Surfonomics quantifies the worth of waves
By Gregory Thomas,
In 2002, a surfer named Chad Nelsen enlisted an economist at Duke University to help put a price tag on a popular surfing spot on Puerto Rico’s northwest coast. Nelsen’s idea was novel: to prove that the waves breaking on the beach constituted a multimillion-dollar asset and persuade the local town to take pains to preserve it.
Real estate developers were after another multimillion-dollar asset: the views from the beach, which would be the selling point for three high-rise condominiums they planned to build.
Surfers and environmentalists feared that the construction at Rincon, the village in Puerto Rico, would change the flow of sediment around the beach and bury a reef that created the surf break. Nelsen sought to show that without the reef, there would be no waves, no surfers and, ultimately, a big drop in tourism dollars.
“We found that people were buying second houses there just for the surfing,” said Linwood Pendleton, the Duke economist who assisted Nelsen and is a chief economist for the National Oceanic and Atmospheric Administration. “It was contributing literally millions of dollars a year to the local economy.”
Rincon and its world-class wave break, discovered by surfers in the late 1960s, embodies a cycle that’s as regular as the tides: Surfers trek to remote reaches of the globe in search of the perfect wave. They discover prized beaches. Word gets out. Tourists pile in. Developers seize land and opportunity. Construction alters the wave break. The surf loses its edge.
Surf advocates have long argued that Mother Nature is priceless, invoking geological and hydrological mechanics that distinguish the character and appeal of the waves. In a new strategy, Nelsen and a handful of other surf intellectuals are letting go of lofty environmentalist rhetoric and fighting economics with economics.
“Those of us who really love the ocean have an instinct when we see beautiful places like this to think that they’re priceless and to think that the commodification of nature, and putting price tags on everything, is the root cause of nature’s destruction. . . . I think that’s actually counterproductive,” Jason Scorse, director of the Center for the Blue Economy, said in a TEDx talk in April. Scorse is the author of the book “What Environmentalists Need to Know About Economics” (2010). “When nature is undervalued, we make bad decisions.”
Rincon was a rare victory for surfers. The international campaign to protect the wave break, led by the Surfrider Foundation, an advocacy group, blocked the condo proposal and persuaded lawmakers to designate Tres Palmas, the name of the break, as the heart of Puerto Rico’s first marine reserve.
And it helped launch the science of “surfonomics.”
Intrinsic value in a wave
In March, Nelsen, 42, completed a doctorate of environmental science at UCLA, where he studied the economics of surfing. Surfonomics is an offshoot of natural resource economics that seeks to quantify the worth of waves, both in terms of their value to surfers and businesses and their non-market value — or how much people would be willing to pay not to lose them.
“The assumption is often that surfing is worth zero dollars,” said Nelsen, environmental director for the Surfrider Foundation. “It’s taken for granted. It’s not perceived as being a viable and important source of economics, particularly with decision makers in coastal zone management that we’re talking to all the time.”
To prove there is intrinsic value in a wave, Nelsen started at the beginning. A report he produced last August tabulates the number of surfers in the country and how much money they shell out for the privilege of riding the waves. After surveying more than 5,000 surfers, Nelsen concluded that about 3.3 million people in the country surf 108 times a year, drive an average of 10 miles per session and contribute at least $2 billion to the U.S. economy annually.
“The report is to demonstrate that, hey, there’s a lot of surfers in the U.S. They go to the beach a lot, and they spend a lot of money in these communities,” Nelsen said. “Therefore, you should take their interests seriously.”
In part, the survey is an effort to shake the stereotype of the shaggy stoner who lives out of a van and doesn’t contribute to society. Nelsen calls that misconception “the Spicoli virus” in reference to Sean Penn’s iconic surfer-slacker character from the 1982 movie “Fast Times at Ridgemont High.” The median surfer these days is 34 and pulls in more than $75,000 a year, according to Nelsen’s study.
“Even 10 years ago, the posture was one of trying to dismiss the arguments of these ‘crazy surfers,’ ” said Michael Walther, a coastal engineer in Florida whose research persuaded officials in Monmouth County, N.J., to rethink a beach renourishment plan that would have buried a surf break at Sandy Hook in 2001.
Building proposals for a new harbor in Los Angeles, a cruise ship terminal in Australia, a factory in Mexico or a jetty in France don’t account for potential damage to surf breaks that bolster nearby communities with tourism dollars. When surfers have spoken up, Nelsen said, their arguments have tended to be passionate but abstract and lacking a concrete link between the building, the break and the local economy. Meanwhile, the argument of real estate developers is more easily couched in economic terms: job creation, revenue and growth.
A simple case study: A world-class surf break at Madeira, an island off the coast of Portugal, suffered a damaging blow when the government installed a seawall in the 1990s. The idea was to defend cliffs against erosion to prepare the area for tourism infrastructure. U.S.-based Save The Waves Coalition objected, saying the wall would make surfing more dangerous. The seawall was built, and surfers stopped visiting en masse. Save The Waves Founder Will Henry thinks that they lost the fight because they weren’t properly equipped.
