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Contingent Valuation: a Practical Alternative When Prices Aren't Journal of Economic Perspectives—Volume 26, Number 4—Fall 2012—Pages 27–42 Contingent Valuation: A Practical Alternative when Prices Aren’t Available Richard T. Carson ppersonerson mmayay bbee wwillingilling ttoo mmakeake aann eeconomicconomic ttradeoffradeoff ttoo aassuressure tthathat a wwilder-ilder- nnessess aarearea oorr ssceniccenic rresourceesource iiss pprotectedrotected eevenven iiff nneithereither tthathat ppersonerson nnoror A ((perhaps)perhaps) aanyonenyone eelselse wwillill aactuallyctually vvisitisit tthishis aarea.rea. TThishis ttradeoffradeoff iiss ccommonlyommonly llabeledabeled ““passivepassive uusese vvalue,”alue,” aalthoughlthough iitt isis aalsolso knownknown bbyy otherother namesnames includingincluding ““existenceexistence vvalue”alue” aandnd ““stewardshipstewardship vvalue.”alue.” AAss KKrutillarutilla ((1967)1967) eexplainedxplained iinn hhisis cclassiclassic American Economic Review ppiece,iece, ““ConservationConservation RReconsidered,”econsidered,” passivepassive useuse isis notnot ggenerallyenerally rrevealedevealed bbyy cchoiceshoices iinn thethe mmarketplace,arketplace, uunlikenlike manymany llocalocal ppublicublic goodsgoods wwhichhich aarere eeitherither ccapitalizedapitalized iintonto ppropertyroperty vvaluesalues oorr wwhichhich rrequireequire tthehe cconsumptiononsumption ooff ccomplementaryomplementary pprivaterivate ggoodsoods ttoo eenjoy.njoy. PPassiveassive useuse representsrepresents thethe quintessen-quintessen- ttialial ppureure ppublicublic ggoodood iinn tthathat exclusionexclusion iiss notnot ppossible,ossible, nnoror eveneven ddesirable,esirable, becausebecause eenjoymentnjoyment iiss nnonrivalrous.onrivalrous. TThehe cconceptoncept ooff ppassiveassive uusese hhasas pplayedlayed aann iincreasinglyncreasingly iimportantmportant rroleole iinn eeconomicconomic tthinkinghinking cconcerningoncerning tthehe vvaluealue ooff ppublicublic ggoods,oods, aandnd pparticularly,articularly, tthosehose iinvolvingnvolving eenvironmentalnvironmental andand naturalnatural resourceresource amenitiesamenities wherewhere ppassiveassive aandnd ddirectirect uusese valuesvalues areare ooftenften tthoughthought ttoo ccoexistoexist (Freeman(Freeman 2003).2003). InIn CCarson,arson, FFlores,lores, aandnd MMitchellitchell ((1999),1999), mmyy ccoauthorsoauthors aandnd I pproviderovide a ddetailedetailed ooverviewverview ooff ppassiveassive uusese vvalue.alue. WWithoutithout mmarketarket information,information, otherother strategiesstrategies mustmust bebe consideredconsidered toto developdevelop mmeasureseasures ooff economiceconomic tradeoffstradeoffs thatthat involveinvolve passivepassive useuse value.value. ForFor example,example, passivepassive vvaluesalues cancan bebe capturedcaptured throughthrough a single-issuesingle-issue referendum,referendum, butbut popularpopular votesvotes onon bballotallot propositionspropositions thatthat relaterelate toto thesethese typestypes ofof concernsconcerns areare nonexistentnonexistent atat thethe nnationalational levellevel andand infrequentinfrequent atat thethe statestate oror locallocal level.level. However,However, moremore thanthan a half-half- ccenturyentury ago,ago, earlyearly studiesstudies ofof publicpublic goodsgoods likelike BowenBowen (1943)(1943) andand Ciriacy-WantrupCiriacy-Wantrup ((1947)1947) drewdrew thethe implicationimplication that,that, whenwhen thethe ballotballot boxbox isis notnot available,available, demanddemand ■ RRichardichard TT.. CCarsonarson iiss PProfessorrofessor ooff EEconomics,conomics, UUniversityniversity ooff CCalifornia,alifornia, SSanan DDiego,iego, LLaa JJolla,olla, CCalifornia.alifornia. HHisis eemailmail aaddressddress isis [email protected]@ucsd.edu. http://dx.doi.org/10.1257/jep.26.4.27. doi=10.1257/jep.26.4.27 28 Journal of Economic Perspectives fforor ppublicublic goodsgoods mightmight bebe estimatedestimated throughthrough anan appropriatelyappropriately structuredstructured surveysurvey ooff a rrepresentativeepresentative samplesample ofof thethe public—inpublic—in effect,effect, whatwhat wewe nownow callcall a contingentcontingent vvaluationaluation survey.survey. BowenBowen wentwent soso farfar asas toto argue:argue: “The“The pollingpolling ofof a “scientifi“scientifi ccally”ally” sselectedelected samplesample mightmight produceproduce moremore accurateaccurate resultsresults thanthan generalgeneral voting,voting, unlessunless aarrangementsrrangements werewere mademade toto insureinsure thatthat everyevery personperson wouldwould actuallyactually vote.”vote.” CContingentontingent vvaluationaluation sstudiestudies aasksk qquestionsuestions tthathat hhelpelp ttoo rrevealeveal tthehe mmonetaryonetary ttradeoffradeoff eeachach ppersonerson wwouldould mmakeake cconcerningoncerning