Entrepreneurship and coastal resource management.

AuthorRinehart, James R.

Many environmental problems along the coast are fundamentally no different from those in the interior parts of the country. Congestion, noise, and air and water pollution concern Dallas and Kansas City as much as they do Myrtle Beach or Miami. But beaches and estuaries are especially sensitive to economic development, and coastal areas of the United States are experiencing more rapid development than inland areas. The number of people living within fifty miles of the U.S. coastline rose from 61 million to 130 million between 1940 and 1988 (Long 1990, 6). More than 50 percent of Americans currently live within fifty miles of the shoreline, but the figure is projected to rise to 75 percent by 2010.(1) The number of nonresident tourists traveling to coastal areas has also grown substantially. Many, if not most, of our coastal environmental concerns stem from population growth pressure.

Poorly planned development in environmentally fragile coastal areas can cause shoreline erosion, polluted water, noisy and crowded surroundings, and extensive loss of trees, wetlands, fish and other wildlife. Population growth reduces land availability, encouraging developers to fill in marshes, destroying fish and animal habitats. The clearing of land destroys vegetation and trees, which increases runoff and ruins the overall natural beauty of the environment. Damage to streams, marshes, and marine life results from the use of pesticides, fertilizers, toxic chemicals, and other pollutants. Storm water runoff and effluent from sewage treatment facilities also cause trouble. The large amounts of nitrogen and phosphorous that pour daily into estuaries result in algae blooms that remove oxygen from the water, sometimes producing fish kills. Development also leads to the withdrawal of large amounts of water from aquifers, which causes salt infiltration and reduces water quality.

Shoreline erosion is a problem along much of the nation's coastline. The U.S. Army Corps of Engineers estimated in 1971 that 40 percent of the total shoreline of the lower forty-eight states was experiencing significant erosion (Morris 1992, 122). Wind and wave action associated with storms and high tides bring about natural erosion, but people effect much erosion, too. Damming rivers restricts the flow of eroded rock, which is the source of much of the sand on beaches. Destruction of sand dunes, sea oats, trees, and grasses removes natural protection, leaving the shore more vulnerable to ocean waves and currents, thus imperiling property and lives. Barrier islands, landforms that protect the mainland from the direct force of waves and storms, are especially susceptible to erosion. These dynamic islands are constantly eroding or accreting because of changing energy conditions (Leatherman 1988).

Erosion control techniques employing hard devices such as seawalls, groins, and jetties may actually accelerate beach loss rather than prevent it (Platt et al. 1992, 8). Another method of dealing with beach loss involves beach restoration via sand replenishment. This process, which trucks sand from inland pits or pumps sand from rivers or the ocean, is expensive and short-lived. Ocean City, Maryland, replaced nine miles of oceanfront sand at a cost of $51.2 million, only to see the bulk of it wash away during heavy storms in the fall of 1992. Most of the renourishment sand from a 1993 project at Folly Beach, South Carolina, that cost $12 million was washed away within two years ("Beach Programs" 1995). Similar stories abound.

Market Failure and Government Involvement in the Coastal Region

Many coastal resources exhibit characteristics of a common pool resource (CPR). This term refers to a resource for which exclusion of potential users is difficult and the use of which by one individual diminishes the amount available to others. When sufficient demand exists and access is not controlled, the result is the classic "tragedy of the commons" (Hardin 1968). Ocean fisheries, which tend to be overfished because users have little incentive to conserve the resource, exemplify this problem. Marshes, estuaries, beaches, and barrier islands all have aspects of CPRs and suffer from what some call market failure.

As estuaries and marshes are owned in common, no one prevents runoff from roadways and developed areas from polluting these critical waters. As development has expanded in coastal areas, increased pollution has reduced the productivity of these valuable resources. In Hilton Head, South Carolina, the recent closure of oyster beds signals such problems. In fact, a third of the 600,000 acres of South Carolina coastline has severe restrictions on oyster harvesting due to pollution (Fretwell 1995, A18). Nationally, the percentage of shellfish beds closed due to pollution has increased from 20 percent in 1965 to 37 percent in 1990 (Stipp 1991, B1).

Sand is another example of a CPR. Wider beaches provide recreational and protection benefits for property owners on and near the ocean. Sand constantly moves, however, and property owners build jetties and other constructions to trap the sand for their own uses. These techniques can deny sand to other areas, reducing benefits for their owners. Numerous controversies have developed over who has the right to sand.

Environmental problems in coastal areas certainly cry out for solutions. The question is: What is the most efficient way to solve the problems? Various methods, including government regulation,(2) government ownership, market incentives, and privatization might be utilized in an attempt to correct the negative effects associated with CPRs.

Until 1960, the government did little to regulate development in coastal areas. For instance, Michael Danielson (1995, 238) reports that in the initial phases of the development of Sea Pines on Hilton Head Island, South Carolina, in the late 1950s and early 1960s, public regulation was minimal and government brought few pressures to bear on developers to behave in an ecologically responsible manner. However, public pressure on the government to become involved intensified in the late 1960s. The National Flood Insurance Act (NFIA), passed in 1968, was intended to promote wise development of flood-prone areas by encouraging floodplain ordinances designed to reduce future flood losses.(3) Additional direction came from the Coastal Zone Management Act of 1972, which provided funding for coastal states to plan, evaluate, and control shoreline erosion.(4) The Coastal Barrier Resources Act (CBRA) of 1982 (PL 97-348) provided a means of slowing development in the coastal zone by removing selected areas from government subsidized insurance and other financial assistance. The Coastal Barriers Improvement Act of 1990 (PL 101-591) further strengthened CBRA.

Also, state governments have initiated efforts to protect coastal areas through regulation and public ownership. In South Carolina, state regulation of coastal areas began with the Coastal Management Act of 1977. The state's regulatory powers were broadened by the 1988 Beachfront Management Act (SC 49-39-250) and revised again in 1990. Permits are now required before dredging or filling activities and dock, pier, and bridge construction can begin. Most other states with shorelines have enacted similar legislation.

Problems with the Government Approach

Recognizing market imperfections in the provision of environmental goods is one thing; improving matters through government regulation is another. A recent study of Oregon's coastal management program (Good 1994) finds that state policies designed to protect beaches are often ineffective. Although the state's policies give preference to hazard avoidance and nonstructural means of erosion control, the methods generally used are seawalls and revetments, which can damage neighboring properties. The study suggests revising the state's laws as a means of solving the problems.

The government does not necessarily do a better job than the free market in the provision of environmental amenities. First, it is difficult and costly for the government to measure the benefits and costs of its actions. Second, government bureaucrats generally are not liable for their actions. Government decision-makers do not bear the full weight of the costs associated with their actions: costs are diffused, and cost shifting is rampant. Third, government managers do not and cannot know the value of tradeoffs; that is, they cannot know the relative values that individuals place on nonmarket goods such as environmental quality versus other goods and services. Opinion surveys may help, but because respondents do not actually bear the cost associated with their answers, the results are questionable.(5) Fourth, special interest groups, such as real estate developers, environmentalists, and investors, always attempt to influence government decision-makers to see things their way. Often government policy winds up being compatible with the lobbyists' wishes.(6) Finally, no competitive discipline exists in the government sector.

Unfortunately, in environmental matters government bureaucrats often make matters worse. For instance, government-subsidized flood insurance, provided by the 1968 NFIA, has been a significant stimulus to overbuilding in coastal areas (Miller 1975, 2). Government funded infrastructure subsidized or built by agencies such as the Environmental Protection Agency (EPA) and the Army Corps...

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