major of fuel oils. transshipment terminal whereupon distribution takes place by barge2 The rate of lnereaz;e of oil-products demand'will he assumed to I@e approximately _-, per cent per year. Th 3 s 3) If a reflnery is ouilt In New Englana, should assumption Iz baeed on a study made by Arthur D. LJtLle, product tankers be uzea at all? Inc., In 1964-61,.* Tr,e rel3tively small gr,,wth rate reflects the increasIng share projected l'or nuclear planti-. -Taborga has shown that the trade-off between in the power generation of the region. the economies of Beale associated with a small number of very large transshipment LerminalL and the added diotance Using. 1967 as a I,ase year, the- following table gives and transshipment costs associated with intermediate the relative and absolute values of demand. terminals implies that the typical regional developa,pnt distributional pattern will be: *"Projective Economic Studies of New England." C-9 C-10 M to r) @a -V ca .0 0 :a cl,@ 0 Ma (D n (D 3 z 0 0w0.0 CD CD 0 mF- F- (D J3 Is -3 (D p m 0 EQ @-j Is IsW n 0)0 0 9 Z 0 CD -S (A 1@ ic &mct10 El 'D @3 @3n a@ - ic rLa w 0 0E3Mto C, Ea mcn (D ct 0 go (D tz 11 0-0 _3 C, 006 P) n, @r m 00 (D @ 0 " ::r0 0 1-, t @ @v c@ ::r zim -10 1 1 10(D Z CD rD z 0 ct @t It (D (D ct -1 CD a CA :j I ID ca to I n, a (D E3 0) @- P Cf, 1-i a ct 0 0 crLH @- cr m@p ::r rD C@ (D90 CIP -S CL @j Z3 :3 0:3 (D0& W (D N." CL CA I., CD00 t% 04 iv 3 tn -V ct 10 C+ Q C+ CA 1@ PI ct MCr 0 rD0 0) w P 0)w trc -1 @3 13 ct C, ta @4 (D 10 In; -V 0C, @r CD @< Z ">@ En ::r ru -.3 (71w0 0 X" 61 D) -ta 9 (D -4 00 CD W0 :5 .<+" Ea r) @r . ..!@ 14 @3 D) rA zr rr ct (D Is rv wa"n0Lo P3 CL @j 0 CD @l C+ cl V 0 ro (D C) N) rl) (1) ID mw%0 Ij0 CD a :3 P(D cil @-u C@ 0 Ct C+I 0w =zm =9 IV m0 @r 1@1 .:. 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I- (yq cn0ID 13 tA Lj nX :3 CD 140 Ul @q \.n +9 03 o C) 0 C)mro z 0) ock (D0 BC@ cnaco fl: tu0C) 0 0 oq CD 0 0 C) 0 @t P) tj Zr @t CDZ=wP)," , , 0 ::j m 0 CD 0 (D 0. (D I-- CS Ed0 0ID MP) @t P) En @j C,oo o 0 (A 44 @' s I'D 1-0 0 0 0 (D A) as00 i4 @< CD CD 0 0 C+ -1 : ct mc0 ID cl v (b CDz oq0 =r oq ct (D cl better yet, employing expected value analysis as described Figures C.1 through C-3 show operational and cost in Chapter II, and postulating a distribution of product characteristics of a pushed barge system. tanker sizes throughout the life of the system. c.4.3 Specific Case .a Distribution ca@ be attempted by means of either pipelines or some form of maritime transportation. A pipe- We have choserl to study three alternative major line in general has the disadvantage of little flexibi- New England oil distribution systems: lity, since it cannot respond to the changes in optimal distribution strategies which occur with the growth and I. A Distributed System. This system employs consolidation of a regional economy. Furthermore, the direct shipment via_product tankers from the refinery to New England coast is concave. This Implies that sea dis- terminals at tances are shorter than land distances. But maritime transportation is generally competitive with pipelines Penobscot River over the same distances. The.possibility of submarine pipelines does not seem an advisable alternative either, Searsport Maine since the savings in distances are more than offset by the higher cost for materials and construction of the Portland pipeline and by the operational complications associated with floating pumping stations along the pipeline. Portsmouth New Hampshire With these facts in mind, our emphasis has been placed on marine transportation. The question then be- comes one of deciding whether to ship from the refineries Boston with product tankers directly to the shoreside distribu- Massachusetts tion points or to transfer from the product tankers at a Salem limited number of major terminals, using barges.to supply the shoreside distribution points not served by the major II. System Employing Primary Consulidaticin. Here terminals. The costs of transshipment must be balanced product tankers service Portland and Boston only and against the higher utilization of capital afforded by further distribution is by barge. the barge system. 