quite easy to describe to decision-makers. However, in many developing countries
the amount of preventive expenditure is more usually limited by income than by
demand.
8.4.3 Choosing a Technique
All the methods presented in Sect. 8.3 and 8.4 have fairly wide applicability. The
simplest and most powerful is the one which uses changes in productivity; this
method is useful once the impacts of the infrastructure project on the environment
and their resulting effects on productivity have been recognised. Similarly, the
opportunity-cost and preventive-expenditure methods are quite strong as they
depend on actual (or potential) out-of-pocket expenditures to assess values.
The cost-effectiveness analysis is a strong method if used delicately with representative goals. Loss-of-earnings, because of some unresolved biological and ethical
issues, has more limited use but can be helpful in appraising health-related infrastructure projects, such as potable water and sewage disposal.
It is difficult to prescribe any method because the selection relies on many
parameters. However, any of them, suitably used, should yield defendable results
which can be directly included into project analyses.
8.5 Potentially Applicable Techniques
These techniques are termed “potentially applicable” either because they require
more care when used, require more data or on other resources or because they need
sturdier assumptions than the directly operational techniques explained above. The
eight techniques presented here (see Table 8.1) fall into two broad categories:
1. those that use substitute market prices to determine values, and
2. cost-analysis methods which evaluate the amount of probable expenditures.
8.6 Techniques Using Substitute Market Prices
Many environmental features such as clean air, pleasant surroundings and
unobstructed views are public goods (see Chap. 17) for which there is no recognised
market price or is rarely available. However, in several cases, the inherent value of an
environmental good or service may be estimated through the price accepted for
another good which is sold.
Surrogate-market methods, therefore, generate the value of an unmarketed feature
of the environment from an authentic market price. It is assumed that when all the
other factors, except the environmental features, have been accounted for, the
8.6 Techniques Using Substitute Market Prices
229
the amount of preventive expenditure is more usually limited by income than by
demand.
8.4.3 Choosing a Technique
All the methods presented in Sect. 8.3 and 8.4 have fairly wide applicability. The
simplest and most powerful is the one which uses changes in productivity; this
method is useful once the impacts of the infrastructure project on the environment
and their resulting effects on productivity have been recognised. Similarly, the
opportunity-cost and preventive-expenditure methods are quite strong as they
depend on actual (or potential) out-of-pocket expenditures to assess values.
The cost-effectiveness analysis is a strong method if used delicately with representative goals. Loss-of-earnings, because of some unresolved biological and ethical
issues, has more limited use but can be helpful in appraising health-related infrastructure projects, such as potable water and sewage disposal.
It is difficult to prescribe any method because the selection relies on many
parameters. However, any of them, suitably used, should yield defendable results
which can be directly included into project analyses.
8.5 Potentially Applicable Techniques
These techniques are termed “potentially applicable” either because they require
more care when used, require more data or on other resources or because they need
sturdier assumptions than the directly operational techniques explained above. The
eight techniques presented here (see Table 8.1) fall into two broad categories:
1. those that use substitute market prices to determine values, and
2. cost-analysis methods which evaluate the amount of probable expenditures.
8.6 Techniques Using Substitute Market Prices
Many environmental features such as clean air, pleasant surroundings and
unobstructed views are public goods (see Chap. 17) for which there is no recognised
market price or is rarely available. However, in several cases, the inherent value of an
environmental good or service may be estimated through the price accepted for
another good which is sold.
Surrogate-market methods, therefore, generate the value of an unmarketed feature
of the environment from an authentic market price. It is assumed that when all the
other factors, except the environmental features, have been accounted for, the
8.6 Techniques Using Substitute Market Prices
229