26 November 2013 Move over GDP: Putting a wellbeing value on outdoor recreation

Measuring economic value should mean more than just Gross Domestic Product (GDP). That’s according to Professor of Economics, Paul Dalziel, of Lincoln University’s Agribusiness and Economics Research Unit (AERU) who was speaking at The World Outdoors Summit in Rotorua last week.

Professor Dalziel argued for factoring in the idea of wellbeing to any equation which aims to measure economic value. More specifically, he was speaking with regards to wellbeing and economic value as it relates to outdoor recreation.

Although warning of the necessity for a cautious approach when allocating an economic value to the natural environment, Professor Dalziel did stress that the requirement for considering wellbeing within any such calculation stems from the idea that all economic value has a social dimension attached to it. The very fact that an individual may choose to walk the Milford Track, for instance, comes from a belief that the activity has a ‘wellbeing value’ associated with it. Otherwise the individual would not take up the activity.

This point is particularly relevant when considering that goods and services are consumed by an individual when undertaking such an endeavour (such as specialist footwear, clothing or equipment; hut fees; travel costs; or food and drink) and that the market value of these transactions would factor in to a traditional GDP calculation. However, these transactions would not have eventuated if the individual in question did not consider the activity to have a sufficiently high wellbeing value associated with it in the first place.

“The market value of any transactions associated with, say, taking time out to walk the Milford Track, exist only because the consumer chose to undertake this activity under an expectation that it would promote his or her wellbeing,” says Professor Dalziel.

“I think it is very important not to lose sight of this fundamental point – market values depend on experiences adding to people’s wellbeing,” he said.

Underwritten in this observation is the idea that, by virtue of the very fact that an individual chooses to undertake an activity such as walking the Milford Track, the value in terms of their wellbeing must be higher than the total market value of costs.

Professor Dalziel notes that in the case of outdoor recreation, where many activities are generally ‘free’, the difference between the perceived wellbeing value and the costs (known as the ‘consumer surplus’) may be particularly large. This then begs the question when setting policy for outdoor recreation as to whether wellbeing or market transactions should be maximised. Increasing the consumer surplus by increasing the wellbeing derived from outdoor recreation, for instance, may mean more individuals prepared to bear any financial costs associated with the activity.

The question remains, however, how to actually measure the consumer surplus so as to attribute some sort of economic value to the recreational experience.

One conservative way Professor Dalziel suggests in his presentation is to consider the opportunity cost from time taken out to undertake the activity, such as lost wages. That is, any income sacrificed from paid employment could go some way to attributing an economic value to the experience.

Professor Dalziel’s presentation was in many ways a taster of what is currently phase one of a project with Outdoors New Zealand and Sports New Zealand to gather evidence for a value proposition for the outdoors in this country.

Such research may be of particular benefit when considering such things as a recent New Zealand Values Study where 94 per cent of the survey reported that a high quality natural environment was either an important or very important influence on their decision to spend the rest of their life in New Zealand.

This alludes to a strong connection with the natural environment which has a positive economic spin-off as well. For instance, according to The Horizon Research 2013, for every $100 spent directly on outdoor recreation, another $36.62 is spent on travel, accommodation and other trip-related activities.