Saturday, 8 August 2009

Time as a Major Barrier to Sustainable Development

There are many barriers to sustainable development, including

  1. Just defining what sustainable development is,
  2. Trying to making connections between sustainability issues that exist at different scales (from personal to community to global),
  3. Trying to make connections between sustainability issues that exist in different industries and activities (total life cycle costing issues), and
  4. Deciding how to properly balance environmental, social and ecological issues.

Most of these issues are mentioned in literature on sustainable development (including my study area of sustainable tourism) in some way or another.

One major challenge, however, that seems to never come up (please correct me if I am wrong) is the limitation of the human perception of time. "Be here now" is, unfortunately, how most of us behave too much of the time. It is extremely difficult to keep a long term time-horizon in mind in our day-to-day behavior and in our short-term, and even long-term, decision making.

For example, when we study major issues related to the environmental or social changes that the communities and the world in general have experienced, no matter what the methodology that we use, we are always limited to looking at one or more single slices of time. We take snapshots of the climate, of a glacier, of an ethnic group, of a city, and of an experience. We then assume that these snapshots from the past have some continuity and can, therefore, inform us of the current and future situation.

There are many problem with this approach.

First, the same problem can (and will) change over time. Problems do not exist in isolation. They are part of a larger ecosystem of influences, that are themselves influenced by external, and usually unpredictable, forces. All of these shape and influence the problem we are studying, morphing the it to something that could be very different from the time that the original data was collected.

Second, change is rarely linear. While we can hope that a linear regression formula of past data points will project in the same way into the future, we can never really know this. Unknowable catastrophic event are relatively common in the natural, social and business sciences (as any amateur economist would to attest to these days, if they were honest).

And third, human perception is inherently time horizon limited. We can probably make a pretty good prediction of the impacts of most of our actions over a very short time period -- say one day to one month or a little more. We can try to plan out activities for a year, but beyond that many people do not even think about it. (For some, even a year is such a challenge that they do not attempt it.) The reason for our lack of confidence in our planning time horizons is because we know that things change over time, and they usually change in a non-linear (i.e., non-predictable) manner.

The result of three time barriers is that we are better at seeing and acting upon short-term problems, and we are very bad at comprehending long term challenges, with the result being that we almost never take action on long term problems, even when most people agree that doom is impending. The largely unpredictable future freezes us in our tracks, and out of fear we cling to a belief that the long-term will be the same as today.

Unfortunately, issues of sustainability are almost always long-term, but the most common sustainability efforts tend to be short-term. Examples include making a decision whether or not to have your hotel towel washed or to reuse it, and trying to decide whether or not to install a very expensive home solar electrical system, even though you will earn your money back in the long run of ten years or so. We have made great progress in developing green certification programs that address immediate, short-term sustainability issues in different economic sectors (such as for hotels and travel providers). But we are at a loss as to how to deal proactively with global warming at a societal level.

We can think of sustainability issues at different time scale horizons. For example:

Short-Term / Immediate Emergency Issues

  • Environmental Sustainability : More Pandemic Diseases
  • Economic Sustainability : Job Losses; Windfall Profits
  • Social Sustainability : Lack of Social Safety Nets

Near-Term Sustainability Impending Issues

  • Environmental Sustainability : Loss of Coral Reefs
  • Economic Sustainability : Shift in Job Locations & Types
  • Social Sustainability : Increase in Global Internet Access

Long-Term Sustainability Visionary Issues

  • Environmental Sustainability : Flooding of Coastal Cities
  • Economic Sustainability : Need for New Types and Areas of Education
  • Social Sustainability : Need for New Types and Forms of Governance

Long-term issues can be addressed at less cost and in a more gradual and less shocking manner if they are address early on. Over time, however, long-term issues will gradually become near-term and then short-term emergencies. Short-term and immediate issues are the most expensive and can require dramatic and sudden changes in policies, practices and behaviors.

Unfortunately, long-term solutions are also (1) the most difficult to project, because, as stated above, the problem will change over time, and (2) the most difficult to address because the limited time horizon of human perception makes political action almost impossible. But that does not mean that we should not try to think in terms of long-term sustainability in our personal behavior, our community actions, and our global outlook.

Alan A. Lew, Northern Arizona University. Originally posted on my Tourism Place blog.

