Modeling the Lake George Watershed Economy:

a Pilot Education and Training Project

Jon D. Erickson, Principal Investigator

Andy Bahn, Graduate Research Assistant

Department of Economics

Rensselaer Polytechnic Institute

Troy, New York

This is a pilot project to build an integrated social accounting matrix and geographical information system of the Lake George watershed economy, and begin to develop scenarios that demonstrate the interrelationship between economic change, land-use, and aquatic health. The model and preliminary scenarios will be demonstrated at the Lake George Association’s “Water Smart Communities” conference on October 9, 2001.

Capturing the complex interrelationships between economy, social institutions, and the environment will begin with an empirical analysis provided by a social accounting matrix (SAM). Social accounting is an extension of input-output analysis, an analytical tool that models the interrelationship among different sectors of an economy. A SAM table is an expanded matrix of economic flows between sectors (categorized by Standard Industrial Classifications) and institutions (households, government, enterprises). An expanded SAM with environmental accounts further demonstrates the interconnections between economic sectors, social institutions, and the supporting environmental/natural resource base.

This conceptual framework is made operational in the form of a mathematical model of an economy defined in terms of different economic sectors and institutions. A SAM can detail flows among sectors of an economy, characteristics of the labor force, income distribution, land use, and various kinds of pollution for a given year. Impacts from new job, household, or industry creation can be estimated, including both the direct and indirect effects, as demands from a new activity ripple through economic sectors. Economic sectors produce both economic output and waste streams by consuming inputs from other industries, labor from households, and natural resources from the environment. Institutions, such as households, consume goods and services from industries and create their own demands on the natural environment through these consumption patterns and lifestyle choices. The impact on a local economy of tourism expansion, for example, can be seen through changes in income distribution, regional capital investment, energy and land requirements, or specific pollutants entering watersheds.

The creation of a SAM to study economic change and water quality in the Lake George Watershed Economy will begin with the Rensselaer Economics Department’s IMPLAN (Impact analysis for PLANning) database for New York State. IMPLAN tables can be created for any collection of counties or zip code groups in the U.S. based on national and state databases, and then modified using best available local data (see, www.implan.com). Professors Erickson and Gowdy of the Economics Department are currently working on a number of projects using IMPLAN SAM models to project economic impact of land-use change along the Albany and Rensselaer County Hudson waterfront, in Dutchess County in the lower Hudson River Valley, and in the Adirondack Park (see www.rpi.edu/dept/economics/).

A second component to this modeling work is integration to a watershed-level geographical information system (GIS). Most economic models do not include spatial variation of activity, however, location is critical to estimating environmental loading. The SAM model can overcome this limitation through integration with a GIS of land use, household characterization, business location, and geophysical attributes such as watershed boundaries, slope, soil type, and land-cover. Rensselaer’s Economics Department has partnered with MapInfo, Inc. (an industry leader of GIS software and data development, www.mapinfo.com) to build an extensive GIS database for New York State. The Ecological Economics computer lab maintains GIS workstations which host all census-derived demographic data for New York State by county, zip code, and census groupings; Business Point data by 8-digit Standard Industrial Classification; and tax parcel data from the New York Office of Real Property Services with geophysical overlays from the U.S. Geological Survey. GIS data will be used to (1) characterize the industrial and household sectors of the SAM model, (2) provide a land inventory for local development scenarios, and (3) characterize land parcels by location and geophysical attributes.

In future work, to link economic scenarios of the SAM model with land-use change in the GIS model, parcel characteristics can be used to estimate parcel-specific development probabilities and land data linked to water quality parameters. As part of this pilot project, we will begin to develop these linkages (from economic scenarios, to land-use, to water quality) in cooperation with Rensselaer’s Darrin Freshwater Institute in Bolton Landing. If funding is extended for the Fall 2001 semester, an integrated model will be designed using PowerSim system modeling software (see www.powersim.com) and available water quality data.