16.4 Nonmarket Valuation of Ecosystem Goods and Services
231
Dollar Units Provide the Convenience of
Common Units of Measurement
In many contexts, a combination and comparison
of physical quantities using different physical units
may not provide enough input to decision making.
How do we go about comparing the loss of 50
hectares of wetland to the gain in agricultural production from the farmland that was created? Do we
compare the number of waterfowl nests that are
lost, plus the number of recreational waterfowl
hunting days plus the cubic meters per year of
groundwater recharge foregone with the bushels of
com per year gained? What about the additional
person-hours per year of employment gained by
bringing the additional acreage into production or
the addition to farm income?
The measurement units that are used to quantify
the physical stocks and flows may not convey a
consistent measure of the value of the resources to
society. The value of an additional total allowable
catch of 15,000 tons per year for menhaden would
be quite different from the same amount of cod, a
species that demands a higher price in consumer
markets. The value of several thousand cubic meters per month of water recharging an aquifer is
likely to be much greater in an arid, heavily developed region than in a region that is less heavily
populated or with greater water reserves. The value
of any additional recharge to an aquifer is likely to
be greater in a region with no alternative sources
for potable water than in a region with many alternative surface water sources. Measures of value
take into account the interaction between physical
properties, uses by society, scarcity of the resource
in question relative to its own reserves, and the
availability and cost of suitable substitutes.
The use of money facilitates trade in a complex
social environment. The value of money depends
on the value of the goods and services that it represents. Individuals' values for resources are revealed indirectly by the amounts of money that they
are willing to pay for given market environment.
Money is a medium for exchange in a complex
market environment. It allows for a common unit
to compare values of a myriad of different items
and services, which are measured in a wide variety of physical units that are typically not directly
comparable.
Physical Units of Ecosystem Impacts to
be Valued Must be Appropriate to the
Policy Context
Before we can ask how to measure ecosystem values, we fIrst must understand what is measured and
why and anticipate how this information is to be
used. Typically. the notion of measuring ecosystem
values arises in response to specifIc policy options
or proposals. Thus it is often the case that the necessary policy-relevant information is not provided
by answering the question, "What is the value of
groundwater and surface protection services provided by this watershed?" but rather, "What would
be the net change in value of water protection services effected by the proposed policy to limit clearcutting in this watershed?" These are two very distinctly different questions, and the information
obtained from each is not substitutable in terms of
informing public policy.
Before any economic analysis of value can be
achieved, the statement of the problem must include a precise defmition of the ecosystem good or
service that is being valued. A measure of ecosystem value must be policy relevant. Under what circumstance might these services be altered? Economic valuation requires a precise defmition of
how a proposed change in the ecosystem will affect clearly identifIed services received by society.
Those who receive the value or bear the cost if the
ecosystem service is altered must be identifIed. The
next section focuses on the steps that lead up to applying valuation methods.
16.4 Nonmarket Valuation
of Ecosystem Goods
and Services
The goal of the remainder of this chapter is to describe circumstances that contribute to successful
measurement of ecosystem values. This section
briefly discusses considerations that need to be
taken into account before any decision to conduct
some form of ecosystem valuation is made. The
purpose of the discussion is to describe issues that
are encountered before a valuation study is set up.
A large number of articles and books provide
greater detail on these and related topics (e.g.,
Mitchell and Carson, 1989; Johnson and Johnson,
1990; Freeman, 1993). While most nonmarket valuation methods are, in theory, consistent with the
economic concept of value, the application of methods and the usefulness of resulting value estimates
can be problematic. Five basic steps that must be
taken before any decisions can be made about the
specifIc methods used in a valuation study are reviewed next.
The fIrst step is to identify which ecosystem
goods and services might be affected by the proposed policy. These may differ for a given type of
231
Dollar Units Provide the Convenience of
Common Units of Measurement
In many contexts, a combination and comparison
of physical quantities using different physical units
may not provide enough input to decision making.
How do we go about comparing the loss of 50
hectares of wetland to the gain in agricultural production from the farmland that was created? Do we
compare the number of waterfowl nests that are
lost, plus the number of recreational waterfowl
hunting days plus the cubic meters per year of
groundwater recharge foregone with the bushels of
com per year gained? What about the additional
person-hours per year of employment gained by
bringing the additional acreage into production or
the addition to farm income?
The measurement units that are used to quantify
the physical stocks and flows may not convey a
consistent measure of the value of the resources to
society. The value of an additional total allowable
catch of 15,000 tons per year for menhaden would
be quite different from the same amount of cod, a
species that demands a higher price in consumer
markets. The value of several thousand cubic meters per month of water recharging an aquifer is
likely to be much greater in an arid, heavily developed region than in a region that is less heavily
populated or with greater water reserves. The value
of any additional recharge to an aquifer is likely to
be greater in a region with no alternative sources
for potable water than in a region with many alternative surface water sources. Measures of value
take into account the interaction between physical
properties, uses by society, scarcity of the resource
in question relative to its own reserves, and the
availability and cost of suitable substitutes.
The use of money facilitates trade in a complex
social environment. The value of money depends
on the value of the goods and services that it represents. Individuals' values for resources are revealed indirectly by the amounts of money that they
are willing to pay for given market environment.
Money is a medium for exchange in a complex
market environment. It allows for a common unit
to compare values of a myriad of different items
and services, which are measured in a wide variety of physical units that are typically not directly
comparable.
Physical Units of Ecosystem Impacts to
be Valued Must be Appropriate to the
Policy Context
Before we can ask how to measure ecosystem values, we fIrst must understand what is measured and
why and anticipate how this information is to be
used. Typically. the notion of measuring ecosystem
values arises in response to specifIc policy options
or proposals. Thus it is often the case that the necessary policy-relevant information is not provided
by answering the question, "What is the value of
groundwater and surface protection services provided by this watershed?" but rather, "What would
be the net change in value of water protection services effected by the proposed policy to limit clearcutting in this watershed?" These are two very distinctly different questions, and the information
obtained from each is not substitutable in terms of
informing public policy.
Before any economic analysis of value can be
achieved, the statement of the problem must include a precise defmition of the ecosystem good or
service that is being valued. A measure of ecosystem value must be policy relevant. Under what circumstance might these services be altered? Economic valuation requires a precise defmition of
how a proposed change in the ecosystem will affect clearly identifIed services received by society.
Those who receive the value or bear the cost if the
ecosystem service is altered must be identifIed. The
next section focuses on the steps that lead up to applying valuation methods.
16.4 Nonmarket Valuation
of Ecosystem Goods
and Services
The goal of the remainder of this chapter is to describe circumstances that contribute to successful
measurement of ecosystem values. This section
briefly discusses considerations that need to be
taken into account before any decision to conduct
some form of ecosystem valuation is made. The
purpose of the discussion is to describe issues that
are encountered before a valuation study is set up.
A large number of articles and books provide
greater detail on these and related topics (e.g.,
Mitchell and Carson, 1989; Johnson and Johnson,
1990; Freeman, 1993). While most nonmarket valuation methods are, in theory, consistent with the
economic concept of value, the application of methods and the usefulness of resulting value estimates
can be problematic. Five basic steps that must be
taken before any decisions can be made about the
specifIc methods used in a valuation study are reviewed next.
The fIrst step is to identify which ecosystem
goods and services might be affected by the proposed policy. These may differ for a given type of