Measuring Environmental Values

1
Measuring Environmental Values

• David Letson
• University of Miami

2
Main Points

• Why value?
• When markets do not exist.
• Related to supply and demand.
• WTP versus WTA.
• Types of value.
• Valuation pro and con.

3
Why do need to know economic values?

• Current decisions.
• Wisdom of past decisions.
• Implied values may be ignored.
• Natural resources scarcity.
• Opportunity cost.

4
Environmental goods and services often not traded
in markets.

• In markets we have clear information.
• Prices
• Incomes
• Goods and services
• In markets, most goods/services are rival and
  excludable.

5
How much better off?

• Suppose a change in policy or technology that
  improves water quality.
• How to value changes in resource quality or
  quantity?
• Economic surplus consumers producers
• Value is change in economic surplus following
  change in water quality

6
(No Transcript)
7
Reading the Fine Print...

• Marshallian versus Hicksian demand.
• Public intervention.
• Imperfect competition.
• Market failures.

8
Economic Analysis

• Cost-benefit analysis
• Identify and quantifying project impacts
• Monetization
• Damage assessment
• Economic impact analysis
• Cost-effectiveness analysis

9
Example Atlantic Billfish

• Bycatch releases improve stock abundance.
• Raises likelihood of catch to recreationists.
• Increased recreational trips, value.
• Value of policy Compare
• increased recreational surplus
• lost revenue to commercial fishers

10
Perspective Matters!

• Willingness to pay (WTP) vs. willingness to
  accept (WTA)
• Property rights.
• Uniqueness.
• Specifically
• WTP to secure a benefit
• WTP to prevent a loss
• WTA to forego a benefit and
• WTA to tolerate a loss.

11
Economic values are not intrinsic.

• Economic values stem from human preferences.
• Intrinsic values reside in something.
• Not observable.
• Not measurable.

12
Total economic value use values non-use
values option values

• Use values
• direct
• indirect
• Option value WTP to secure a potential, future
  use.

13
Total economic value, continued.

• Non-use (passive use) value, also known as
  existence value.
• Knowledge that a resource exists in a given
  state.
• Stewardship or
• Concern/sympathy/respect for welfare of
  non-humans.

14
Complications

• Values occurring far into the future.
• Moral obligations
• Uncertainty
• Future resource needs and availability
• Poorly understood biological and physical systems
• Irreversibility

15
Case for Measuring Values

• Scarcity implies tradeoffs.
• Structured framework
• Available for public scrutiny
• Evaluates uncertainty
• Characterizes values we cant quantify
• Total benefits as a step toward who benefits.
• Need to impute value when markets dont reveal it
  directly.