The topic for this week is non-market valuation.
Valuation means estimating what something is worth (to people, usually in dollars).
Non-market means that the goods or services that we are attempting to value are not traded in markets. That is, these are things of value, but we do not have prices to serve as signals of what they are worth.
There are a lot of misconceptions about the non-market valuation of natural resources of environmental goods and services. The first and perhaps biggest misconception is that economists want to go around estimating the monetary value of things for no particular reason. This is far from true. We only attempt to understand the value of environmental goods and services when there is a reason to do so. For example, we might wish to understand the the tradeoffs that society faces for a development decision or a conservation project. Understanding the opportunity costs of lost environmental quality helps decision makers understand the worth of what stands to be lost. Understanding the benefits of conservation (again, in dollar terms) helps us see if conservation initiatives are "worth it". In short, understanding the value of things can be useful for informing policy.
Another misconception is that if and when the monetary value a natural resource is estimated, this somehow "cheapens" the resource. Again, I do not think this is true at all. Indeed, the default value of many environmental resources is zero, because many goods and services provided by the environment can be obtained for free. Valuation helps remind society that just because something is free, this does not mean it is not valuable.
Finally, its important to consider that the process of non-market valuation is simply formalizing something that we do (implicitly) every day.
For example, when you decide to drive your car instead of walking, you
are implicitly stating that you value your own convenience more than you
value the pollution that you cause by driving. On an aggregate level,
when we vote for policies or politicians that favor other spending
opportunities over spending on the environment, we are implicitly
stating that we value those other things more than we value the
environment. We even implicitly value human lives, including our
own. When we choose to spend less money on road repair or highway
safety, we are implicitly valuing human life. We could spend more money
and have fewer people die, but we choose not to because it's "too expensive". When someone chooses to
look at their phone when they are driving, they are revealing that they
value that bit of information over their own safety and the safety of
others. Our actions (individually and collectively speaking) reveal what
The process of economic valuation makes the tradeoffs easier to
understand and compare by expressing them in dollar terms.
Here are links to some good sources:
Why Economics Matters for Endangered Species Protection (Shogren et al., 1998)
The Role of Economic Valuation in the Conservation of Tropical Nature (Naidoo, 2008)
Conservation Pays (Yuskavitch, 2007, Defenders of Wildlife)
Marine Conservation: How Economic Valuation of Ecosystem Services Can Help (Environment Matters, 2008)
Can Environmental Economic Valuation Techniques Aid Ecological Economics and Wildlife Conservation? (Loomis, 2000, Wildlife Society Bulletin)
Of additional interest:
Economic Incentives and Wildlife Conservation (Bulte et al., 2003)
Tons of references and links here: Economic Valuation References WRI
Information on coral reef valuation can be found here and here and here and here.
Valuation and the endangered species act here.
More on the economics and value of endangered species here and here.
is a tiny fraction of what's out there. What are your thoughts on
I'd especially like to see if students from different backgrounds look
at valuation differently. When you post a reply, let us know your
primary field of