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Contingent Valuation of Environmental Goods

A Comprehensive Critique Edited by Daniel McFadden, E. Morris Cox Professor of Economics and Kenneth Train, Adjunct Professor Emeritus of Economics, University of California, Berkeley, US
Contingent valuation is a survey-based procedure that attempts to estimate how much households are willing to pay for specific programs that improve the environment or prevent environmental degradation. For decades, the method has been the center of debate regarding its reliability: does it really measure the value that people place on environmental changes? Bringing together leading voices in the field, this timely book tells a unified story about the interrelated features of contingent valuation and how those features affect its reliability. Through empirical analysis and review of past studies, the authors identify important deficiencies in the procedure, raising questions about the technique’s continued use.
Extent: 336 pp
Hardback Price: $155.00 Web: $139.50
Publication Date: 2017
ISBN: 978 1 78643 468 5
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  • Economics and Finance
  • Environmental Economics
  • Valuation
  • Environment
  • Environmental Economics
  • Valuation
Contingent valuation is a survey-based procedure that attempts to estimate how much households are willing to pay for specific programs that improve the environment or prevent environmental degradation. For decades, the method has been the center of debate regarding its reliability: does it really measure the value that people place on environmental changes? Bringing together leading voices in the field, this timely book tells a unified story about the interrelated features of contingent valuation and how those features affect its reliability. Through empirical analysis and review of past studies, the authors identify important deficiencies in the procedure, raising questions about the technique’s continued use.

Individual chapters investigate how respondents answer questions in contingent valuation surveys, with a particular focus on how the procedure’s estimates change based on the costs that the researcher specifies, the payment mechanism, and the scope of the environmental improvement. Other issues covered include whether the survey respondents make trade-offs between the program costs and benefits; and whether corrections can be applied to account for any misunderstanding of the questions by respondents and for the hypothetical nature of the survey.

This book will appeal to environmental economists and students in environmental and resource economics. Government staff at environmental agencies and survey researchers will benefit from the close analysis of previous applications.
‘While scepticism about the validity of contingent valuation (CV) approach is widespread in many parts of the choice modelling community, advocates of CV for the valuation of environmental goods point to a number of guidelines that, if followed (often blindly), should lead to reliable results. The evidence in this excellent book, compiled in an objective manner by Dan McFadden and Kenneth Train, casts doubts on this, and points to the far bigger issue of respondents not being able to adequately value such unfamiliar goods in a survey context. The book makes required reading for anyone interested in the topic and suggests that researchers and practitioners in environmental economics should think very carefully about their continued reliance on CV, or indeed other stated preference approaches, for the valuation of environmental goods.’
– Stephane Hess, University of Leeds, UK
Contributors: J. Burrows, H.M. Chan, L. Daniel, W. Desvousges, P. Dixon, H. Foster, J. Genser, B.D. Israel, M. Kemp, E. Leamer, J. Lustig, D. MacNair, J. Martin, K. Mathews, D. McFadden, K. Myers, R. Newman, G. Parsons, J. Plewes, J. Schneider, T. Tomasi, K. Train


Contents:

Introduction
Daniel McFadden and Kenneth Train

1. Response to cost prompts in stated preference valuation of environmental goods
James Burrows, Powell Dixon and Hiu Man Chan

2. Fat tails and truncated bids in contingent valuation: an application to an endangered shorebird species
George Parsons and Kelley Myers

3. Inadequate response to frequency of payments in contingent valuation of environmental goods
Kelley Myers, George Parsons, and Kenneth Train

4. An adding-up test on contingent valuations of river and lake quality
William Desvousges, Kristy Mathews and Kenneth Train

5. Do contingent valuation estimates of willingness to pay for non-use environmental goods pass the scope test with adequacy? A review of the evidence from empirical studies in the literature
James Burrows, Rebecca Newman, Jerry Genser and Jeffrey Plewes

6. Stated preference methods and their applicability to environmental use and non-use valuations
Daniel McFadden

7. Some findings from further exploration of the “composite good” approach to contingent valuation
Michael Kemp, Edward Leamer, James Burrows and Powell Dixon

8. Inferences from stated preference surveys when some respondents do not compare costs and benefits
Edward Leamer and Josh Lustig

9. Assessing the validity of stated preference data using follow-up questions
Kelley Myers, Doug MacNair, Ted Tomasi and Jude Schneider

10. Hypothetical bias: a new meta-analysis
Harry Foster and James Burrows

11. Legal obstacles for contingent valuation methods in environmental litigation
Brian D. Israel, Jean Martin, Kelly Smith Fayne, and Lauren Daniel

Index