Contingent Valuation: Controversies and Evidence (original) (raw)

The Use of Contingent Valuation in Benefit–Cost Analysis

Handbook on Contingent Valuation, 2006

Benefit-cost analysis is policy analysis that identifies whether a government project or policy is efficient by estimating and examining the present value of the net benefits (PVNB) of the policy, , where B t are the social benefits of the policy in time t, C t are the social costs of the policy in time t, r is the discount rate and T is the number of time periods that define the life of the policy. If the present value of net benefits is positive, then the program yields more gains than losses and the program is more efficient than the status quo. The contingent valuation method (CVM) is a stated preference approach for measuring the benefits, or, in the case of benefits lost, the costs of the policy. The purpose of this chapter is to provide an overview of the role the contingent valuation method plays in benefit-cost analysis.

The issue of scope in contingent valuation studies

American Journal of Agricultural Economics, 1993

Natural resource damage assessment under various federal and state laws has given research in non-market valuation high visibility. This paper is about a consistency check suggested by the recent NOAA Blue Ribbon panel as one basis for evaluating contingent valuation (CV) surveys. This check relates to the responsiveness of valuation estimates to changes in the scope or size in an environmental commodity. Critics of the CV method have recently argued, on the basis of several empirical studies, that the CV method is incapable ...

Contingent Valuation: Past, Present And Future

Prague Economic Papers, 2010

This paper summarizes the long history of the contingent valuation method, stressing the important dates and events that infl uenced its economic applications. It reviews the economic theory of contingent valuation, highlights the related survey design, alludes to the econometrics methodology involved and discusses the validity and reliability of this method. In summary, this paper presents the state of the art of a method that has been applied in the economic valuation of natural resources for many decades.

Economic Valuation of Environmental Goods by Contingent Valuation Method ( CVM )

2018

Contingent valuation method (CVM) is a direct approach it directly asks people what they are willing to pay for a benefit and/or what they are willing to receive by way of compensation to tolerate a cost in a hypothetical market for environmental goods/services. Although CVM has been widely used for the past two decades, there is considerable controversy over whether it adequately measures people's willingness to pay for environmental quality. In this article an attempt is made to analysis the full economic value of the natural resource using CVM and also to identify determinants of willingness to pay of a household for this natural resource. Generally non-commercial economic value of environmental goods has been neglected in policy designs. The policy implication of this article is that since net social benefit could be achieved from multi-purpose environmental goods at a community level, the government should give more emphasis for such kinds of projects in its policies and pr...

Demand Based and Contingent Valuation: An Empirical Comparison

1985

The reliability of the contingent valuation method (CVM) has proven difficult to assess. Regression analyses have shown CVM results to be systematically related to individual demographic characteristics and generally consistent with preferences revealed by actual market choices (Tolley, et al.). Direct comparisons of CVM results with market demand based measures are less conclusive. Such comparisons typically reveal more about the variability of the demand based method than about the performance of CVM. Additionally, relatively few coherent concepts have been available to guide empirical research and testing. The objective of this paper is an improved comparison of CVM and market based valuations. As a first step, previous empirical analyses are briefly reviewed and highlighted by recent conceptual results. Second, the valuation context is considered. Recent travel demand research is combined with Maler's notion of weak complementarity to derive a surprisingly simple, market based measure of site specific surplus. Third, the contingent valuation experiment is described. Because both the travel demand approach and the CVM experiment yield both variances as well as means, the comparison of surplus measures can be based upon standard. statistical tests rather than on simple comparisons of absolute values. Previous Research Previous studies have had some difficulty in designing a direct comparison between the CVM and demand based techniques. More often than not, a given valuationcontext lends itself to either a demand based technique or the CVM but not both. Nevertheless, two types of market based comparisons have been made: (1) those 1 based on the travel cost technique and (2) those using the hedonic approach.

Rethinking the scope test as a criterion for validity in contingent valuation

Journal of Environmental Economics and Management, 2005

The scope test is widely recommended as a way to evaluate the validity of contingent valuation (CV) studies. We measured contingent values of parts and wholes for four different environmental goods and applied the conventional scope test. In addition, the study design allowed examination of scope relationships for individual respondents. We also used social psychological theory to expand the definition of scope to include attitudinal and behavioral scope. Looking at the individual responses showed that conventional economic scope test results, which depend on comparisons of average values, can hide important relationships that are relevant to the validity of CV studies. We showed that, as a validity test, the conventional scope test can lead to false positives and false negatives. We are led to question the efficacy and cost effectiveness of making scope tests a routine part of validity assessment in applied CV studies. r 2004 Elsevier Inc. All rights reserved.

