Commercialization Decisions and the Economics of Introduction

Euphytica, Vol. 148, pp. 151-164, 2006

Posted: 8 Jun 2006

See all articles by Edward B. Barbier

Edward B. Barbier

Colorado State University, Fort Collins - Department of Economics

Duncan Knowler

Simon Fraser University (SFU) - School of Resource and Environmental Management

Abstract

A Commercial horticultural industry that establishes plant-breeding nurseries for an exotic species throughout a regional economy will expand until the marginal profit of the last nursery established is zero. However, a regional government concerned with social welfare will take into account not only the profits of the horticultural industry but also any expected costs of an accidental invasion. The latter costs will consist of the discounted expected social damages due to an increase in the rate of invasion over time and the increase in expected damage cost per hectare caused by an additional nursery. A government can employ an "introducer' pay" tax equal to the latter social costs to ensure that the plant breeding industry establishes the optimal number of nurseries. We illustrate this outcome with the example of purple loosestrife (Lythrum salicaria) in North America. In the absence of any tax, the horticultural industry will establish n-3528 nursery operations, and the expected damage from invasion is US$ 28.2 million per year. With the tax, only n = 300 nurseries are established but the expected damages from invasion are reduced to US$ 1.3 million per year. Although profits for the horticultural industry are lower from the tax, the net gains in overall social welfare more than offset the losses. Although these results are illustrative only, they show that the problem of plant invasives initiated by commercial operations is amenable to standard economic analysis and solutions, such as implementation of an "introducers' pay tax"

Keywords: biological invasions, economics, exotic species, introducers' pay tax, plant breeding, purple loosestrife

Suggested Citation

Barbier, Edward B. and Knowler, Duncan, Commercialization Decisions and the Economics of Introduction. Euphytica, Vol. 148, pp. 151-164, 2006. Available at SSRN: https://ssrn.com/abstract=906851

Edward B. Barbier (Contact Author)

Colorado State University, Fort Collins - Department of Economics ( email )

Fort Collins, CO 80523-1771
United States

Duncan Knowler

Simon Fraser University (SFU) - School of Resource and Environmental Management ( email )

888 University Drive
Burnaby, British Colombia V5A 1S6
Canada
604-291-3421 (Phone)

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