222
Carson, 1989; Johnson and Johnson, 1990; Braden
and Kolstad, 1991; Freeman, 1993; Pearce, 1993;
Tietenberg, 1996; Smith, 1997). Many authors explain the relevance of defining specific categories
of economic values for natural amenities, such as
use and nonuse values, existence values, bequest
values, and option values. Literature comprising
thousands of publications over the last 10 years focuses on methodological issues encountered in economic valuation. Carson et al. (1993) reference
over a thousand nonmarket valuation studies using
one technique, contingent valuation, alone. It is expected that Environment Canada's Environmental
Valuation Reference Inventory (EVRI), an on-line,
continually updated bibliographic reference tool,
will catalogue several thousand environmental valuation studies from around the world (Environment
Canada, 1998).
However, simultaneous with the development of
the theory and methods of environmental valuation,
others question economic valuation on a variety of
grounds, suggesting that more research is needed
to better understand how to use estimates of ecosystem value. Some authors question whether certain
methods are up to the task of estimating nonmarket economic values (AERE, 1992; Boyle and
Bergstrom, 1992; Smith, 1992; Arrow et aI., 1993;
Hausman, 1993). Others point out that, while the
methods may be reliable in theory, many applications of the methods are sloppy and ill-informed,
producing estimates of ecosystem benefits that are
of questionable use (Sarker and McKenney, 1992;
Arrow et al., 1993). Still others consider the philosophical implications of the differences between
economic value, which is anthropocentric in nature,
and other definitions, which attempt to identify intrinsic values apart from human derivations of
value (Rescher, 1980; Kneese and Schulze, 1985;
Van De Veer and Pierce, 1986; Norton, 1987;
Sagoff, 1988). The result is that research on methods and theory is ongoing while, in practice, valuation measurements are used to inform day to day
decision making.
Rigorous questioning and discourse are integral
parts of the academic process. The process has refined and greatly improved the development of valuation theory and methods and our understanding
of how measures of ecosystem value can be used.
Many of those who most vociferously question aspects of ecosystem valuation also concur that in the
real world individuals, firms, and governments
make decisions daily that could alter ecosystems.
The incentives driving many of these decisions are
economic. Decision criteria include perceptions of
net changes in value that occur under different alMeasuring Ecosystem Values
ternatives. But, in fact, in many instances the full
range of economic values that could be affected by
a given decision may include ecosystem values that
are not revealed in markets. Without an attempt to
properly identify and quantify these changes in values, the decision process remains incompletely informed. Thus, while the academic discourse indicates that there is room for continued research in
the area and that this research will likely change
the details of how future valuation studies are to be
performed and interpreted, valuation is already a
powerful tool in ecosystem management.
The fact is that environmental degradation and
resource misallocation problems exist precisely because the full range of ecosystem benefits to society now and in the future is not fully represented
in the market economy. With respect to their use
of environmental resources, individuals and firms
acting in their own interests do not always have incentives to take those actions that would be most
beneficial for society as a whole. In the terminology of economics, a mismatch between individual
interests and social interests indicates that the market, or environmental policy, has failed. This failure to take into account the full value of ecosystems can potentially be corrected through the use
of carefully designed economic instruments and
policies that alter people's options and incentives.
Quantitative estimates of the value of ecosystem
services are often necessary in order to develop and
justify the implementation of land-use regulations,
taxes, subsidies, permit systems, user fees, liability
laws, and other policies to encourage wise use and
conservation of ecosystem resources.
This chapter provides a conceptual understanding of what ecosystem valuation attempts to measure as defined in economic theory. A major goal
is to provide insight into the factors that determine
and influence the economic value of ecosystems
and their services. This chapter describes the policy contexts in which it is desirable to quantify
ecosystem values, summarizes techniques available
for measuring nonmarket ecosystem values, and
provides relevant examples and references for further information. This chapter is conceptual in nature and written for the professional who has limited formal economic training. It is intended to be
complementary to others in this volume.
Section 16.2 justifies the need to estimate
ecosystem values to make information available
that the market cannot provide to policymakers,
governments, firms, and individuals who would
prefer that the full value of environmental services
be incorporated into economic decision making.