Appraising the use of contingent valuation

Health Economics, 1992

The valuation of treatments and health states has been pursued in a number of ways. Most predominant are contingent valuation (CV), QALYs, and HYEs. CV-that is, willingness to pay and willingness to accept-is the only one of these methods that can be consistent with welfare economic theory, but, as discussed by Gafni (1990), in order to do so three criteria must be met. This article argues that the fulfilment of these criteria is not sufficient to obtain useful results, and some additional criteria are suggested. Several CV studies carried out in the area of health are reviewed, and their compliance or non-compliance, with both sets of criteria, is discussed. Finally, it is argued that, although CV is the more theoretically correct method, it is not a superior tool to QALYs and HYEs, and that the decision as to which is the appropriate valuation method depends on the policy issue at hand. KEY WORDS-contingent valuation, willingness to pay, quality-adjusted-life-years, healthy-years equivalents, health status valuation. Much concern and effort has been devoted to establishing comparable valuations for health care programmes in order to facilitate decision making and priority setting in the health care sector. Costutility analysis-specifically the QALY (Quality Adjusted Life Year)'*2 and the HYE (Healthy-Years Equivalent) 3,4 measures-has been used extensively for this purpose. Johannesson and Jonsson recently' argued that such measures and approaches might not be appropriate in a number of contexts, and they suggested contingent valuation (CV) as a suitable method for eliciting public evaluations of health care programmes. This paper provides a review of how CV has been used to measure health care benefits, discusses why it has sometimes failed to do so effectively,

Economic Environmental Valuation: An Analysis of Limitations and Alternatives

The structure of this report is as follows. In Section 2 we will introduce economic methods for environmental and biodiversity valuation, and in particular the total economic value model. Sections 3 through 7 will advance five distinct but related classes of criticisms of economic environmental valuation, and in each we will suggest the way in which alternative valuation methods contain the resources to help address those criticisms. In Section 3 we will advance the first of our five classes of criticisms of economic valuation methods, namely, that such methods fail to respect considerations with regard to spatial explicitness and nonlinearity in service provision, and threshold effects in ecosystem functioning. We will then explicate an original method – which we call the bio-folio approach – that can be used to modify the economic approach in such a way that mitigates this failure of standard economic approaches. In Section 4 we will advance the second of our classes of criticisms, which is oriented around the claim that economic valuation fails to adequately register ethical and intrinsic values and the reasons for which people respect these values. We argue that participatory and deliberative techniques can go much of the way to accommodating these values and allowing participants in the valuation process opportunities to both articulate their own reasons for holding the positions that they do and to challenge the reasons that others advance for their positions. In Section 5 the criticism that we focus on is that economic valuation methods mistakenly assume value commensurability, and that the broader decision making context of which it is part mistakenly assumes that rational decision making requires value commensurability. We will claim that certain forms of multicriteria analysis acknowledge the incommensurability of the values involved in environmental decision making and allow that practical judgement has an ineliminable role in environmental decision making. In Section 6 we characterise economic approaches to environmental valuation as the ‘itemisation approach’, and advance a fourth class of criticisms of this approach. We firstly distinguish between two kinds of valuing attitudes – de re and de dicto – and argue that the itemisation approach mistakenly assumes that nonhuman nature is principally to be valued in a de dicto rather than a de re sense. Secondly, we argue that economic valuation overlooks the profoundly important temporal dimension of environmental value. Thirdly, we argue that it fails to justify any consideration of certain blocks on whether natural objects or places are substitutable for replicas or replacements. This results in a failure to respect this temporal dimension of value and our de re valuing attitudes. We suggest that participatory and deliberative techniques are wellplaced to avoid these criticisms. In Section 7 we address a key premise of Work Package 1 of BIOMOT: that economic valuation methods are motivationally deficient. We will distinguish two senses in which such valuation methods fail with respect to their motivational capacity. According to the first sense the motivational capacity of a valuation method is a function of the extent to which its output is able to motivate actors to protect or preserve that which is the subject of the valuation. In relation to this sense we will discuss the phenomenon of ‘crowding out’, whereby the introduction of external incentives such as payment diminishes intrinsic motivation. According to the second sense the motivational capacity of a valuation method is a function of the extent to which it has the resources to register the content or nature of existing motivations of different groups to act in proenvironmental ways. Finally, in our concluding remarks in Section 8, we will draw together the improvements to economic valuation methods that our analysis has revealed are needed.

Expressed Preference Methods of Environmental Valuation: Non-Market Resource Valuation Tools

2019

The objective of this paper was to give an overview of the expressed preference (EP) techniques of environmental valuation. These methods offer estimation of the value of a resource not necessarily willingness to pay (WTP) or willingness to Accept (WTA) compensation rather upper and lower values. The method of measuring individuals’ willingness to pay is usually based on contingent valuation method (CVM). This research focuses on defining, categorizing, and applicability of various environmental valuation techniques that have been and can be applied in attaching value to a given resource using expressed/Revealed preference methods. The study serves as a supplementary synthesis and discussion to the board of knowledge of resource valuation methods. More specifically, selected methods to discussed herein include; contingent valuation method, hedonic pricing model, travel cost method, trade-off game method, the costless-choice method, Delphi method, Replacement Cost Method, Relocation ...