Ask a Scientist: How big of an industry is the Chesapeake Bay?

This month’s Ask a Scientist column focuses on a different kind of science: economics. We asked Beth McGee, senior scientist with the Chesapeake Bay Foundation, to answer a question about the importance of the Chesapeake Bay to our region’s economy. As you’ll read, the Chesapeake Bay is more than an extraordinary ecological system – it’s also an incredibly valuable industry.

When you think of an “industry” – like the steel, health care or business industries – you think of a well-oiled, intricate business system. You could calculate the economic value of that industry in terms of jobs created, value of their product, and other economic benefits.

If you think about it, the Chesapeake Bay ecosystem is also an enormous, productive industry. Like any other system, every part – rivers, wetlands, forests, animals, people and so on – has a role in the whole “machine” working at optimum levels.

So how much is the “Chesapeake Bay industry” worth? According to many economists, placing a value on the Bay is difficult because some of its features are difficult, if not impossible, to quantify. For example, how much is a beautiful sunrise over the Bay worth? Or the joy of catching our first rockfish of the season? Or watching our children play on the beach? Because we can’t quantify these values in terms of dollars, they are not explicitly factored into our estimate of the Bay’s value.

The best we can do to estimate the Bay’s overall economic value is to compile information on its tangible “products and services” – the “parts” of the entire Bay industry.

In 2004, the Blue Ribbon Finance Panel report estimated that the Bay’s value was more than one trillion dollars related to fishing, tourism, property values and shipping activities. If you were to adjust that figure for inflation, the number would have increased to roughly $1.144 trillion by 2011.

A recent report released by the Chesapeake Bay Foundation provides some more specific examples of the economic benefits associated with the Chesapeake Bay ecosystem.

• The commercial seafood industry in Maryland and Virginia contributed $2 billion in sales, $1 billion in income, and more than 41,000 jobs to the local economy.
• The saltwater recreational fishery contributed $1.6 billion in sales, which then created more than $800 million of additional economic activity and roughly 13,000 jobs.
• Activities related to recreational striped bass fishing (such as expenses, travel and lodging) generates roughly $500 million of economic activity.
• Further upstream, nearly two million people go fishing in Pennsylvania each year, contributing more than $1.6 billion to the economy.

If you were to add income generated from forestry, recreational boating, ecotourism, heritage tourism, shipping, and many other industries, it’s easy to see how the “Chesapeake Bay Industry” could reach one trillion dollars.

That figure could be higher if we restored the health of the Chesapeake Bay and its rivers and streams to make them even more productive. When the Bay’s “products and services” decline, there are costs.

• A fish kill in the Shenandoah River watershed in 2005 – likely caused in part by poor water quality – resulted in roughly $700,000 lost in retail sales and revenues.
• The oyster decline over the last 30 years has meant a loss of more than $4 billion in Maryland and Virginia.

Investing in clean water technologies creates jobs and stimulates local economies. A recent study by the University of Virginia found that better agricultural practices, such as livestock stream exclusion, buffer plantings and cover crops, would generate significant positive economic impacts. Every $1 of state and/or federal funding invested in agricultural best management practices would generate $1.56 in economic activity in Virginia.

For urban areas, an analysis of the value of investing in water and sewer infrastructure concluded that these investments typically yield greater returns than most other types of public infrastructure. For example, $1 of water and sewer infrastructure investment increases private output (Gross Domestic Product) in the long-term by $6.35.

And what about the costs and benefits of regulation? A recent report by the Economic Policy Institute states: “Regulations are frequently discussed only in the context of their threat to job creation, while their role in protecting lives, public health, and the environment is ignored.” Furthermore, the same study reports that the Office of Management and Budget reviewed major regulations covering 2000 to 2010 and found that, each year, the benefits substantially exceeded the costs an average of seven times over.

No industry can survive using a model of constant production without reinvestment. The longer we go without “reinvesting our profits” into our “ecosystem machine” – via wastewater upgrades, critical habitat restoration, good development and agricultural practices, and other actions – the greater our costs are going to be in terms of our health, our quality of life, our pockets and the waterways we care about.