they are methodically varied to reach equilibrium in the labour market and unless
labourers are free to move.
8.6.4 Travel Cost
The travel-cost method has been widely applied in developed countries to evaluate
recreational goods and services. It relies on the simple assumption that observed
behaviour can help produce a demand curve and enable estimating a value (including
consumer’s surplus) for an unpriced environmental good by considering increasing
travel costs as a substitute for variable admission prices.
8.6.5 Marketed Goods as Environmental Surrogates
Sometimes a privately marketed good may be a suitable, but imperfect substitute, for
some environmental service or publicly provided good. For example, private swimming pools may substitute for clean lakes and streams, or private parks for national
parks. The demand for the private good will probably provide a good indication of
the potential benefits arising from an increased availability of an environmental
feature, such as a park. Given that the private good is a close substitute of the public
good, the users’ welfare level will not be significantly modified.
8.7 Cost Analysis
Three methods that may be classified as cost-analysis techniques were presented
earlier, namely: the cost-effectiveness, preventive expenditure and opportunity-cost
approaches. All of them, by using market prices, relied on actual expenditures. Here,
cost-analysis techniques - using potential expenditure estimates to evaluate an
infrastructure development impact on the environment - are presented. Each method
examines the costs that would be involved if some environmental impact were to be
alleviated by replacing the services which had been impaired or demolished. The
information collected then helps to decide if it is better to adopt preventive measures
beforehand or undertake compensatory measures following the event. Although the
three methods are similar, there are circumstances when one will be more suitable
than another. Hence, they are separately presented.
8.7 Cost Analysis
231
labourers are free to move.
8.6.4 Travel Cost
The travel-cost method has been widely applied in developed countries to evaluate
recreational goods and services. It relies on the simple assumption that observed
behaviour can help produce a demand curve and enable estimating a value (including
consumer’s surplus) for an unpriced environmental good by considering increasing
travel costs as a substitute for variable admission prices.
8.6.5 Marketed Goods as Environmental Surrogates
Sometimes a privately marketed good may be a suitable, but imperfect substitute, for
some environmental service or publicly provided good. For example, private swimming pools may substitute for clean lakes and streams, or private parks for national
parks. The demand for the private good will probably provide a good indication of
the potential benefits arising from an increased availability of an environmental
feature, such as a park. Given that the private good is a close substitute of the public
good, the users’ welfare level will not be significantly modified.
8.7 Cost Analysis
Three methods that may be classified as cost-analysis techniques were presented
earlier, namely: the cost-effectiveness, preventive expenditure and opportunity-cost
approaches. All of them, by using market prices, relied on actual expenditures. Here,
cost-analysis techniques - using potential expenditure estimates to evaluate an
infrastructure development impact on the environment - are presented. Each method
examines the costs that would be involved if some environmental impact were to be
alleviated by replacing the services which had been impaired or demolished. The
information collected then helps to decide if it is better to adopt preventive measures
beforehand or undertake compensatory measures following the event. Although the
three methods are similar, there are circumstances when one will be more suitable
than another. Hence, they are separately presented.
8.7 Cost Analysis
231