Non-market Valuation Techniques Research Articles

Contingent Valuation: Controversies and Evidence

Contingent valuation (CV) has become one of the most widely used non-market valuation techniques. CV's prominence is due to its flexibility and ability to estimate total value, including passive use value. Its use and the inclusion of passive use value in benefit-cost analyses and environ- mental litigation are the subject of a contentious debate. This paper discusses key areas of the debate over CV and the validity of passive use value. We conclude that many of the alleged problems with CV can be resolved by careful study design and implementation. We further conclude that claims that empirical CV findings are theoretically inconsistent are not generally supported by the literature. The debate over CV, however, has clarified several key issues related to nonmarket valuation and can provide useful guidance both to CV practitioners and the users of CV results.

Renewable Natural Resource Management and Use without Markets

Natural resources, by their nature, are not readily bent to the status of private property. Efficient resource use is complicated by jurisdictional externalities, public goods, non-use values, and beneficiaries spatially separated from the location of resources. The task is made more challenging by ecological complexity that obscures cause (benefits) and effects (costs), and dramatic time lags between individual actions and subsequent social consequences that, together with substantial uncertainty, introduce the chance of irreversibilities. Resource economists have played a major role in the literature on externalities, the development of individual transferable quotas, non-market valuation techniques and common property management.

Choice modelling and its potential application to tropical rainforest preservation

Loss of rainforest occurs in part because of a global market failure problem. Markets routinely transmit signals about international demands for forest products such as timber, but fail to transmit signals about demands for preservation. To make efficient resource allocation choices, decision makers need some framework to estimate the non-use values that might be held by an international community for rainforest preservation. Non-market valuation techniques can be used for this purpose, but framing and other problems limit the application of the contingent valuation method (CVM). An alternative technique, choice modelling (CM), appears to hold some promise because it can be used to model complex situations and to frame choices consistent with ‘real life’ choices. In this paper a CM experiment to assess the values that Australians hold for rainforest conservation in Vanuatu is reported. The experiment disguises effectively the issue of interest, rainforest conservation in Vanuatu, within a pool of other conservation locations. Also, the experiment demonstrates that choice tradeoffs may involve a variety of environmental and socio-economic factors, rather than be concentrated on some monetary tradeoff. The results demonstrate that a variety of predictive and valuation tools can be gained from a CM experiment, and suggest that further development is warranted.

Ethical Rules and the Demand for Free Range Eggs

In this paper, two contingent valuation experiments to estimate values for animal welfare are reported. The focus of the experiments was to demonstrate the application of non-market valuation techniques for this purpose, and to determine whether the applications are invalidated by any association of the amenity to be valued with ethical and moral themes. Such an association has been suggested, in several formats, to underlie potential scoping effects. The experiments show that little evidence can be found to suggest that any association between free range eggs and ethical and moral themes causes particular valuation problems. However, accurate estimation of the welfare of battery hens is difficult, because animal welfare concerns may only be one reason why free range eggs are purchased. Also, the potential use of consumer purchase prices as references to value may make consumer surplus estimates problematic.

Humans Valuing Nature: Synthesising Insights from Philosophy, Psychology and Economics

A rational process for assessment of environmental policy options should be based on an appreciation of how humans value nature. Increased understanding of values will also contribute to the development of appropriate ways for us to relate to and manage natural areas. Over the past two decades, environmental philosophers have examined the notion that there is an intrinsic value in nature. Economists have attempted to define and measure the market and nonmarket economic values associated with decisions concerning natural areas. Psychologists have tried to assess the extent to which people believe in an intrinsic value in nature, and have also begun to work with economists to improve nonmarket valuation techniques. I briefly review the contributions made to our understanding of natural area value by environmental philosophy, psychology and economics, and develop a model that integrates insights from these disciplines. Components in the model include cognitions, held values, assigned values and various modes of value expression. I make recommendations for future validation, development and use of the model.

Humans Valuing Nature: Synthesising Insights from Philosophy, Psychology and Economics

A rational process for assessment of environmental policy options should be based on an appreciation of how humans value nature. Increased understanding of values will also contribute to the development of appropriate ways for us to relate to and manage natural areas. Over the past two decades, environmental philosophers have examined the notion that there is an intrinsic value in nature. Economists have attempted to define and measure the market and nonmarket economic values associated with decisions concerning natural areas. Psychologists have tried to assess the extent to which people believe in an intrinsic value in nature, and have also begun to work with economists to improve nonmarket valuation techniques. I briefly review the contributions made to our understanding of natural area value by environmental philosophy, psychology and economics, and develop a model that integrates insights from these disciplines. Components in the model include cognitions, held values, assigned values and various modes of value expression. I make recommendations for future validation, development and use of the model.

