The Endangered Species Act (Act) of 1973, as amended, assigns the U.S. Fish and Wildlife Service (USFWS) the responsibility for listing species of plants and animals in the United States whose existence is either threatened or endangered. After a species is listed, the Service is responsible for, among other things, developing recovery plans, reviewing proposed federal actions to ensure that they do not compromise recovery efforts, and designating critical habitat for listed species. Such critical habitat designations, at least in certain situations, can alter economic activity in critical habitat areas that might otherwise be of detriment to certain species. Although the Act has no provisions for studying the economic consequences of listing threatened and endangered species, it does require the Service to assess the economic impacts of all proposed critical habitat designations. As a result, economists have been participating in the ongoing process of designating critical habitat for endangered species and assessing the economic impacts of such designations.
Critical habitat designations impose use restrictions on lands that can change the way in which economic resources are allocated. Threatened and endangered species are usually listed because the current allocation of resources has resulted in excessive habitat degradation. Such adverse modification of natural habitat is generally due to economic activity that has occurred as a result of human settlement and economic development. Resources are allocated to particular uses as a result, and stabilizing and/or reversing this development requires that these resources be allocated to other uses.