The Benefits of Environmental Improvement: Theory and Practice

Abstract

Freeman's book is concerned with the theoretical and empirical aspects of the measurement of benefits associated with environmental pollution control. For many purposes, this is equivalent to thinking about the measurement of pollution damages. Roughly the first third of the book is concerned with definitional issues, problem setting, and the development of the conceptual aspects. Freeman then treats general empirical issues and devotes the remainder of the volume to an application of the framework to value the impacts of pollution control on longevity, outdoor recreation, and productivity. In addition to introducing the volume, Freeman's first chapter provides us with a checklist of reasonable criteria which any methodology for benefit estimation ought to meet. These criteria provide direction for the book. Freeman cautions us that, so far, no benefit study has been entirely satisfactory in meeting all of them, but, of course, this is true for much other economic research as well. The focus of chapter 2 is on the measurement of the physical effects associated with environmental pollution: relationships between discharge levels and environmental quality and between the latter measures and environmental service flows. There is a discussion of regression analysis, the most commonly used technique to describe these relationships. The chapter also contains a discouraging note on the state of the art in the biological sciences. The knowledge for linking physical environmental quality parameters to environmental service flows is still very limited. Chapter 3 is a well-organized perspective on the theoretical issues related to benefit measurement. It becomes apparent here that Freeman's audience is made up of professional economists and students having a good grasp of microeconomic theory (Preface). The analysis is well done but probably too concise for the reader who is not already familiar with the concepts being used. Consumer surplus measures of welfare change are evaluated on the basis of their practicability, implied property rights, uniqueness, and consistency. Freeman reviews especially the ordinary consumer surplus and the compensating and equivalent variations and concludes that there are problems with each of these measures. But, because the ordinary consumer surplus can be most readily derived from market data, Freeman tends to favor this measure as an approximation for either the compensating or equivalent variations. Freeman also provides us with a quick