“If you talk in dollars, that’s a language the government speaks,” Henry said. “We didn’t have any real data at the time to say, ‘This asset is going to be worth X amount of dollars over the next 10 years.’ It just didn’t exist.”
Save The Waves has since produced two studies evaluating the economic value of surf breaks, in partnership with academics at Stanford University, the University of Oregon and the University of Hawaii. Mavericks, an epicenter of big-wave surfing in Half Moon Bay, Calif., is worth $23.9 million annually in a report produced in 2010. A wave at Mundaka, off the coast of southern Spain, brings in about $4.5 million to the local economy each year, according to a 2007 study.
Economists calculate the value of a surfable wave by tabulating visiting expenses of surfers and surf spectators. Some of the indicators they watch: distance traveled, visits per year, time taken off work, length of stay, drive time, gas money, parking fees, food breaks, gear rentals. The theory is that such figures represent how much money a person is willing to part with for the experience. At Mavericks, for example, economists calculated that more than 420,000 people, not just surfers, visit each year to watch the waves and spend an average of $56.70 per visit.
‘Waves are our Yosemite Valleys’
The practice of protecting natural resources for public use is as old as Yellowstone, the country’s first national park. It was established in 1872 “for the benefit and enjoyment of the people,” according to the statute signed by President Ulysses S. Grant. The field of natural resource economics is a natural outgrowth of the same idea. It began as a means of quantifying value in mining, fishing and timber industries, and it provides a method of assessing dollar values for travel and activities around places where people recreate. The methodology gives economists tools to gauge how much people are willing to pay to go skiing or whale-watching or to hike the Appalachian Trail.
“These waves are our Yosemite Valleys,” Nelsen said. He believes they deserve the same considerations and protections. “We think of these as national treasures.”
The same way national parks set use restrictions on select areas, surfers are beginning to induct unique wave breaks into what they call World Surfing Reserves. The designation was created in 2009 by Save The Waves and modeled on an Australian organization called National Surfing Reserves that has had success coordinating protection plans with government officials for about a dozen surf breaks. What is often lacking is the financial element — key to swaying decision makers, said Neil Lazarow, an economist who evaluated surfing on Australia’s famed Gold Coast.
The movement to apply economics to environmentalism got a boost last year from the President’s Council of Advisors on Science and Technology. In a report issued to the White House, the council recommends investing in research surrounding “environmental capital,” or non-consumptive natural resources that people will pay to enjoy. The idea that self-sustaining resources such as waves don’t attract dollars simply because you can’t count people moving through a turnstile is outdated thinking, said Pendleton, the Duke economist.
“We’ve tended to focus on big industrial uses of the outdoors while forgetting about these much more sustainable uses of the outdoors, especially recreation,” Pendleton said. “And we do it at our own economic peril.”
Economic studies of activities like surfing are critical when economists are calculating damage assessments in the wake of environmental disasters, such as the Deepwater Horizon oil spill in the Gulf of Mexico.
“Unfortunately, we’ve been performing a lot of crisis-driven studies where we are figuring things out after the fact,” said Charles Colgan, chief economist for the National Ocean Economics Program, a project of the Monterey Institute of International Studies. “We don’t want to wait for the next oil spill or hurricane to figure out what’s going on. It’s a costly way to do things.”
As industries such as commercial fishing have taken a plunge, tourism has come to account for a larger chunk of the ocean economy. Commercial fishing produced slightly less than $5.7 billion in 2009 while coastal tourism and recreation accounted for more than $61 billion that year, according to NOAA reports.
Colgan thinks the rise in coastal tourism is partly because of the economic downturn driving people to cheaper housing inland. Because it is too expensive to live where they can surf, people are traveling farther to do so.
“As growth is shifting inland and people are traveling to the coast from further inland, the idea of surfing as just a cultural issue on the coast needs to be shifted,” Colgan said. “It’s not about that one stretch of beach. It affects a larger geographical area.”
A risky proposition
Surf economists admit that surfonomics is a risky proposition. The few reports documenting the value of waves have not, so far, been challenged or scrutinized by developers. But what if, for example, a wave worth $24 million annually is pitted against a new hotel that would bring in $30 million a year, Surfers Against Sewage, another advocacy group, says in a 2010 report on ocean resources. “Are the developers then in a position to ‘buy’ that wave from the surfers?”
“That’s everyone’s fear, especially when you start stacking up recreation against offshore oil,” Pendleton said. “How can we ever compete?”
Scorse, the marine policy advocate, is in the final stages of a study that he said proves that surfing contributes potentially hundreds of millions of dollars — not in tourism, but in property tax revenue. He said his research, which he expects to complete this year, shows that houses within walking distance of surf spots in Santa Cruz, Calif., are worth far more than coastal homes farther from great wave breaks.
Nelsen, for his part, isn’t worried about the implications.
“We’re not arguing that the world is one big cost-benefit analysis,” he said. “You could probably make more money on Yosemite than you make today if you filled it with condos. But no one is arguing that we should. Surfonomics is just one measure of the value of these resources. It’s not the only measure.”