Using Surveys to Value Public Goods: The Contingent Valuation Method

Using Surveys to Value Public Goods: The Contingent Valuation Method

Using Surveys to Value Public Goods: The Contingent Valuation Method

Using Surveys to Value Public Goods: The Contingent Valuation Method

Synopsis

Economists and others have long believed that by balancing the costs of such public goods as air quality and wilderness areas against their benefits, informed policy choices can be made. But the problem of putting a dollar value on cleaner air or water and other goods not sold in the marketplace has been a major stumbling block. Mitchell and Carson, for reasons presented in this book, argue that at this time the contingent valuation (CV) method offers the most promising approach for determining public willingness to pay for many public goods---an approach likely to succeed, if used carefully, where other methods may fail. The result of ten years of research by the authors aimed at assessing how surveys might best be used to value public goods validly and reliably, this book makes a major contribution to what constitutes best practice in CV surveys. Mitchell and Carson begin by introducing the contingent valuation method, describing how it works and the nature of the benefits it can be used to measure, comparing it to other methods for measuring benefits, and examining the data-gathering technique on which it is based---survey research. Placing contingent valuation in the larger context of welfare theory, the authors examine how the CV method impels a deeper understanding of willingness-to-pay versus willingness-to-accept compensation measures, the possibility of existence values for public goods, the role of uncertainty in benefit valuation, and the question of whether a consumer goods market or a political goods market (referenda) should be emulated. In developing a CV methodology, the authors deal with issues of broader significance to survey research. Their model of respondent error is relevant to current efforts to frame a theory of response behavior and bias typology will interest those considering the cognitive aspects of answering survey questions. Mitchell and Carson conclude that the contingent valuation method can obtain valid valuation information on public goods, but only if the method is applied in a way that addresses the potential sources of error and bias. They end their book by providing guidelines for CV practitioners, a list of questions that should be asked by any decision maker who wishes to use the findings of a CV study, and suggestions for new applications of contingent valuation. Additional features include a comprehensive bibliography of the CV literature and an appendix summarizing more than 100 CV studies.

Excerpt

Public policy decision making often involves balancing the costs of a policy with the benefits. When a policy affects goods and services traded in normal markets, costs and benefits result from consumer responses to changes in prices faced and incomes received. a large body of empirical evidence exists that links price and income change to consumer behavior. This evidence may be employed in a reasonably straightforward fashion to calculate a policy's costs and benefits. On the other hand, when a policy affects the availability or character of public goods--goods such as national parks, wilderness areas, drinking water, and numerous other environmental and natural resources--one does not observe price and income changes, and thus must infer the changes in consumer behavior by using more roundabout methods.

Using Surveys to Value Public Goods: the Contingent Valuation Method provides decision makers, policy analysts, and social scientists with a detailed discussion of a new technique for the valuation of goods not traded in private markets. Termed contingent valuation, the technique draws upon economic theory and the methods of survey research to elicit directly from consumers the values they place upon public goods. This technique for public goods valuation complements earlier advances made at Resources for the Future in the late fifties and early sixties. These earlier approaches inferred the value individuals place on public goods from observable behavior indirectly related to the good. For example, the seminal work of Marion Clawson in 1959 estimated the value of outdoor recreation experiences from the observed distances individuals traveled to particular recreational sites.

The advantage of contingent valuation over the previous indirect approaches concerns the nature of the values that may be addressed. the indirect methods, exemplified by the Clawson travel-distance approach, are best applied to estimate values concerning the use of a public good, while the contingent valuation method may be employed to estimate values . . .

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