Bishop, 1978. The SMS approach is argued to apply in situations involving true Knightian un-
certainty and irreversibility, but actual applica- tions remain rare. Appeals to the SMS approach
are common in discussions of sustainability Folke et al., 1994Turner et al., 1994Castle, 1996,
often with respect to protecting at-risk species and biodiversity Randall, 1991Bishop, 1993.
In applying an SMS approach to protecting an at-risk species or set of species, the burden of
proof lies in demonstrating that the economic consequences of preservation activities are intoler-
able. What constitutes intolerable is to be decided by the social or political consensus process in any
particular case Farmer and Randall, 1998. How- ever, investigation of the types of considerations
that might constitute intolerableness is critical to the SMS approach as a pragmatic policy tool.
Following Randall 1991, invoking the intolera- ble cost argument to circumvent preservation
ought to require some ‘extraordinary decision process’.
Several sources have noted that the general structure of the ESA, as amended, is consistent
with the SMS approach Castle and Berrens, 1993Woodward and Bishop, 1997. In reviewing
the lengthy ESA process for the northern spotted owl in the Pacific Northwest, Thomas and Verner
1992 p. 637 make a similar argument, albeit without explicitly identifying the SMS approach
and see Booth, 1994 p. 238. For the case of endangered fishes in the Colorado River, Berrens
et al. 1998 use the results from federal court-or- dered US Fish and Wildlife Service USFWS
implementation to illustrate how the ESA was consistent with the SMS approach. Specifically, in
the exclusion process for designating critical habi- tat, the lack of severe economic costs was deter-
mined by comparing expected aggregate regional economic impacts against historical fluctuations
in the regional economy. However, this step to- wards implementing the SMS approach fails to
incorporate distributional concerns, which may be important in defining intolerable economic costs
of species preservation actions. Endangered spe- cies debates are often focused on the distribution
of economic consequences Brown and Shogren, 1998. Randall and Farmer 1995 acknowledge
that an SMS approach might be amended to included distributional considerations.
The case studies involve results from previous economic analyses done by or for the USFWS in
two prominent ESA cases: 1 endangered fishes in the Colorado River; and 2 the northern spot-
ted owl in the Pacific Northwest. These cases illustrate the general link between the ESA and
the SMS approach, but also bring out the impor- tance of including distributional and compensa-
tion issues in considering what might constitute intolerable costs.
2. The SMS approach: from ethical issues to providing practical guidance
Irreversible species losses involve intergenera- tional equity issues Norton, 1987. Present value
benefit-cost decision rules neglect fundamental ethical issues such as intergenerational allocation
of natural assets. Thus, it may be necessary to go beyond standard efficiency criteria Bishop, 1993.
One widely discussed alternative to standard benefit-cost analysis BCA is the SMS approach.
While the SMS approach begins with the assump- tion that preservation of at-risk species is a priori
beneficial, there is no ‘trump card’ Randall, 1991. With respect to protecting natural capital
assets for the future, the SMS approach has been viewed as falling between ‘strong’ and ‘weak’
sustainability perspectives Turner et al., 1994. The SMS approach is a conditional imperative,
recognizing the need to protect ‘critical’ natural capital e.g. species habitat, but remaining sensi-
tive to costs. Bishop 1980 p. 209 frames the ethical decision problem as: ‘To what extent is it
fair for the current generation to bear costs in order to reduce uncertainty faced by future
generations?’
Given this ethical decision problem, the condi- tion that economic costs not be intolerable is
typically represented as an aggregate condition under the SMS approach. But if costs are borne
unevenly, then grappling with the notion of what constitutes intolerable costs may involve current
distributional considerations, and potential com- pensation for those adversely impacted. Concern
for intragenerational equity is motivated by the same ethical mandate of fairness distributive jus-
tice as that underlying intergenerational equity Folke et al., 1994.
Farmer and Randall 1998 argue that trying to resolve our obligations to the future while weigh-
ing current interests imposes a ‘responsibility to seek consensus’ across moral arguments; thus, a
shift away from strict benefit-cost decision rules is not logically inconsistent. Certainly, potential ir-
reversibility coupled with a high degree of uncer- tainty and complex environmental goods that are
not priced and traded in markets imposes an exceptional burden on regular decision-making
processes.