tthehe vvaluealue ooff ggoodsoods oorr sservices.ervices. IInn CCarsonarson aandnd LLouviereouviere ((2011),2011), mmyy ccoauthoroauthor aandnd I pproviderovide a ccommonommon nnomenclatureomenclature fforor suchsuch ““statedstated preference”preference” qquestions.uestions. SuchSuch ssurveysurveys areare a practicalpractical aalternativelternative aapproachpproach fforor eelicitingliciting tthehe vvaluealue ooff ppublicublic ggoods,oods, iincludingncluding tthosehose wwithith ppassiveassive uusese cconsiderations.onsiderations. TThousandshousands ooff ccontingentontingent vvaluationaluation sstudiestudies hhaveave bbeeneen ddoneone iinn ooverver 113030 ccountriesountries llookingooking aatt ccultural,ultural, eenvironmental,nvironmental, hhealth,ealth, ttransportation,ransportation, aandnd ootherther iissuesssues ((CarsonCarson 22011).011). AAlmostlmost 6600 ppercentercent ooff tthehe eestimatesstimates iinn tthehe vveryery llargearge EEnvironmentalnvironmental VValuesalues RReferenceeference IInventorynventory ((EVRI)EVRI) ddatabaseatabase mmaintainedaintained bbyy EEnvironmentnvironment CCanadaanada iinn cconjunctiononjunction wwithith tthehe UU.S..S. EEnvironmentalnvironmental PProtectionrotection AAgencygency aandnd tthehe eenvironmentalnvironmental aagenciesgencies ooff sseveraleveral ootherther ccountriesountries ccomeome ffromrom ccontingentontingent vvaluationaluation ((atat hhttps://www.evri.ca).ttps://www.evri.ca). TThehe UU.S..S. EEnvironmentalnvironmental PProtec-rotec- ttionion AAgency’sgency’s ((1994)1994) eestimatesstimates ooff tthehe bbenefienefi ttss ooff tthehe UU.S..S. CCleanlean WWaterater AAct—whichct—which llargelyargely ccomprisesomprises rrecreationecreation aandnd ppassiveassive uuse—isse—is dderivederived uusingsing ccontingentontingent vvalua-alua- ttion,ion, aass aarere tthehe bbenefienefi tsts ooff iindividualndividual rregulationsegulations ttargetedargeted aatt sspecifipecifi c iindustriesndustries oorr wwaterater bbodiesodies ((GriffiGriffi tthshs eett aal.l. 22012).012). RResultsesults ffromrom ccontingentontingent vvaluationaluation sstudiestudies aarere uusedsed fforor mmanyany ppurposesurposes iinn bbenefienefi tt–cost–cost sstudies:tudies: rrecentecent examplesexamples iincludenclude tthehe wwill-ill- iingnessngness ttoo ppayay ooff PPennsylvaniaennsylvania hhouseholdsouseholds fforor aadditionaldditional iincarcerationncarceration vversusersus a rrehabilitationehabilitation pprogramrogram fforor sseriouserious jjuvenileuvenile ooffendersffenders ((Nagin,Nagin, PPiquero,iquero, SScott,cott, aandnd SSteinbergteinberg 22006);006); tthehe wwillingnessillingness ooff LLexington,exington, KKentucky,entucky, rresidentsesidents ttoo ppayay hhigherigher ttaxesaxes ttoo hhelpelp ssupportupport tthehe cconstructiononstruction ooff a nnewew bbaseballaseball sstadiumtadium aandnd bbasketballasketball aarenarena ( JJohnsonohnson aandnd WWhiteheadhitehead 22007);007); tthehe vvaluealue ooff ddevelopingeveloping vvaccineaccine ppoliciesolicies iinn AAfricafrica ( JJeuland,euland, LLucas,ucas, CClemens,lemens, aandnd WWittingtonittington 22009);009); eestimatingstimating tthehe hhourlyourly vvaluealue ooff iinformalnformal ccareare ggiversivers iinn tthehe NNetherlandsetherlands ((dede MMeijer,eijer, BBrouwer,rouwer, KKoopman-oopman- sschap,chap, vvanan ddenen BBerg,erg, aandnd vvanan EExelxel 22010);010); llookingooking aatt wwillingnessillingness ttoo iincurncur hhigherigher wwaterater ttariffsariffs fforor llessess rriveriver ppollutionollution iinn FFuzhou,uzhou, CChinahina ( JJiang,iang, JJin,in, aandnd LLinin 22011);011); aandnd tthehe wwillingnessillingness ooff tthehe UU.S..S. ppublicublic ttoo ppayay fforor cclimatelimate cchangehange mmeasureseasures ((Aldy,Aldy, KKotchen,otchen, aandnd LLeiserowitzeiserowitz 22012).012). TThishis essayessay bbeginsegins bbyy ddiscussingiscussing tthehe eeventsvents ssetet iinn mmotionotion bbyy tthehe Exxon Valdez ooilil sspillpill ofof MMarcharch 1989,1989, focusingfocusing onon whywhy itit isis importantimportant toto measuremeasure monetarymonetary tradeoffstradeoffs fforor ggoodsoods wherewhere passivepassive useuse considerationsconsiderations loomloom large.large. AlthoughAlthough discussionsdiscussions oftenoften sseemeem ttoo putput muchmuch ofof theirtheir emphasisemphasis onon whetherwhether contingentcontingent valuationvaluation isis suffisuffi ccientlyiently rreliableeliable forfor useuse inin assessingassessing naturalnatural resourceresource damagesdamages inin lawsuits,lawsuits, itit isis importantimportant ttoo rrememberemember thatthat mostmost estimatesestimates fromfrom contingentcontingent valuationvaluation studiesstudies areare usedused iinn benefibenefi tt–– ccostost assessments,assessments, notnot naturalnatural resourceresource damagedamage
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