Benefits Transfer and Low Flow Alleviation: What Lessons for Environmental Valuation in the UK?

Use of environmental valuation and benefits transfer in a recent legal ruling in the UK between Thames Water Utilities and the Environment Agency over water abstraction costs appeared to set an unfortunate precedent. In the first attempt to fulfil its statutory duties, the Agency was thwarted in its use and interpretation of non-market valuation techniques, in particular, the vexed issue of how to aggregate the results of valuation studies in original sites or those to where values might be transferred. The ruling has broader implications for water pricing and resource development by the industry. Far from being a blow for either cost-benefit analysis or environmental valuation, the decision highlights some of the research imperatives for the derivation of non-market values by economists and their translation for use in government decisions.

Comparing the Economic Value of Mountain Biking Estimated Using Revealed and Stated Preference

This research compares non-market valuation techniques by applying a count data travel cost method (TCM) and dichotomous choice contingent valuation method (CVM) to a form of recreation for which it has not been previously applied: mountain biking. Due to mountain biking's increasing popularity these estimates of benefits may be useful in addressing conflicts. One of the most famous mountain biking sites in the US (Moab, Utah) was chosen as the site for which to apply these two models. The benefits that were estimated for trips taken in the spring of 1996 are US$205 and US$235,for the TCM and CVM, respectively.These values are not statistically different using conventional significant levels.

In search of forest resource values of indigenous peoples: Are nonmarket valuation techniques applicable?

This article examines issues surrounding the potential applicability of nonmarket valuation techniques to indigenous peoples. A conceptual model examines relationships between natural and cultural environments and value systems. Problems of valuation identified include eliciting values for individuals, aggregating individual values into measures of social welfare, and comparisons of welfare across culturally different groups. The influence of sacred or taboo goods, the potential for satiation, and variations in property rights are factors to address in assessing individual values. Differences in political and property rights systems, and unique demographic structures are seen as limits to aggregating values for randomly selected individuals. Since valuation is endogenous to specific social environments, aggregations of indigenous and nonindigenous measures of social welfare may be inappropriate.

The Role of Expectations and Heterogeneous Preferences for Congestion in the Valuation of Recreation Benefits

Studies of recreation congestion generally utilize nonmarket valuation techniques to determine the use level and entrance price that maximize aggregate recreation benefits for a specific recreation area. This paper improves upon these previous studies by relaxing the assumption of homogeneous preferences among visitors of the same recreation area and accounting for visitor expectations of congestion. The results indicate that failing to account for heterogeneous preferences for congestion by time of visit leads to overestimates of the benefits of relieving peak-time congestion, while accounting for expectations raises questions about the validity of the standard optimal use model.

Community perceptions, environmental impacts, and energy policy: Rail shipment of coal

Policy changes over the last two decades have dramatically changed the coal and electric utility industries. Many of these changes have led to secondary and environmental impacts which, taken together, affect many communities and individuals but are rarely considered during policy debates. We undertake an analysis of fugitive coal dust emissions during rail transport of coal to illustrate the side effects of public policy and the need for more comprehensive consideration of subjective costs and benefits. The economic and environmental impacts on communities and individuals of one aspect of increased coal usage are measured with non-market valuation techniques.

Discounting the Economic Costs of Conservation and Compensation

Sites are scarce, depletable resources. Development at sites frequently involves losses of aesthetic, recreational, and spiritual qualities. Attempts to quantify these losses are increasingly made via nonmarket valuation techniques. Conservation of sites frequently involves foregoing alternative uses of the sites. The benefits which could potentially be provided by alternative uses of sites can be evaluated to provide estimates of the gross economic costs of conservation. The economic costs likely to be imposed by protecting rock from quarrying at a site near Dunedin, New Zealand, are examined, and attempts are made to estimate compensation requirements. Protection of this site is expected to impose costs on the quarryowners and society at a distant time. The choice of discount rate is of overriding importance in estimating the magnitudes of these distant costs. In the case studied, ‘high’-magnitude discount rates appear to reduce the costs of conservation and ‘low’-magnitude discount rates increase those costs.

