Question

The San Francisco Nature Commitee submits a plan to "rewild" Alamo Square by fencing it off from the public, bringing in environmental engineers to plant native trees and shrubs, and releasing several species of endangered Bay Area small mammals, birds, and reptiles into the reserve.

a. What would be the major social costs of this project? Would you expect them to be dominated by market or non-market costs?

b. What would be the major social benefits of this project? Would you expect them to be dominated by market or non-market benefits?

c. Do you think the costs would outweigh the benefits? Explain.

Answer 1

a)

Social cost is private cost plus externalities. Private cost does not include externalities.

Social cost is faced by the general public here. Since Alama Square is being fenced and it would restrict the movement of people and they would not be able to enjoy the natural bounties. Hence, this is external cost of fencing.

Here Non-Market cost in form of externalities dominate overall cost of fencing.

b)

Fencing also would have strong positive externalities for society as whole. it helps in saving endangered species and purify environment of surrounding.

Hence, these benefits would be dominated by -non market benefits.

Public parks and projects have strong and sustained positive externalities for whole society.

c)

Definitely, costs of preserving and fencing nature would have relatively more benefits than its cost in long run. Such projects create strong and sustained positive externalities.