Non-market Goods Research Articles

Reflections around the performance of the social enterprise

In a social enterprise, the notion of "performance" must be understood in a broader sense than just financial profitability. Because this type of company pursues a social mission whose achievement has collective impacts, it is necessary to go beyond what the only indicators provided by the market allow.
 This article thus endeavors to construct a definition of the performance of a social enterprise that is as rigorous as possible, by developing an approach defining the performance of a social enterprise not as a "yield", but as an "expanded production" in adding to the traditional definition of production “the impacts”, usually not taken into account by the market, on all the individuals concerned, whether or not they are the direct beneficiaries.
 By nature, these impacts are not taken into account by the market and their measurement refers to the classic question of the valuation of non-market goods. The author therefore examines the indicators for measuring the performance of social enterprises. The aim is to identify the different techniques for monetary measurement of the value of non-market goods and to indicate whether they are likely to lead to relevant values ​​for the evaluation of the performance of a social enterprise. This reading grid is applied to the technique of social return on investment (SROI).

Accounting for subsistence needs in non-market valuation: a simple proposal

Revealed and stated preference techniques are widely used to assess willingness to pay (WTP) for non-market goods as input to public and private decision-making. However, individuals first have to satisfy subsistence needs through market good consumption, which affects their ability to pay. We provide a methodological framework and derive a simple ex post adjustment factor to account for this effect. We quantify its impacts on the WTP for non-market goods and the ranking of projects theoretically, numerically and empirically. This confirms that non-adjusted WTP tends to be plutocratic: the views of the richest – whatever they are – are more likely to impact decision-making, potentially leading to ranking reversal between projects. We also suggest that the subsistence needs-based adjustment factor we propose has a role to play in value transfer procedures. The overall goal is a better representation of the entire population’s preferences with regard to non-market goods.

Do buyers and sellers evaluate air pollution reduction differently? Experimental evidence from China

This paper is the first study to investigate the good dealness account of the endowment effect in non-market goods. We designed a within-subjects experiment to measure the value of air pollution reduction through the evaluation of a market good, PM 2.5 filters. We divided the subjects into buyers and sellers and asked them to trade four PM 2.5 filters using the Becker–DeGroot–Marschak auction under two treatments: a) a drop in air quality, which served to increase the market price of the filters; and b) the receipt of information on the relationship between death rates and air pollution, which served to increase the intrinsic value of the filters. Our results show that buyers’ willingness to pay for pollution reduction did not increase when air pollution worsened but did increase when informed of the possibility of health damage from air pollution. Sellers’ willingness to accept for air quality deterioration increased when pollution worsened but remained the same upon receiving information about health damage. We conclude that sellers are more sensitive to changes in market price, while buyers are more sensitive to changes in intrinsic value. Our findings support the theory of seeking a good deal in explaining the endowment effect.

Évaluation délibérative et prise de décision : une clarification conceptuelle

A voluminous literature addresses the weaknesses of standard stated preference methods used to value non-market environmental goods and services, such as contingent valuation and choice experiment. Deliberative Monetary Valuation (DMV) has emerged as a prominent alternative to the standard versions of these methods. It combines deliberative institutions with preference elicitation. Despite an anchorage in an extensive philosophical literature on deliberative democracy, the theoretical foundations of DMV are underinvestigated. A noteworthy exception is Bartkowski and Lienhoop (2018)’s effort to use Sen’s philosophical views to elaborate such theoretical foundations. The present conceptual contribution pursues this theoretical effort by pointing out two issues left unanswered by the above contribution. The first issue is: how can one ascertain that deliberation has attained its goal in DMV and, more broadly, in decision-making? (We term this the deliberative credentials issue.) The second issue is the role that economists and consultants involved in the proceedings of deliberation are supposed to play. (We term this the role of the analyst issue.) In order to clarify the kind of investigations that DMV or any alternative method should implement to be unequivocal on these issues, we use a formal framework introduced by Cailloux and Meinard (2019), designed to capture the stance that an individual has on a given topic once she has participated in a deliberation: her “deliberated judgment”. This framework allows to identify empirical questions that DMV do not tackle whereas answering these questions would be necessary to clarify the stance that DMV takes on the deliberative credentials issue. When it comes to the role of the analyst issue, our framework advocates an active role of the practitioner in creating what we call models of Deliberated Judgments. This framework thereby helps to characterize the normative stance adopted when implementing a deliberative approach.