Tuesday, 6 May 2008

On the Use and Abuse of Tourism Satellite Accounts

I posted a link to my blog post on Tourism is Not the World's Largest Industry! to the TRINET email discussion list, which is the largest email list for tourism academics worldwide. It generated a fair amount of discussion. One of the arguments used to support the importance of tourism as an industry was the Tourism Satellite Accounting system, which estimates the total economic and employment impact of tourism, taking into account the proportions of other industries that rely on tourism and travel in some way. (A satellite industry is any industry that is no part of the traditional core industries that comprise the System of National Accounts, which is the economic data commonly collected by all countries.)

An example of the statements that people made based on the TSA is seen in this post, which was also emailed to, and reposted on, eTurboNews:
  • May 05, 2008: eTN Mailbox: Tourism is NOT the world's largest Industry, so stop saying it is!

    "Tourism is not an industry in the definition of "industry" as per the System of National Accounts (SNA) the measure of contribution to an economy (GDP). Tourism is a consumption group (all tourists, domestic & international) and hence the set up of the TSA, (Tourism Satellite Account) which is apart from SNA but draws data from SNA.

    So when one says one should exclude transport for example when comparing Tourism to say Transport, one of the worlds biggest industries, one is denying the contribution towards transport made by Tourism (consumption group) By definition Tourism overlaps a number of industries and is a combination of partial outputs of many industries. most only partially associated with tourism. Put another way, if Tourism consumption were to cease, this will result in a reduction of the output of a number of industries, the biggest of which is probably the transport industry.

    The development of the TSA has been very important in understanding the economic impact of an "industry" defined by tourists and their consumption for the 'industry' in getting recognition by the community and public sector, for planning purposes.

    At the end of the day, it might not be the biggest industry in the world, but it is one of the biggest both as an employer and economically speaking. We could not say this with confidence prior to the TSA."

    (Click Here to see the original article on eTurboNews.)

Well, I think we could easily say that tourism is one of the largest industries in the world prior to the TSA system. The World Trade Organization data clearly shows this, and their data is based on the System of National Accounts (SNA), which is the core economic data collected by each country. In addition, I am not sure who wants to exclude passenger transportation from tourism, though I would argue for excluding cargo transportation, as I did in my previous post.

Anyway, in response, I posted my own assessment of the Tourism Satellite Accounting System.
  • "Well, of course I have my issues with how people use the TSA, as well...

    The TSA approach provides alternatives to traditional GDP and employment calculations, and which is probably more accurate in estimating the economic role of passenger travel and tourism in an economy. The best source [that I have seen] for understanding how this is done is this publication from the WTTC:

    There are a couple of caveats to this approach. First, while it is based on the best available data, there are holes in that data and assumptions must be made on how to fill those holes. These assumptions may or may not be valid in reality.

    , the data only looks at travel and tourism. It does not provide a comprehensive input-output model that compares travel and tourism (however it is defined as a partial industry) to other industries. Given the fuzzy nature of the partial-industries that the satellite accounting system is designed to address, I am not sure how this could ever be done. But more importantly, it means that you can not say that travel and tourism is the largest industry, or that it is second or third etc., based on the satellite accounting system. You can not compare the results of a TSA exercise with the results of GDP exercise based on traditional national accounts. They are related, but different beasts.

    What you would need to do is to run a satellite accounting exercise on other industries, some of which may claim large parts of the core of passenger transportation and tourism -- which I think would decrease the totals that people are currently coming up with in the TSAs. Short of that, you can only say that t+t makes a certain contribution to a certain economy based on certain assumptions.

    A quick review on Google found that Tourism appears to be the only partial-industry that has whole heartedly adopted the satellite accounting approach. The only other hits that come up are suggestions to use the satellite accounting approach to develop a green accounting model.

    As I said before, please let me know what I am getting wrong here.

    Cheers, Alan"
To further clarify the limits of the TSA, let's say you want to compare Tourism with Food and Entertainment and Education. All of these are what Neil Leiper (2008) refers to as "partial industries" because they all overlap (see reference below). You can come up with a total economic impact for tourism, using the TSA, but that number includes portions of Food (e.g., restaurants), Entertainment (e.g., amusement parks), and Education (e.g., museums). But a Satellite Accounting System for each of those industries would also include profits and employees that are in the tourism economy. This is why adding up the total profits and employees of all possible industries would probably 10 to 100 time larger than the real economy - depending on how the different industries are identified and defined.

