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27 Cards in this Set
- Front
- Back
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Environmental Views (fill in from slide) |
Sustainability Anthropocene |
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Economic View (fill in from slide) |
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How do we determine the total economic value of the environment? |
Use Values + Non-use Values |
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Use Values |
Resource that is directly or indirectly used. We benefit from it. |
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Direct Use Value Examples |
Timber; Non-timber products; hiking; hunting |
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Indirect Use Value Examples |
Soil erosion control; flood control protection; carbon storage |
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Non-Use Values: |
Option Value; Bequest Value; Existence Value |
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Option Value Example |
Future Recreation possibilities; Potential pharmaceuticals |
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Bequest Value Example |
Forest Available for future generations |
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Existence Value Example |
Welfare from just knowing forest exists; Polar bears; Otters |
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Total non-market value = |
Use Values + Non-use Values |
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Two Important Applications of Environmental Valuation |
1. Measurement of costs associated with externalities 2. (fill in from slide) |
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Consumer Surplus |
The difference between what one is willing to pay and what one actually has o pay or a service or a project |
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Two ways to determine consumer surplus: |
1. Willingness-to-pay (WTP) 2. Willingness-to-accept (WTA) - accept payment |
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Which is generally greater: Willingness to Pay or Willingness to Accept? |
WTA > WTP Because people are more willing to accept payment to do things or clean up/etc than to pay for the clean up. |
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Determining Direct Use Value with Market Valuation |
Social benefits are determined by using the market value of environmental goods to assess impacts to producer and consumer surplus. |
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Cost of Illness |
Monetize direct and indirect costs of illness related to environmental quality Direct Costs: - Medical Costs - Lost Wages Indirect Costs - Decrease in human capital - Pain and suffering - Impacts to efficiency |
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Indirect Use Value: Replacement Costs |
Ecosystem Services; How much does it cost to replace these benefits? -Labor and construction cots - Water treatment plant - Infrastructure to prevent floods and landslides |
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Direct Use and Revealed Preference: Travel Cost Method |
Travel costs; Payment Foregone Earnings; Give up $$ to pay Travel Cost Method: Multiply by all visitors |
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Direct Use and Revealed Preference: Hedonic Pricing |
Uses the difference in price between comparable goods to infer a WTP for a healthier environment, "ceteris paribus" |
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Non-use Value and Stated Preference: Contingent Valuation |
Contingent Valuation: uses surveys t determine WTA (decrease in environmental quality) or WTP (for improvements in environmental quality). Provides a means for estimating non-use values (as well as use value) |
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Contingent Valuation and Lost Passive Use Example |
Damages from the Exxon Valdez Oil Spill, 1989 |
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Oil Pollution Act of 1990 |
Natural Resources Damage Assessment measures impacts in ecological terms such as the number of fish killed or acres of wetland destroyed |
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Sources of Error in Contingent Valuation |
- Hypothetical Bias (hypothetical questions -> hypothetical responses) - Protest Bids: Survey response is based on respondent's opposition o the question or payment video - Free-riding: May lead to understantmet of WTP - Strategic Bias: People might inflate their WTP to acheive greater cleanup if tey believe they will not have to pay. - Embedding Bias: Answers are strongly affected by the context provided about the issue at stake (e.g. protection of a single national park vs protection for all national parks) |
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Ethical Issues in Contingent Valuation |
- WTP might be affected by ability to pay - Price is not an adequate reflection of our rights and responsibilities |
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Economic Approach: wage-risk studies |
Take people in high-risk jobs and compare casualties and wages to the average person with an average job. |
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Problems with wage-risk studies |
- Worker's knowledge of risks - Do risky people choose risky jobs? - Is the risk involuntary? - Is all human life valued the same? |