Loss aversion for the value of voting rights: WTA/WTP ratios for a ballot

What is the subjective value of voting rights? This article presents an empirical demonstration of people’s loss aversion for the value of voting rights. By way of vignette experiments using scenarios of the 2020 U.S. presidential election (Studies 1 and 2, with U.S. citizens) and a fictitious direct premier election in Japan (Study 3, with Japanese citizens), the present research measured the willingness-to-accept compensation (WTA) and the willingness-to-pay price (WTP) for a ballot(s) in political elections. A great disparity between WTA and WTP was found regardless of the electoral setting, the proportion and width of ballot alteration, and the initial status. Specifically, the observed WTA/WTP ratios for a ballot(s) were within the range of 5.00–27.36, which is much larger than the ratios for ordinary market goods (about 1.5–2.5) and which is comparable to the ratios for other non-market goods. In addition, WTA for a mere 10% dilution of voting rights is still higher than WTP for full voting rights; the powerful effect of loss aversion might help explain universal barriers against suffrage extension.

Forest Sector Dependence and Economic Well-Being in Kentucky: An Econometric Analysis

Abstract Kentucky’s forest sector plays an important role in the state’s economic development through provision of market and nonmarket goods and services as well as the employment. The forest-dependent communities are socio-economically diverse with varying poverty rate levels. An aggregate state-level analysis of the forest sector and its contribution to communities’ well-being masks regional differences in how forest sector dependence is related to the economic well-being of dependent communities. In this research, we divided Kentucky into three regions based on county poverty rates and used common indicators of forest sector dependence and economic well-being to assess this relationship at regional level. We used panel data from 2010 to 2017 and ran fixed effects regression to assess this relationship. Results show that the relationship between secondary wood manufacturing, pulp and paper dependence and per capita income was negative in high-poverty counties whereas the relationship between pulp and paper dependence and per capita income was positive in medium-poverty counties. This reflects high structural difference in economies of medium-poverty counties relative to high-poverty counties. Most of the high-poverty counties are in rural areas with limited job opportunities. Policy interventions on capacity building and workforce training in high-poverty counties is necessary for sustained forest industries in these regions.

Using consumer’s surplus to bound willingness to pay for non-market goods

Measuring willingness to pay for non-market goods continues to be problematic for the benefit-cost analyst. This note presents a new procedure for placing a lower bound on that value. The measure identified herein offers the advantage of not requiring any assumptions that are not empirically verifiable, and can be taken using the market demand schedule for any good that has the quantity of the non-market good consumed as an argument.

Recycling Nutrients and Reducing Carbon Emissions in the Baltic Sea Region-Sustainable or Economically Infeasible?

Ecotechnologies have the potential to reduce the use of finite resources while providing a variety of co-benefits to society, though they often lack in market competitiveness. In this study, we investigate the sustainability of ecotechnologies for recovering carbon and nutrients, and demonstrate how a so-called "bottom-up" approach can serve as a decision-making instrument. Based on three case study catchments with a focus on domestic wastewater in Sweden and Poland, and on manure, grass and blackwater substrates in Finland, we apply a cost-benefit analysis (CBA) on system alternatives derived from a participatory process. After drawing on an initial systematic mapping of relevant ecotechnologies, the scope of the CBA is determined by stakeholder suggestions, namely in terms of the considered assessment criteria, the physical impacts and the utilised data. Thus, this CBA is rooted in a localised consideration of ecotechnologies rather than a centralised governmental approach to systems boundaries. The key advantage of applying such a bottom-up approach is that it has gone through a robust participatory selection process by local stakeholders, which provides more legitimacy to the decisions reached compared with traditional feasibility studies. Despite considering the revenues of the recovered products as well as the provision of the non-market goods CO2 mitigation and reduced eutrophication, findings from this study indicate that the benefits of the considered ecotechnologies are often outweighed by their costs. Only anaerobic digestion of agricultural wastes appears to be economically feasible under the current conditions, highlighting that further efforts and incentives may be required to mainstream ecotechnologies.

Evaluating the Social Cost of Conflict between New Media and Society: The Case of Gaming Disorder in South Korea