Estimation of nonmarket ecosystem values, in par-
Carson, 1989; Johnson and Johnson, 1990; Braden
and Kolstad, 1991; Freeman, 1993; Pearce, 1993;
Tietenberg, 1996; Smith, 1997). Many authors explain the relevance of defining specific categories
of economic values for natural amenities, such as
use and nonuse values, existence values, bequest
values, and option values. Literature comprising
thousands of publications over the last 10 years focuses on methodological issues encountered in economic valuation. Carson et al. (1993) reference
over a thousand nonmarket valuation studies using
one technique, contingent valuation, alone. It is expected that Environment Canada's Environmental
Valuation Reference Inventory (EVRI), an on-line,
continually updated bibliographic reference tool,
will catalogue several thousand environmental valuation studies from around the world (Environment
Canada, 1998).
However, simultaneous with the development of
the theory and methods of environmental valuation,
others question economic valuation on a variety of
grounds, suggesting that more research is needed
to better understand how to use estimates of ecosystem value. Some authors question whether certain
methods are up to the task of estimating nonmarket economic values (AERE, 1992; Boyle and
Bergstrom, 1992; Smith, 1992; Arrow et aI., 1993;
Hausman, 1993). Others point out that, while the
methods may be reliable in theory, many applications of the methods are sloppy and ill-informed,
producing estimates of ecosystem benefits that are
of questionable use (Sarker and McKenney, 1992;
Arrow et al., 1993). Still others consider the philosophical implications of the differences between
economic value, which is anthropocentric in nature,
and other definitions, which attempt to identify intrinsic values apart from human derivations of
value (Rescher, 1980; Kneese and Schulze, 1985;
Van De Veer and Pierce, 1986; Norton, 1987;
Sagoff, 1988). The result is that research on methods and theory is ongoing while, in practice, valuation measurements are used to inform day to day
decision making.
Rigorous questioning and discourse are integral
parts of the academic process. The process has refined and greatly improved the development of valuation theory and methods and our understanding
of how measures of ecosystem value can be used.
Many of those who most vociferously question aspects of ecosystem valuation also concur that in the
real world individuals, firms, and governments
make decisions daily that could alter ecosystems.
The incentives driving many of these decisions are
economic. Decision criteria include perceptions of
net changes in value that occur under different alMeasuring Ecosystem Values
ternatives. But, in fact, in many instances the full
range of economic values that could be affected by
a given decision may include ecosystem values that
are not revealed in markets. Without an attempt to
properly identify and quantify these changes in values, the decision process remains incompletely informed. Thus, while the academic discourse indicates that there is room for continued research in
the area and that this research will likely change
the details of how future valuation studies are to be
performed and interpreted, valuation is already a
powerful tool in ecosystem management.
The fact is that environmental degradation and
resource misallocation problems exist precisely because the full range of ecosystem benefits to society now and in the future is not fully represented
in the market economy. With respect to their use
of environmental resources, individuals and firms
acting in their own interests do not always have incentives to take those actions that would be most
beneficial for society as a whole. In the terminology of economics, a mismatch between individual
interests and social interests indicates that the market, or environmental policy, has failed. This failure to take into account the full value of ecosystems can potentially be corrected through the use
of carefully designed economic instruments and
policies that alter people's options and incentives.
Quantitative estimates of the value of ecosystem
services are often necessary in order to develop and
justify the implementation of land-use regulations,
taxes, subsidies, permit systems, user fees, liability
laws, and other policies to encourage wise use and
conservation of ecosystem resources.
This chapter provides a conceptual understanding of what ecosystem valuation attempts to measure as defined in economic theory. A major goal
is to provide insight into the factors that determine
and influence the economic value of ecosystems
and their services. This chapter describes the policy contexts in which it is desirable to quantify
ecosystem values, summarizes techniques available
for measuring nonmarket ecosystem values, and
provides relevant examples and references for further information. This chapter is conceptual in nature and written for the professional who has limited formal economic training. It is intended to be
complementary to others in this volume.
Section 16.2 justifies the need to estimate
ecosystem values to make information available
that the market cannot provide to policymakers,
governments, firms, and individuals who would
prefer that the full value of environmental services
be incorporated into economic decision making.
Estimation of nonmarket ecosystem values, in par-