1
Standard BCA assumptions may be violated. BCA is strongly consequentialist and
welfarist Berrens and Polasky, 1995Randall and Farmer, 1995, requiring identification of all out-
comes, assuming complete individual preference orderings, and depending on accurate measure-
ment and aggregation of individual values.
Assigning monetary values to species preserva- tion benefits may be especially problematic. Both
supporters and critics of nonmarket valuation, including controversial applications of the contin-
gent valuation CV method to measure nonuse values, call for further exploration of the SMS
approach Vatn and Bromley, 1995Loomis and White, 1996. In their recent meta-analysis of
endangered species CV results, Loomis and White 1996 argue that there is important systematic
information about preservation benefits. How- ever, acknowledging various composition and
adding-up problems, they stop short of endorsing the use of such values in strict benefit-cost deci-
sion rules, and instead support an SMS approach to protecting endangered species.
Others argue that a valid SMS approach should necessarily require the measurement of preserva-
tion benefits including nonuse values in the defining the net social costs of preservation e.g.
Crowards, 1998.
2
While one can support the logic for including estimated species preservation
benefits in defining net social costs, the practical concern lies with validly estimating nonuse values.
Economists remain highly divided on the validity of CV for estimating nonuse values Diamond
and Hausman, 1994Hanemann, 1994. As indi- cated by recent history with natural resource dam-
age law Jones and Pease, 1997, the potential for formally requiring inclusion of nonuse values in
ESA economic analyses would appear unlikely.
3
Whether or not the full range of nonmarket and social values are included in defining the net
social costs of preservation actions, the protection offered by the SMS approach is not absolute, and
this poses a conundrum. An SMS approach ini- tiated out of concern for incomplete articulation
of our obligations to the future, and even current social policy objectives
4
, must be checked by a measure of what costs are tolerable. As such, the
SMS approach often appears to be a muddle through process Hohl and Tisdell, 1993Rolfe,
1995.
This might appear to leave real world practi- tioners with little guidance, and condemned to
oversee a slow, cumbersome process. But, by not
2
Crowards 1998, p. 308, argues for including the ‘rela- tively near-term quantifiable benefits’ of preservation. Gowdy
1997, p. 38, argues to extend the SMS to include the preser- vation benefits of ‘evolutionary potential’.
3
Brown and Shogren 1998, p. 13 argue that despite ex- traordinary analytical difficulties, ‘‘determining at least a plau-
sible range for these values would seem to be essential if we are to make judgements about the benefits of preservation.’’
Berrens et al. 1998 argue that while the SMS approach is not dependent on nonmarket valuation information, estimates of
preservation benefits could be considered within the ESA process, as a kind of separate piece of economic information
which may have its own distributional issues. Further, if economic studies are impact analyses, then this presents ques-
tions of consistently combining with estimates of preservation benefits.
4
For example, a recurrent ESA policy question is what is the exact preservation objective e.g. individual species, ecosys-
tems or genetic diversity? Metrick and Weitzman 1998 provide evidence that agency actions have tilted toward pro-
tecting ‘charismatic megafauna’.
1
Several recent theoretical investigations provide support for the SMS approach as rational public policy in situations of
Knightian uncertainty and irreversibility Woodward and Bishop, 1997Palmini, 1999.
taking seriously the ambiguities that initiate con- sideration of the SMS approach, attempts to rec-
oncile to pre-articulated social objectives miss the point. Ambiguities about how to balance current
concerns with duties to the future ‘compels a resource manager to regulate by consensus’
Farmer and Randall, 1998. Consensus processes can be focused by anchoring to relevant and
familiar issues. To the extent that the dimensions of preservation costs size and distribution are
immediate, these costs can serve as a touchstone.
Some scholars express legitimate concern that an unarticulated value for the full range of social
benefits of preservation disadvantages those pro- tections against clearly articulated costs Norton,
1995; e.g. in the rush to get something done the difficult-to-measure benefits of preservation may
not be fully considered. An alternative concern is that management practices for species preserva-
tion may frequently be delayed as is common under the ESA in measuring impacts and their
distribution. Such delay risks unnecessarily over- riding protection actions in the political consensus
process, since unmitigated costs can mount. The sooner these costs and their distribution are artic-
ulated, the less muddled the consensus process can become. Thus, working to some political con-
sensus on what constitutes intolerable cost is a central issue. Properly conceived, the SMS ap-
proach is a collective choice process and not just identification of safety standards.
3. Linking the ESA and the SMS approach