Furthermore, I would guess that a satellite accounting system for Food would result in economic and employment impacts at least as large as tourism, if not larger. It all depends on definitions. Food could include all agricultural production, investments and transportation, along with all places and ways that food is sold and served, and portions of all other businesses that support the production, selling, transport and disposal of food in the world. Also included would be research and development of food, dietitians and other medical and quasi-medical diet clinics, food related television shows and books, and everyone employed in all of these roles. This is a huge economy and has a huge overlap with tourism.

My conclusion is that a satellite accounting system should NEVER be used to compare one industry with another because: (1) defining the boundaries of a satellite industries is subjective, flexible and easily changed; (2) anything can be defined as a satellite industry; and (3) the overlap between satellite industries varies and is not taken into account when comparisons are made.

TSA numbers can be used to benchmark industry changes over time, if definitions are fixed and not changed. They can also be used to see the degree to which tourism overlaps with different sectors of the economy. These are valuable planning tools. But, the TSA can not be used to claim that tourism is larger than any other specific industry, because under the satellite accounting system approach, each industry has a different definition.

One respondent in the "NOT Largest Industry" discussion on TRINET stated:
  • "TSA provide insights into where tourists spend, the extent to which different sectors gain from tourist spending, and the extent to which individual sectors are dependent upon tourism.TSA can serve as a medium for public information helping to raise awareness of tourism and its contribution to national economies. They help tourism stakeholders to better understand the economic importance of this activity; and by extension its role in all the industries involved in the production of goods and services demanded by visitors. TSA thus help to legitimize or give credibility to the tourism industry as a main economic sector in the minds of politicians and the general public."
And another person stated that:
  • "The technique is good but without the data it comes back to the rubbish in rubbish out syndrome. Also TSAs may show the significance of tourism they do not show the economic impact of tourism - for this you need the input-output model or CGE. But more fundamental to whatever model is used, the data collected relating to tourist expenditure globally is generally poor and without that the estimation of the size of the industry is impossible."

But I am still puzzled as to why passenger travel and tourism is the only industry that is using the satellite accounting approach to measure its impact...

PS: the following two related readings was posted in the TRINET discussion list:
UPDATE (6May08):

The following list was sent to me today. These are a sampling of items that are included in the WTTC's calculation of the Global Tourism Satellite Account, collected from the WTTC document cited above. They demonstrate the subjectivity and arbirary nature of the satellite accounting approach, and what the sender called "the WTTC-everything-and-the-kitchen-sink method of estimating the contribution of travel and tourism to the global economy."
  • 100% of boats with motor (even though the boat owner may never travel beyond the 50 mile distance perimeter, which is the criterion for being classified a 'traveler.')
  • More than 29% of all towing charges
  • More than 35% of all VCR and video disk players
  • Almost a third (29%) of all vehicle purchases and vehicle insurance
  • More than 38% of all treadmills (sports, recreation and exercise equip)
From the document: "Because the Federal Railroad Administration runs Amtrak, its entire budget was also counted as 100% Travel & Tourism."
  • US Federal Aviation Administration 89.70%
  • US Federal Highway Administration 22.47%
  • US Federal Railroad Administration 100.00%
  • US National Park Service 100.00%
  • US Fish & Wildlife Service 100.00%

[All of this was originally posted on the Tourism Place Blog]

Thursday, 1 May 2008

Tourism is NOT the World's Largest Industry - So Stop Saying It Is!

(originally posted on my Tourism Place blog)

It is the end of the semester and I am marking term papers. Few things drive me more crazy in doing this than coming across quoted and cited claims that tourism is the world's largest industry. Tourism is NOT the world's largest industry. (see this, for example)

Tourism actually ranks about 6th in international trade, after trade in fossil fuels, telecommunications and computer equipment, automotive products, and agriculture (based on World Trade Organization data). It is just slightly smaller than agriculture, and given the fuzziness of all numbers of this kind, tourism at best might be 5th, just ahead of agriculture.