Historically, the introduction of a new media in mass market caused a strong conflict starting from the nineteenth century popular literature, comics, rock music and film. Interestingly, these conflicts have shown similar and repeated patterns, which is now called media panic and moral regulation, and games are following this pattern. In 2019, Gaming disorder (GD) was decided to be included in the International Classification of Diseases (ICD-11), and similar conflicts on games arenow expected. However, the social cost and damage have not been fully addressed until now. Thus, this study focuses on the estimation of the social cost induced by GD for policy design and decisions in the public healthcare of South Korea. Using the contingent valuation method, a popular valuation method in econometrics for non-market goods, this study has tried to estimate the social cost induced by the introduction of GD into the public healthcare practice. Focusing on a false positive problem in the diagnosis, this study estimates that the willingness to pay for GD diagnosis for children is about KRW 152 K (USD 135). Considering the difference between the prevalence of GD (1.9%) and GD suspicion rate of children in the respondents (12.54%), the excessive medical diagnosis cost due to the false positive problem is estimated to KRW 101 billion (USD 89.6 M), which is about four times more than the annual medical cost for Attention Deficit Hyperactivity Disorder (ADHD) treatment in South Korea. Thus, strong scientific proof and a cautious policy approach on GD are needed before the inclusion of GD in the public health practice.

A Modified Contingent Valuation Method Shrinks Gain-Loss Asymmetry

Large, unpredictably variable gaps between Willingness-to-Accept and Willingness-to-Pay (WTA-WTP gaps) are a methodological concern with the Contingent Valuation Method. The present study investigates WTA-WTP gaps as one manifestation of gain-loss asymmetry: the phenomenon that selling prices exceed buying prices. We investigate some causes of this asymmetry. Using a novel paradigm, and scaled goods, we obtain valuations of three nonmarket goods: one private (Health), and two public (Environment). We systematically explore the effects on gain-loss asymmetry of Good-type (Public vs. Private), Method (Price vs. Choice), and Payment Units (absolute valuation vs. percentage of income). Across methods, gain-loss asymmetry varies by Good-type: it is larger for public goods. We also find that gain-loss asymmetry shrinks, but does not disappear, from Price to Choice. We identify the mechanism of this shrinkage: a bidirectional, asymmetric valuation shift in Gain and in Loss. Eliciting valuations via income percentages instead of absolute values, and reversing the Price/Choice sequence, preserves these effects. Valuations show less variability when elicited as income percentages than when elicited as absolute values. Insofar as smaller and less variable gain-loss asymmetries suggest methodological validity, Choice seems preferable to Price. Further, Income Percentage seems an economically justifiable basis for anchoring contingent valuations.

Evaluation of carbon shadow price within a non-parametric meta-frontier framework: The case of OECD, ASEAN and BRICS

Unintended outputs, as non-market goods, may have no exchange value and require shadow pricing to investigate the abatement costs. Unlike previous research, which assumes homogeneous production technology for decision-making units in the shadow price analysis, this paper considers group and global production frontiers. The ratio of group to global shadow prices is derived to indicate the position with respect to the tangent point (i.e., equal shadow prices) of the group and global technologies. This departs from the conventional technology gap approach. The nonparametric meta-frontier approach is used to evaluate the shadow price of carbon emission for several groups of countries (OECD, ASEAN, BRICS) that are likely to face homogenous technologies. The results show that carbon shadow prices for the countries differ across group and non-meta technologies. Therefore, the traditional approach towards shadow pricing may render a biased economic interpretation. This paper also compares the inefficiency scores with and without considering carbon emissions in countries. Therefore, the role of the carbon emission is assessed from different perspectives.

Increasing provision of ecosystem services through participation in a conservation program

Grasslands provide a variety of goods and services that benefit humans, but only a few have a market value. Despite the benefits provided, native grasslands continue to be degraded. Lack of a proper valuation, including a monetary value of grassland nonmarket goods and services, has become one of the factors contributing to the degradation trend. The objective of this research was to quantify the cost of increasing the provision of ecosystem services from grassland ecosystems in the Gulf Coastal Plains and Ozarks (GCPO) Landscape Conservation Cooperative geographic area of the U.S. A contingent valuation method (CVM) was used to estimate landowner willingness to accept (WTA) monetary compensation in exchange for implementing management practices preserving grassland ecosystems. The mean WTA compensation was $290.10 per acre per year for a 10-year contract. Required compensation increased with landowner income, frequency of contacts with state wildlife agencies, and percentage change in grassland area. Landowner age and proximity to the nearest local park were negatively associated with WTA. The total cost of preserving ecosystem services, estimated based on WTA, was US$3 billion per year and 57 times larger than the 2016 Conservation Reserve Program (CRP) allocation for this purpose in the amount US$50 million. However, the preservation cost varied from US$1.7 million to 1.1 billion depending upon the number of ecological attributes to be preserved and corresponding levels of ecosystem services. Results will be helpful in quantifying future funding levels necessary for implementation of coordinated conservation activities in grasslands and other ecosystems, prioritizing ecosystem services for restoration, and developing conservation programs in the U.S. and other countries.

