Exam 2 Study GuideChapter 4: Tourism, The Environment and Economics- The Role of the Natural Environmento Services provided by the natural environment for society: Resources for wealth creation. Ability to act as a waste disposal system. Providing us with aesthetic appreciation and landscapes for recreation. Provides us with a life support system; oxygen and water.- Economic Growth and Human Welfareo One of society’s primary concerns is increasing the “standard of living”.o The conventional view to achieve this objective is through higher levels of production and consumption or “economic growth”.o Economic growth has come to be identified as a way of improving people’s welfare.o Tourism may have a significant role in wealth creation within the context of economic growth. o From the perspective of government, the primary concern with tourism has been as a vehicle for economic growth.o The most important benefits are: Foreign exchange earnings Reduction of the trade deficit Employment creation Increased expenditure Linkages to other sectors of the economy Diversification of the economyo Tourism can be developed with relatively little financial investment, when compared to other industries. o The rationale has therefore been based upon economic benefits with relatively little consideration on its impact on the environment.o The terms “standard of living” and “quality of life” are used interchangeably.o However, they mean different things. “Standard of living” measures economic welfare; “quality of life” includes environment, culture activities, levels of health, and religious or spiritual life. o The degree of success in achieving economics growth is measured by the gross domestic product (GDP) and gross national product (GNP) o GDP is the value of all the goods and services produced over a period of time.o GNP has been commonly used to measure the total production of the country. o GDP: the value of the production of all the goods and services in a country’s economy, over a certain time period.o GNP: a further refinement of the measure of GDPo They are key indicators of the success of economic policyo Both tell little about the quality of the environmento GNP only measures things that are bought and sold for cash, it does not take into consideration clean air, pure water, and natural beauty. - Tourism and Growtho Many view tourism as a measure of pursuing economic growtho It is important to recognize that only a portion of the money spent by tourism will stay in the destination economy.o The reason is that the money spent leaks out of the economy.o The leakage occurs when interest charges are paid on loans; import ofmaterials and equipment; the employment of foreign workers; taxes paid to the government, etc.o Package tours have a high leakage factoro Approximately 80% of all expenditures going to airlines, hotels, and other international companies.o The cost of air transportation is about 40-50% of the total cost of travel vacation.o It is important to consider the “real” economic benefits of tourism during the planning stage before development. Considering community-based services and products- The World’s Tourism Earners in 2005o U.S. $81,700 billiono Spain $47,900 billiono France $42,300 billiono Italy $35,400 billiono United Kingdom $30,700 billion- Problems of Externalitieso Tourism development can lead to negative effects.o For example, pollution of the sea can lead to the contamination of stocks impacting the fishing industry. o Increased air and car traffic could lead to air pollution and incidences of asthma in the local population. o There is a discrepancy between “private costs” of production and full “social costs” in a society. o Externalities arise because resources such as clean air, water and landscapes, can be classified as “public goods”o One way to correct the situation is to have the government impose an environmental tax on the hotels.o The imposition of a fine on the hotel means that the external cost of the operations are internalizedo The producer (the hotel) will then be paying for the compensation of fishermen for their loss of opportunity to fish and for the health care to treat residents.o The hotel management may pass these additional costs to their guestsby raising their rates. o One of the problems with the “polluter pays” concept is estimating thevalue of the resources being damaged.o Another problem is establishing the “cause and effect” relationship, which makes it difficult to isolate the cause of an environmental problem. o Another method of the application of the “polluter pays” principle is through taxation. o This form of taxation is known as “green taxation”.o Green taxation has been considered as a method to close the gap between private and social costs. - Public or Collective Consumption Goodso In the tourist industry, many of the impacts caused by development are related to resources with open access and with few legal controls. o Finding a solution to the overuse of the earth’s resources is a complicated issue. o The fact that public goods are non-exclusive and considered as having zero cost means that the market for these goods cannot operate. - Tourism, Economics, and Conservationo Economists have tried to examine how economics can be inclusive of the natural environment.o Once method is based upon consumer preference for the environment.o Putting an economic value on environmental assets is difficult.o Society, however, puts values on environmental assets by deciding which policies are implemented. o Individuals and non-governmental organizations give money to protect the environment. o The environment must have an economic value.o Willingness to pay (WTP) is a measure of an individual’s preference for a good in the market place. o The “Travel Cost Method” (TCM) has been the most widely accepted method.o It is based on what people spend on traveling to recreational sites.o Tourists place a “value” on the quality of their destination by spendingmoney and time to travel there. o If tourists wish to see wildlife then it is possible to give it a market value.o There are some species of animals that are not attractive to tourist, but have a role to play in the ecological system.o If natural habitat is judged not to have sufficient economic value, then other options for its development are considered. o Revenues