Aquatic habitat measurement and valuation: Imputing social benefits to instream flow levels

Instream flow conflicts have been analysed from the perspectives offered by policy oriented applied (physical) science, theories of conflict resolution and negotiation strategy, and psychological analyses of the behavior patterns of the bargaining parties. Economics also offers some useful insights in analysing conflict resolution within the context of these water allocation problems. We attempt to analyse the economics of the bargaining process in conjunction with a discussion of the water allocation process. In particular, we examine in detail the relation between certain habitat estimation techniques, and the socially optimal allocation of non-market resources. The results developed here describe the welfare implications implicit in the contemporary general equilibrium analysis of a competitive market economy. We also review certain currently available techniques for assigning dollar values to the social benefits of instream flow. The limitations of non-market valuation techniques with respect to estimating the benefits provided by instream flows and the aquatic habitat contingent on these flows should not deter resource managers from using economic analysis as a basic tool for settling instream flow conflicts.

Confidence Intervals for Evaluating Benefits Estimates from Dichotomous Choice Contingent Valuation Studies

I evaluate the potential usefulness of nonmarket valuation concepts and techniques from environmental economics for improving wildlife conservation. The concepts include distinguishing between on-site recreation use value and off-site passive use or ...

Okoboji experiment: Comparing non-market valuation techniques in an unusually well-defined market for water quality

Three techniques to value the non-market commodity of water quality are compared in a notably active and unusually well-defined market: the Okoboji Lakes region of northwest Iowa. The paper compares: (a) a site valuation based on differing property values across lakes; (b) a market valuation by soliciting realtors' interpretations of observed price differentials; and (c) a contingent valuation of willingness to pay for water quality changes. The results obtained are similar in magnitude; the value of water quality ranges from 13 to 23% of the total residence value per square foot of private residence.

Behavioral Implications of Nonmarket Valuation Models

A variety of methods exist for the valuation of nonmarket benefits. Some mechanisms determine these values from market data while others use hypothetical questions. This paper examines these mechanisms for valuing nonmarket goods and the attempts to validate these measures. The assumptions and implications of the nonmarket valuation techniques are examined and the various attempts at validation of the results are discussed. In light of the limitations of these validation approaches, a new validation procedure is suggested and an application is presented. (This abstract was borrowed from another version of this item.)

Compensation for Natural Resource Injury: An Emerging Federal Framework

This paper provides an overview of the emerging natural resource damage assessment and compensation framework and a review of several economic and legal issues that are likely to affect the ability of the framework to achieve its objectives. The Superfund Act as amended establishes a federal regulatory structure that provides a legal legitimization for the use of economic-based nonmarket valuation techniques in judicial proceedings involving natural resource injuries resulting from oil and hazardous waste spills and releases. While the regulations have the potential to foster more appropriate compensation as well as prospective incentives to limit damages to natural resources, several controversial elements, definitions, and assumptions built into the damage assessment regulations appear to have the potential to undermine the efficiency and equity of damage assessments. These issues reflect the difficulty of integrating economic concepts of natural resource value and their estimation into th...

Economic Value of Idaho Sport Fisheries with an Update on Valuation Techniques

Improvements in nonmarket valuation techniques were explored, especially as they apply to sportfishing in Idaho. Definitions and appropriate use of the terms expenditures, consumer surplus, net value, and maximum net revenue are clarified. Advancement in the travel cost and contingent value methods are outlined. Travel cost improvements in the last decade include regional (multisite) specification, incorporation of travel time, quality, and substitutes. Contingent value advancements include valuing primary- and nonprimary-purpose trips, refinements in the survey design, and exploration of changes in values associated with changes in the resource base. The results of a 1983 angler survey of net values for cold-water, warmwater, and steelhead (Salmo gairdneri) fishing were $42.93, $42.18, and $27.87 per day, respectively, according to the travel cost method. By the contingent value method, net cold-water, warmwater, and steelhead fishing values per day were $22.52, $16.35, and $31.45, respectively.

Regional environmental assessments for policy making and research and development planning

Following a review of the content of classic management accounting texts and the accounting research literature, this paper concludes that corporate accounting in general, and management accounting in particular, have ignored a wide range of non-market activities that are associated with private sector organizations and their impact on the biophysical environment. The formal decision analysis invoked in traditional management accounting neglects the social cost and benefits of corporate activities. Integrating environmental concerns into accounting will come in part from focusing on developments in other disciplines, particularly the natural and social sciences, which have a much longer history of analysing environmental problems. In this paper an analysis of the concept of sustainability and its relationships with decision-making is used to illustrate the multidisciplinary issues that are often involved when considering the environment. Such an analysis points towards additional developments for management decision-making and education, for example, social cost-benefit analysis and non-market valuation techniques. At the same time, this analysis also raises the issue of the scale of economic activity in relation to ecosystem capacity, and challenges some conventional wisdom, such as the practice of project analysis. The paper introduces a framework of analytical approaches to environmental resources within which to view existing and future accounting developments.