111. Complete Consolidation. Here all transship- The barge costs cited are based on seagoing barges ment is handled from a single Major terminal. which are pushed rather than pulled by the towboat. Push- Ing has the advantage that the towboat-barge combination Two possibilities are considered under alternative 111. operates as one hull with consequent savings in power due to lowered wave resistance. It also is a more maneuver- a) Tankers arrive at Boston only. This alternative able and basically less hazardous system than towing. corresponds to a minimum distribution cost con- However, it should be noted that the pushing of harges In figuration as can be seen by multiplying entries open sea conditions is barely the state of the art. In the matrix of di@;tances (Table D.5) times However, the technological problems remaining appear far the demand at the-destination and adding over from insuperable.* each row. Boston h3s the least ton miles to be distributed with this arrangement. *The problem of the coupling of towboats and barges in higli b) The main terminal is In Machiasport, Maine. seas conditions has not been properly researched yet, mainly on account of lack of visible need for it. It is As we shall see, analysis of this last alternative hoped that this study will maJe apparent the current allows us to make the statement that, if a refinery is importance of such research. built in New England, all distribution should take place in barges directly from the refinery. C-13 C-14 In all cases, inland distribution is treated as a parameter not having any impact on the comparison of TABLE C.8 alternatives being attempted. Arrival Rates (Ships/Month at'Ea" Terminal) The areas of influence for each port are as follows (as shown by 1967 dat'a): Year Portsmouth: Handles.66% of demand in New Hampshire. Port 1970 198S Portland: Handles 100% of demand in Vermont, 34% of Penobscot River 1.37 1.84 - 2.48 demand In New Hampshire and 57% of demand in Maine. - Searsport 0.55 0.74 0.99 Penobscot River: Handles 30.5% of demand in Maine. Portland 5.11 6.88 9.25 Searsport: Handles 12.5% of demand In Maine. Portsmouth 1.76 2.37 3.1.8 Salem; Handles 5% of demand in Massachusetts. Salem 1.22 2.64 2.21 Boston: Handles 95% of demand In Massachusetts. Boston 23.20 31.20 42.00 C.4.4 Summary of Evaluation Results -C.4.5 Summary of Costs of Distributed-System-(Case-I) A comparison of alternatives Is made on the basis of minimum present value costs to serve the demand shown In the distributed system no transshipment is in Table C.4 with this demand e@scalated at 2% per year. required and we must concern'ourselves with terminals only. Table C-7 gives the annual operating costs and the present value costs for the terminals to service a Each alternative has four main Items, berths and storage at the terninals, and barges and towboats, if distributed system in.New England. transshipment is required (as in b and c). The present value calculations have been made for interest rates of TABLE C.9 5% and 8%. 1970 U.S. dollars have been used throughout. Ten knots average speed has been uoed for barges and Yearly Costs and Total Present Value Cost for Terminals towboats. Yearly Cost Total Present Value Cost Case I. Distributed System Terminal 1970 1985 2000 Int. Rate 5% Int. Rate 8% TABLE C-7 Thousands of Dollars Dollars Throughput at Each Terminal (millions of tons) A* 935 935 950 15-32xlO 6 11.4x,06 Ports 1970 1985 2000 Boston 2,627 3,122 3,425 48.4oxio6 36.46xio6 Penobscot River 1.31 1.76 2.37 6 6 Portland -1,529 1,529 1,800 27.03xlO 18-76xio Searsport 0.53 0.71 0--95 Total present value costs for Portland 4.91 6.61 8.89 4 Case A terminals, Boston and Portland 134.71xlO 6 loo.82xlO6 Portsmouth 1.69 2.28 3-o6 Salem 1.17 1.58 2.13 *Terminal A stands for any of the following terminals: Penobscot River, Searsport, Portsmouth, Salem. Bost on 22.23 30.20 4o..62 'C-15 c- 16 CO "i tv ID (b ED 0 0 Z 0 0 ZI Ell L9 c) Et Z-4 rl cl 'T rD ri (D Z5 (D C) PNT CD Iz, F: In CD W -1 j Ici C+ Is ta 1; M T Ll @i tr C@ M @3 0 -IDc D) t- 1@ rn D) 0 w-i Ea r@ W C" r-i (D 77 F- C. C. '@n z (r4 Z -3 r7i CD 4-wo 0 __.j 0 Z@ c C, Z7 T It ID "S? 'S (A ITW I C. 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