ABSTRACT
Welfare Economics ................................................................................................108 Economic Value .....................................................................................................110 Cost-Benefit Analysis ............................................................................................113 Complementary Analyses ......................................................................................114 Game Theory .........................................................................................................115 Ecological Economics ...........................................................................................116 Applications of Ecological Economics .................................................................117 Conclusion .............................................................................................................118 Acknowledgments..................................................................................................118 References
This chapter discusses economic analysis in relationship to watershed management. As with the introduction to ecological risk assessment that was presented in Chapter 3, the goal here is to provide sufficient background to make the succeeding chapters understandable to the noneconomist, rather than to provide a comprehensive introduction to the topic. First, it describes welfare economics as the foundation of environmental and natural resource economics, and the related concept of economic value. Next, this chapter introduces some tools that are used for the valuation of environmental goods and services, and some watershed-related applications of those tools. Then it presents game theory, a set of approaches for modeling decisions that are based on economic theory. Finally, it discusses ecological economics, an emerging field that has criticized the mainstream economic paradigm, and its potential contribution to the practice of watershed analysis.