Tourism is the world's largest Service Sector Industry, in terms of international trade, as all of the other industries listed above are merchandise product industries. Note that this is for international trade and does not include domestic trade -- data for which is extremely variable from one country to the next. Also, there is no Tourism Industry in the World Trade Organization's data. Instead, I came up with an estimate of the Tourism Industry (see below) based on data for the (1) Travel Services, (2) Transportation Services, and (3) Personal-Cultural-Recreation Services.

For details, I provide the following from a draft version of a textbook that I am working on related to tourism impacts and tourism planning (should be out in late Summer/early Fall 2008). If someone can conclusively demonstrate that the analysis below is not correct, I will be grateful. ...

The travel and tourism industry is the world’s largest commercial service sector industry. The World Trade Organization (WTO, not to be confused with the UN World Tourism Organization (UNWTO)) is the leading international body that monitors international macroeconomic data. The data follows the value of imports and exports between countries and across major economic sectors that are grouped into either Merchandise or Commercial Services.
Travel and tourism are part of the WTO’s Commercial Services group, but is not encompassed under a single category. Intead, the WTO includes a Transportation category and a Travel category. The WTO defines these categories as:

  • Transportation covers all transportation services that are performed by residents of one economy for those of another and that involve the carriage of passengers, the movement of goods (freight), rentals (charters) of carriers with crew, and related supporting and auxiliary services. (United Nations et al. 2002: 36)

  • Travel covers primarily the goods and services acquired from an economy by travellers during visits of less than one year to that economy. The goods and services are purchased by, or on behalf of, the traveler or provided, without a quid pro quo (that is, are provided as a gift), for the traveller to use or give away. In addition, a traveller is an individual staying for less than one year in an economy of which he or she is not a resident for any purpose other than (a) being stationed on a military base or being an employee (including diplomats and other embassy and consulate personnel) of an agency of his or her government, (b) being an accompanying dependent of an individual mentioned under (a), or (c) undertaking a productive activity directly for an entity that is a resident of that economy. (United Nations et al. 2002: 38-39)
Although the WTO data includes both imports and exports, this discussion focused on exports as, from a destination community perspective, they have a more direct visible impact on a destination’s economy although in macroeconomic terms they are of equal importance. For tourism, exports are the receipts that a country received from the money that tourists spend at the destination (as discussed above), while imports are the expenditures that residents make when they travel outside of their home country. The difference between the two is called the tourism balance of trade or tourism balance of payments. In the case of the EU for example in 2005, tourism expenditure and receipts were nearly in balance with expenditure of €235.6bn, and receipts from tourism of €232.6bn. About two-thirds of EU Member States were in surplus. A measure of the economic significance of tourism to the countries concerned is that receipts exceeded expenditure by a factor of two or more in Greece (4.5), Spain (3.2), Malta (2.8), Portugal (2.6) and Cyprus (2.5) (European Communities 2007).

In 2006 Transportation Services (not all of them carrying tourists) accounted for 22.9% of international exports in commercial services, while Travel Services (mostly the hospitality industry, and excluding transportation) made up 27.1%. Compared to other commercial service sectors, the Travel Services sector has steadily declined in its relative importance since 2000 when it accounted for 32.1% of international exports in services. Transportation Services have remained roughly stable over that time period. All other Commercial Services (including communications, construction, finance, insurance, recreation, and computer services) comprised the balance of service sector trade (see also Coles and Hall 2008).

There were 704 million air passenger trips taken in 2006, and air and sea passengers together accounted for about 25% of the Transportation Services sector, though regionally it ranged from 20.1% in the EU to 33.3% in the US (WTO 2007b). The rest of this sector is mostly freight transportation. In addition, a record 842 million international travelers spent a record US$745 billion in 2006 (WTO 2007a, 2007b). International tourist receipts grew 9% in 2006 over 2005, and while not the fastest growing sector in international trade, its steady growth and relatively low entry costs make tourism an attractive option for countries and communities seeking to develop the service sector of their economies to expand job opportunities.

A Tourism Sector can be estimated from the WTO data for Travel Services, passenger Transportation Services (excluding freight), and the recreation portion of the Other Commercial Services sector. Together, this Tourism Sector makes up a third of all commercial services, and about 6.4% of all international exports, including merchandise products. The Tourism Sector is the sixth largest sector of the global economy based on the WTO’s categories, following trade in fossil fuels, telecommunications and computer equipment, automotive products, and agriculture (WTO 2007a, 2007b).

