Economic Valuation of the Environment: an Institutional Perspective

Abstract

Economic valuation of the environment internalises environmental effects in the marketplace through the calculation of quantitative, monetary values. It may be applied by different stakeholders, including companies, governmental and non-governmental organisations. It is however not uncommon to find that different valuation studies on the same subject, carried out by different stakeholders, generate divergent economic values. Since the decision-making contexts in which economic valuation studies may be applied often consist of numerous stakeholders, there is a danger that decisionmakers will become sceptical of such valuation studies if they reflect only the subjective interests of the stakeholder who carried out the study. To improve the practical applicability of economic valuation, therefore, efforts must be directed towards limiting these inconsistencies in economic valuation studies. Taking as a point of departure the argument that economic valuation is useful in certain decision-making contexts, the pursuit of improvements in economic valuation requires a focus on the process of economic valuation in addition to other current research efforts that focus on methodological issues of economic valuation. This paper will provide preliminary thoughts on the process of economic valuation from an institutional theory perspective. To complement the explanations of this perspective, the paper will focus on one particular stakeholder of the environment, namely the Dutch Ministry of Transport, Public Works and Water Management. Insights obtained from such a perspective may be used to seek solutions that pursue improvements in the economic valuation process.