Consumption in Polish households - production function parameters and monetary value of non-market goods

Consumption in Polish households - production function parameters and monetary value of non-market goods

Perceptions of coastal villagers on the non-market goods and services of mangroves in Cagayan province, Philippines

Household survey interviews were conducted to randomly selected 280 respondents in order to understand the socio-economic profile and livelihood structures of coastal villagers, as well as to evaluate the extent of their knowledge of, awareness of, and participation in mangrove rehabilitation projects in Cagayan Province, Philippines. The perceptions of the respondents of the non-market goods and services (i.e., the indirect and non-use values) of mangroves were evaluated through the use of proxy attitudinal statements. The results showed that the majority of the respondents were fishers, which confirmed that the households depended largely on coastal resources for their livelihoods. The respondents were from low-income households, with most of them below the poverty threshold level for the province. Despite this, the respondents displayed high levels of awareness and knowledge of mangroves in the area. The results further showed that the respondents recognized the value of protecting and preserving the mangrove ecosystem; however, there was an exposition of disagreement for statements that contained the phrases “pay”, “cost”, or “money”. This result inferred that respondents were reasonably sensitive with regards to conservation when it involves monetary payment, given their socio-economic conditions. Nevertheless, the possibility that contributions could be in-kind could be explored for further studies. The information generated from this study is an input to future valuation researches in the area.

Linking standard Economic Account for Forestry and ecosystem accounting: Total forest incomes and environmental assets in publicly-owned conifer farms in Andalusia-Spain

A major problem faced by government as trustee of society charged with conserving the nation's forest environmental asset is that the standard Economic Account for Forestry (EAF) fails to measure the contribution of nature to total forest incomes and environmental assets. In the context of this government mission, the debate arises with regard to how to uncover the contribution of nature to the total forest incomes enjoyed by people through a refined accounting framework which extends the EAF. The latter is applied by the statistics office to estimate the values added of timber, firewood, cork, resin, industrial nut and other non-woody final products of the forest at national/sub-national scale. Bearing in mind this narrow scope of the EAF, this research proposes the application of the experimental Agroforestry Accounting System (AAS), which extends the forest incomes and environmental asset estimates by applying simulated exchange values stated/revealed by consumers for non-market public goods and services. We apply the EAF and AAS frameworks to 12 large publicly-owned protected conifer forest farms which are not available for sale on the competitive land market and which cover an area of 47,262 ha in Andalusia-Spain. In this conifer farm case study, the EAF considers the economic activities of timber, firewood, aromatic plants and residential service. The AAS adds to the EAF activities those of grazing, conservation forestry, hunting, livestock, agricultural crops, livestock-keeper private amenity, fire services, free access recreation, mushrooms, carbon, landscape conservation, threatened wild biodiversity and water supply runoff stored lower down the watershed in public reservoirs. The objectives of this conifer farm case study are, first, to compare the final products and incomes estimated by applying the EAF and AAS frameworks and, second, to measure the sensitivity of conifer farm environmental assets to changes in land ownership rights and discounting rates in accordance with the AAS results. The conifer farm results show total income measured by the AAS is 38 times higher than the EAF net value added (NVA) for the 2010 period. The AAS economic activities of forestry conservation, fire services and landscape conservation activities generate 71% of the conifer farm labour compensation. The AAS opening environmental asset measured at the assumed competitive real baseline discounting rate of 3% is 6371.6 €/ha, which is 3.7 times lower than it would be if the conifer farm was available for sale on the competitive land market. The change in the baseline discounting rate chosen, from 3% to 1.5%, would lead to an increase of 116% in the value of the opening environmental asset. The above results reveal the inconsistent EAF measurement of total conifer farm incomes. The sensitivity analysis underlines the important effects on the environmental asset arising from changes in land ownership rights and discounting rates.

The (still) mysterious case of agricultural protectionism

ABSTRACT Existing research demonstrates why farmers demand subsidies, but remains ambiguous as to why consumers/taxpayers support or rather do not oppose such subsidies. We approach this puzzle from two angles: how sensitive are citizens to cost implications of agricultural subsidies, and what is their “value function” with respect to agricultural policy? We argue that farm subsidies, besides benefiting farmers, promise to generate an array of non-market goods that serve various interests in society and thus receive strong support overall. To test our argument, we conducted conjoint survey experiments in two countries: Switzerland and the United States. Our results show that while cost implications only marginally reduce support for subsidies, support is positively affected by the allocation of subsidies to various policy goals, such as guaranteeing food security and enhancing animal welfare. These findings suggest that individual-level support for agricultural subsidies does not result from a lack of information, but reflect genuine appreciation of the perceived multi-functionality of agricultural subsidies.