UPDATE (3May08):

I recently got my hands on some financial projections for 2008 from the World Travel and Tourism Council (WTTC, an international lobbying group mostly for airlines and hotels -- at least that is how I define them). They estimate that travel and tourism will comprise:

US$2,008 billion in 2008, which would be 3.4% of total global GDP
- This is about twice the total of US$916 billion for 2006 that I came up with above, though only about half the global percentage.

My number of $916 billion in 2006 is only for international trade, not for GDP, and not for domestic tourism and travel. So a doubling of my number to include domestic travel makes a fairly rough estimate of the total global size of the travel and tourism economy in dollars (or any other currency). (The World Tourism Organization, UNWTO, estimated that 15.8% of all overnight trips in 2005 were international, while the remaining 84.2% were domestic. Domestic trips typically involve lower per/person/day expenditures.)

However, the WTTC also uses what is known as the Satellite Accounting approach, which tries to estimate the degree to which other economic sectors contribute to and benefit from tourism and passenger transportation. Based on that approach, they estimate that in 2008, travel and tourism will comprise US$5,890 billion, or 9.9% of total world GDP.

A couple of caveats need to be considered here. First, the WTTC never clearly shows how it comes up with its numbers. I have been trying to find this, and have even emailed them requesting it. So I am not convinced that their numbers are anything more than very rough estimates.

In addition, my sense is that when an industry adopts a satellite accounting system (which originated in France as an attempt to show the size on non-traditional industries), that they approach this by basically keeping all their original core data, and then grabbing portions of sectors that are near them. As a result they all end up with larger numbers and larger percentages. Other economic sectors do the same, grabbing part of the core travel and tourism industry that might be better placed in financial services or advertising industries. In the end, of course, this all adds up to well over 100%, which can be addressed in an all-encompassing input-output model. But it is unclear to me that the WTTC, and others who use the satellite accounting system, take that broader perspective.

Now I could be totally wrong on this, but I have yet to see someone explain it with real numbers in any other way. So, I suggest that you take the $6 billion and 10% GDP numbers with a huge rock of salt -- and be wary of using it in any term papers that you submit in my classes.

UPDATE (4May08):

Sat, May 3, 2008 at 9:03 PM, Neil Leiper wrote (reposted here with permission):

G'day Alan

Tonight I read your item entitled "tourism is NOT the 'world's largest industry' ". Well Done! Tourism academe would be improved if there were more professors like yourself who can not only see thru the feeble-minded nonsense put about by WTO & its acolytes (in academe - notably dim-witted textbook writers, in government, in consulting, in the media) but are willing and able to challenge them in this manner!

I urge you to go further, please.

Tourism is not "an industry". Attempts to pin it down in that way are doomed to failure and every attempt I've seen is pathetically weak. Tourism is like all the other "isms". It's a form of human behaviour and the theories and ideologies that shape it. C/F idealism, communism, heroism etc.

As such, tourism is supported, partly, by distinctive industries - we can reasonable and realistically call them 'tourism industries'. They do not sum to one distinctive industry. See my article on plural industries which is in press at "Tourism Management". It dissects all known theories that might support the concept on one giant tourism industry and concludes that they are all defective, but various concludes that many tourism industries exist; each a collection of business organisations, some large and complex, most small and simple, some overlapping.

In fact you (anyone) can listen to my conference presentation on that topic. It's on the internet, recorded at CAUTHE 2006 by Martin Fluker in Melbourne. I don't have the site on hand, but I recall it's titled "Professor Leiper expounds ...".

I note above that tourism (the beahviour of tourists) is supported PARTLY by distinctive industries. It's always like that. It's a partially industrialised phenomenon. Like sex. Like sport. Like education, etc.

See a paper in press at Current Issues in Tourism ("Partial Industrialisation in Tourism: A New Model", by Neil Leiper, Lloyd Stear, Nerilee Hing and Tracey Firth. As you will see, it has detailed theoretical discussion, plus empirical evidence, from three researchers who have tested my theory of PIIT.

I put a note about these papers on the tourism strategic management discussion site set up by Fevzi. In the few months since, there has not been a single comment!! Is this more evidence of intellectual decadence in tourism academe? Or is it too soon to tell?

Neil Leiper
Southern Cross University


...And separately, Click Here for a recent news article that also states the world's largest industry claim.