FORTUNE — One glorious Sunday morning last fall, economist Jason Scorse was strolling down 41st Avenue in Santa Cruz, Calif., dodging surfers. They were everywhere — bustling in and out of surf shops, gearing up in parking lots behind their SUVs, schlepping boards down the steep steps to the world-class breaks beneath Pleasure Point. Scorse lives to surf but not on weekends. Too crowded. Still, the 44-year-old college professor — erudite, bald, and with a neatly trimmed beard — in many ways represents the face of surfing in America today. “The sport has lost the image of being a thing for hippies and stoners, of being kinda ragtag and stupid,” he says. “Surfing today is the Silicon Valley CEO. It’s the brain surgeon. It’s the super-athlete. It’s dad, mom, and the kids.” It’s also significant business.
Over the last decade the number people in America who surf at least once a year has increased by nearly half to 2.6 million (more than a million surf at least eight times annually). The median surfer these days earns $75,000 a year, and in 2010 some $6.3 billion was spent on boards, wetsuits, sunglasses, and surf-related clothing and accessories. With women increasingly joining the lineup (they comprise 36% of American surfers) and with the sport swelling in Europe, China, and Korea, some analysts predict that the global surf industry will generate more than $13 billion by 2017. That number doesn’t include revenue generated by the growing international surf travel business. Companies like Santa Monica-based Waterways Travel specialize in sending well-heeled surfers on two-week safaris to hard-to-reach surf breaks in places like Peru, Indonesia, and Fiji for up to $12,000.
But Scorse says these numbers tell only part of the story. As director of the Center for the Blue Economy at the Monterey Institute and author of the book What Environmentalists Need to Know About Economics, he and a handful of other surf-minded economists are pioneering “surfonomics,” a field that attempts to show that the waves themselves have economic value. From the sweeping vantage atop Pleasure Point, Scorse points out The Hook, Sharks, Privates, and several other breaks crowded with surfers. “All those guys are surfing for free,” he says. “No one’s taking any tickets. But those waves still have an economic value, and we can measure that in several different ways.”
Surfonomics was born on the northwest coast of Puerto Rico in 2002 when surfers feared that a proposed beachfront condo development would spoil the hydraulics of the 30-foot waves that had made the sleepy town of Rincon legendary. Determined to do battle with more than just emotional arguments, a trio of environmental groups commissioned a study showing that tourism — most of it surf-related — generated at least $52 million a year for Rincon. Armed with this price tag, the surfers successfully blocked the condo project. In 2007 a similar study concluded that the surf break at Mundaka on the coast of southern Spain generated $4.5 million annually for the local economy.
These studies revealed a market value for the waves. But waves also have a measurable non-market value that benefits surfers. “It’s a hidden value, because no money changes hands,” Scorse says. “Basically you’re trying to determine what people would pay to surf if someone was taking tickets. Or you’re trying to determine what surfers would pay not to lose a wave.” Economists capture this with “travel cost studies” that measure things like the distance surfers and spectators travel to a surf break, the number of times they visit, the amount of time they take off work, and the amount they spend on gas. A 2010 study valued the big-wave break at Mavericks off Half Moon Bay, Calif., at $23.9 million after determining that 420,000 people visit each year and spend an average of $56.70 per visit. A 2012 study of the break at Trestles in San Diego County found that 300,000 visitors spent an average of $80 a visit, for a total valuation of $24 million.
But Scorse says these studies are just nibbling around the edges. The full value of surf breaks, he insists — the Big Kahuna, as it were — is capitalized into real estate. “See these houses,” he says, nodding towards the multi-million-dollar homes along Santa Cruz’s Pleasure Point. “The irony of travel cost studies is that when you ask the guy who spent $2 million on a house here, ‘How far did you travel?’ ‘Did you use your car?’ ‘Did you buy gas?’ You get zero for all that. He can walk right out his front door and surf. So those studies aren’t picking up the full value.” What Scorse wanted to know was this: If he woke up tomorrow and the surf was gone in Santa Cruz, would all this real estate be worth what it is?
In a study he conducted last year, he compared three beachfront neighborhoods in Santa Cruz, two within walking distance to surfing, one not. After controlling for several variables — proximity to the beach, ocean views, home characteristics, neighborhood amenities — he found that a house next to a surf break is valued approximately $106,000 more than a comparable house a mile away. Given the value of coastal real estate in California, even if just a tiny fraction can be attributed directly to surfing, that’s huge money. “Then there’s the tax revenue from that,” Scorse says. “Property tax is around one-and-a-half percent in California, so it’s not a tremendous amount, but if you’re talking hundreds of millions of dollars in real estate, that’s millions of dollars a year in perpetuity. It’s not nothing. It’s not trivial.”