Measuring the economic benefits of a national planetary protection policy to regulate future private space activities between Earth and Mars: Results of a contingent valuation survey in Greece

Abstract The emergence of private space actors may soon enable the growth of the novel market segments of space research and exploration, space resources utilization, and human access to space. The interdisciplinary field of Planetary Protection has to keep up with these advances. Planetary Protection is defined as a set of guidelines that aim to prevent the forward contamination of celestial bodies with biological material from Earth and the backward contamination of the terrestrial biosphere with extraterrestrial biological material. As space entrepreneurs acquire and develop the resources and competencies for commercial access to space, significant questions are expected to be raised in the future with respect to potential forward and backward contamination issues, particularly with respect to activities between Earth and Mars. Although such private activities do not seem to pose a serious Planetary Protection threat at the moment, certain preparatory steps need to be taken in order to prudently inform the relevant policy-making procedures. This work describes the application of the Contingent Valuation Method, a useful tool of the environmental economics discipline, with the aim of demonstrating a novel approach to estimate the economic valuation of the external benefits of preventing forward and backward contamination between Earth and Mars. Particularly, via a survey specifically developed for this purpose, a set of questions are used to elicit the perceived economic value that respondents place on the prevention of forward and backward contamination; the survey is administered to a national probability sample in Greece, and the generated data is processed through statistical analysis. The Contingent Valuation Method is a popular and well-established stated preference valuation technique; these techniques are often the more suitable choice for ex-ante valuations of future changes, and are currently the only known approach to capture all the aspects of the economic value of non-market goods. Through an initial proof-of-concept in Greece, the goal of this work is to provide useful insights on the expected external benefits of a national Planetary Protection policy to regulate future private space activities between Earth and Mars, and to encourage a larger-scale application of this tool in other countries around the world.

Don't Let Another Crisis Go to Waste: The COVID-19 Pandemic and the Imperative for a Paradigm shift

ABSTRACT The COVID-19 pandemic revealed how globalized, market-based economies critically depend on a foundation of nonmarket goods, services, and productive activities that interact with capitalist institutions and impact market economies. These findings, long argued by feminist economists, have profound implications for how we think about our economic futures. This paper shows how lessons from the ongoing COVID-19 pandemic can inform how people think about the future of our economies and, specifically, how to address a trio of interlocking crises: care work, environmental degradation, and macroeconomic consequences. Drawing on these lessons, this paper argues for a necessary paradigm shift and discusses the implications of such a shift for social and economic policies. HIGHLIGHTS The pandemic highlights the interlocking crises of care, the environment, and macroeconomics. COVID-19 underscores the centrality of care in our economies. The intensifying environmental crisis illustrates the neglect of nonmarket processes in dominant policy approaches. The biggest contradictions in our economic systems result from the interactions between capitalist institutions and the nonmarket sphere.

Relative Prices and Climate Policy: How the Scarcity of Nonmarket Goods Drives Policy Evaluation

Climate change not only impacts production and market consumption but also the relative scarcity of nonmarket goods, such as environmental amenities. We study fundamental drivers of the resulting relative price changes, their potential magnitude, and their implications for climate policy in Nordhaus’s Dynamic Integrated Climate-Economy (DICE) model, thereby addressing one of its key criticisms. We propose plausible ranges for these relative prices changes based on best available evidence. Our central calibration reveals that accounting for relative prices is equivalent to decreasing pure time preference by 0.6 percentage points and leads to a more than 50 percent higher social cost of carbon. (JEL D61, H43, Q51, Q54, Q58)

Subjective well-being and stated preferences: Explorations from a choice experiment in Norway

Subjective well-being valuation has recently grown in use with applications in the fields of environment, health, and cultural heritage. With this methodology values are based on how non-market goods impact on self-reported measures of well-being such as life satisfaction. Despite the differences in theoretical foundations of subjective well-being and preference-based valuation methods, recent applications have attempted to integrate both approaches without the complete understanding of the effects of subjective well-being on stated preference elicitation. The present study investigates the extent to which subjective well-being impacts the responses to a choice experiment in Norway. The results indicate that momentary subjective well-being does not induce a higher level of randomness in the stated choices but rather affects the preferences for attribute. We also find that self-reported well-being measures respond differently to the cost attribute in the choice experiment. Furthermore, we compute marginal willingness-to-pays for various subjective well-being categories and discuss the implications of these results for an integrated modelling of subjective well-being and preference-based valuation methods.