ABSTRACT
This chapter provides the internalization of environmental externalities associated with the conversion of forested wetlands to agricultural uses, so that the socially optimal time-path of resource use can be identified. A model of socially optimal wetland use is developed, the structure and parameters of that model bearing a well-defined relationship to the estimated econometric model of private-market wetland usage. An historical welfare analysis is carried out, in which the simulated optimal use of wetlands is contrasted with the actual use of wetlands during the period 1935-1984. Employing the simulation model of socially optimal forested wetland use, the net environmental benefits of forested wetlands are internalized. The simulations reports suggest that if all wetlands in the sample area had annual ecological values in the range of $80 to $150 per acre, zero-level net depletion of forested wetlands in the area during the 1935-1984 periods would have been socially optimal.
