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Section 7: Determination of the National Economic Efficiency Impacts <br />of Proposed Critical Habitat <br />b <br />A. Direct Economic Impacts as National Efficiency Effects <br />Evaluating the national economic impacts of the changes in resource allocations for <br />recovering the endangered fishes requires comparing the levels of economic activity before <br />and after this reallocation of resources. An implicit assumption underlying such comparisons <br />is that the resource use in the without fish scenario is the highest valued use. Further, it is <br />assumed that the economy returns to a new equilibrium after the initial direct impacts have <br />worked through the economy. Thus, the projected allocation of resources for the with fish <br />scenario is the new highest valued use. These assumptions allow the comparison of the total <br />value of the output of the economy before impacts to the total value of the output after <br />impacts. The difference is the measure of the national economic impacts. The appropriate <br />measure of the cost of resources is their opportunity cost. This is the value of what these <br />resources aze capable of producing in their next best use. These costs or benefits are <br />sometimes referred to as efficiency costs or benefits. Specifically, national efficiency <br />measures are computed as changes in the consumer and producer surplus. These measures <br />capture the net gains and losses resulting from the resource reallocation. <br />Typically, economists have not been able to measure the generalized changes in consumer and <br />producer surplus, and, thus, approximate approaches have been developed. A value is placed <br />on the output change by utilizing existing prices. This assumes that the value of the direct <br />output given up in designating critical habitat is equal to the cost of the resources necessary <br />to undertake the new activities represented by the reallocation. This procedure yields national <br />efficiency impacts. <br />Computing national efficiency impacts in this fashion is an acceptable approximation if <br />several assumptions aze satisfied. First, to use prices to value the resources displaced by the <br />impact requires that the market for the good in question be free of distortions so that the <br />I-39 <br />