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When it is determined that a market is well functioning, the contribution of ecosystem goods and
services to the market prices and quantities can be
used for the value of those goods and services.
However, if markets do not fully take these into account, non-market valuation methods must be used.
Nonmarket Values
There are a variety of reasons why many ecosystem values are not expressed in terms of wellfunctioning markets. The property rights over
ecosystem goods and services may be poorly developed, leading to open-access problems of the
type described by Hardin's Tragedy of the Commons (Hardin and Badin, 1977). Often it is the nature of the resources themselves that make it difficult to exclude users. The atmosphere, waterways,
scenic views, and other resources can be classified
as nonexcludable public goods. The nonexclusive
nature of these resources, in part, justifies public
ownership and regulation of these types of goods
as a means to prevent open-access overexploitation.
Many environmental amenities are nonrival in
nature. This means that the use of the ecosystem
service by one person does not diminish the amount
that remains available for other people. It can easily be shown that the full value of nonrival goods
is not fully revealed in markets, and thus in market prices and quantities, and that the market alone
would underprovide them. Thus goods and services
that are nonrival exhibit nonmarket values. Some
values are not exhibited by the market simply because people hold value in knowing that ecosystems will continue to exist in a given state into perpetuity. People would be willing to express this
value in terms of trade-offs that they would be willing to make to assure that the ecosystems are not
altered, but there is no market available in which
to express this willingness to accept trade-offs. The
following categories are generally used to refer to
the types of nonmarket values that flow from
ecosystems.
Use Value
Use value refers to the benefits derived from direct
contact with an ecosystem or its services. Recreational activities, ecosystem inputs to production
processes, watershed protection, and other activities that involve direct or indirect contact with an
ecosystem result in a use value. An indirect use
value involves direct contact at some point in the
process of creating the good or service, which directly produces benefits. Photos of scenic vistas on
calendars, photos, books, and television shows
Measuring Ecosystem Values
about wildlife and other similar goods are examples of indirect use values of ecosystems.
Consumptive (Rival Goods) and Nonconsumptive
(Nonrival Goods) Use Values
Benefits derived from use values mayor may not
involve consuming the good in question. If, in order to receive an ecosystem benefit, the level of
benefits for other people is necessarily reduced,
then it said that the benefit is consumptive, or rival. Examples of ecosystem benefits that are rival
include hunting and extractive activities. Nonconsumptive or nonrival goods are those for which use
by anyone person does not appreciably reduce the
use by any other person. Once the good exists, it
provides a flow of benefits for many people at once.
The addition of a marginal user does not reduce the
marginal benefit for anyone else. The significance
of nonrival goods is that there is a tendency for
people to free-ride on the amount provided or protected by other people. Therefore, the full value of
the good is not revealed in the marketplace, and the
market alone may accord for too little provision of
these goods. This characteristic of nonrival goods
is the basic reason for public ownership of them.
Another term for nonrival goods is public goods.
As an economic definition, a public good is not
synonymous with public ownership.
Option Value
In many circumstances, people may not be able to
anticipate exactly when or even if they will use the
resource in question. However, they receive value
in knowing that the option exists, if they wish to
exercise it. In this sense, the benefits that they gain
aside from the actual use of the ecosystem are expressed as an option value. This concept is similar
to a person's willingness to pay more for an insurance premium than the expected value of the event
of an accident that the insurance would cover. The
excess is the value to the person of avoiding the
risk. An option value is the value to a person of
avoiding to have to determine at any given time
whether or not they will or will not use a resource
in the future. It is the value in putting off the decision. A quasi-option value is a related concept. If
the decision about use is to be put off until the future specifically because the potential user is awaiting more information about the benefits of future
use, then the information itself has value. Thus
quasi-option value is the value of putting off a decision specifically in anticipation of new information that will reduce uncertainty about the benefits
of use in the future. Option and quasi-option val-
When it is determined that a market is well functioning, the contribution of ecosystem goods and
services to the market prices and quantities can be
used for the value of those goods and services.
However, if markets do not fully take these into account, non-market valuation methods must be used.
Nonmarket Values
There are a variety of reasons why many ecosystem values are not expressed in terms of wellfunctioning markets. The property rights over
ecosystem goods and services may be poorly developed, leading to open-access problems of the
type described by Hardin's Tragedy of the Commons (Hardin and Badin, 1977). Often it is the nature of the resources themselves that make it difficult to exclude users. The atmosphere, waterways,
scenic views, and other resources can be classified
as nonexcludable public goods. The nonexclusive
nature of these resources, in part, justifies public
ownership and regulation of these types of goods
as a means to prevent open-access overexploitation.
Many environmental amenities are nonrival in
nature. This means that the use of the ecosystem
service by one person does not diminish the amount
that remains available for other people. It can easily be shown that the full value of nonrival goods
is not fully revealed in markets, and thus in market prices and quantities, and that the market alone
would underprovide them. Thus goods and services
that are nonrival exhibit nonmarket values. Some
values are not exhibited by the market simply because people hold value in knowing that ecosystems will continue to exist in a given state into perpetuity. People would be willing to express this
value in terms of trade-offs that they would be willing to make to assure that the ecosystems are not
altered, but there is no market available in which
to express this willingness to accept trade-offs. The
following categories are generally used to refer to
the types of nonmarket values that flow from
ecosystems.
Use Value
Use value refers to the benefits derived from direct
contact with an ecosystem or its services. Recreational activities, ecosystem inputs to production
processes, watershed protection, and other activities that involve direct or indirect contact with an
ecosystem result in a use value. An indirect use
value involves direct contact at some point in the
process of creating the good or service, which directly produces benefits. Photos of scenic vistas on
calendars, photos, books, and television shows
Measuring Ecosystem Values
about wildlife and other similar goods are examples of indirect use values of ecosystems.
Consumptive (Rival Goods) and Nonconsumptive
(Nonrival Goods) Use Values
Benefits derived from use values mayor may not
involve consuming the good in question. If, in order to receive an ecosystem benefit, the level of
benefits for other people is necessarily reduced,
then it said that the benefit is consumptive, or rival. Examples of ecosystem benefits that are rival
include hunting and extractive activities. Nonconsumptive or nonrival goods are those for which use
by anyone person does not appreciably reduce the
use by any other person. Once the good exists, it
provides a flow of benefits for many people at once.
The addition of a marginal user does not reduce the
marginal benefit for anyone else. The significance
of nonrival goods is that there is a tendency for
people to free-ride on the amount provided or protected by other people. Therefore, the full value of
the good is not revealed in the marketplace, and the
market alone may accord for too little provision of
these goods. This characteristic of nonrival goods
is the basic reason for public ownership of them.
Another term for nonrival goods is public goods.
As an economic definition, a public good is not
synonymous with public ownership.
Option Value
In many circumstances, people may not be able to
anticipate exactly when or even if they will use the
resource in question. However, they receive value
in knowing that the option exists, if they wish to
exercise it. In this sense, the benefits that they gain
aside from the actual use of the ecosystem are expressed as an option value. This concept is similar
to a person's willingness to pay more for an insurance premium than the expected value of the event
of an accident that the insurance would cover. The
excess is the value to the person of avoiding the
risk. An option value is the value to a person of
avoiding to have to determine at any given time
whether or not they will or will not use a resource
in the future. It is the value in putting off the decision. A quasi-option value is a related concept. If
the decision about use is to be put off until the future specifically because the potential user is awaiting more information about the benefits of future
use, then the information itself has value. Thus
quasi-option value is the value of putting off a decision specifically in anticipation of new information that will reduce uncertainty about the benefits
of use in the future. Option and quasi-option val-