VALUE OF IMPROVED LONG‐RANGE WEATHER INFORMATION

Richard M. Adams, Kelly J. Bryant, Bruce McCarl, David M. Legler, James O'Brien, Andrew Solow and Rodney Weiher

Contemporary Economic Policy, 1995, vol. 13, issue 3, 10-19

Abstract: An important human welfare implication of climate involves effects of interannual variation in temperature and precipitation on agriculture. Year‐to‐year variations in U.S. climate result from El Niño‐Southern Oscillation (ENSO), a quasi‐periodic redistribution of heat and momentum in the tropical Pacific Ocean. The study described here represents a preliminary assessment of the value to the entire U.S. agricultural sector of improved ENSO forecasts in the southeastern United States. This interdisciplinary assessment combines data and models from meteorology, plant sciences, and economics under a value of information framework based on Bayesian decision theory. An economic model of the U.S. agricultural sector uses changes in yields for various ENSO phases to translate physical (yield) effects of ENSO changes into economic effects on producers and on domestic and foreign consumers. The value of perfect information to agriculture is approximately $145 million. The economic value of an imperfect forecast is $96 million. These results suggest that increases in forecast accuracy have substantial economic value to agriculture.

Date: 1995
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