Environmental Engineering Reference
In-Depth Information
money that people have paid to replace them. There are a number of non-demand
approaches, such as the opportunity cost approach, the dose response approach,
the preventative expenditure approach, the averting behaviour approach, and the
replacement cost approach (see, for example, Turner et al.
1994
; Garrod and
Willis
1999a)
. Some examples related to measures of agro-biodiversity value
where non-demand approaches might be applied include the following:
-
Valuing water quality by measuring the cost of filtering or the chemical
treatment of water;
Valuing an environmental externality by observing the costs people are prepared
-
to incur in order to avoid any negative effects;
Valuing land degradation by estimating the restoration cost.
-
The examples show that, in general, non-demand approaches are limited to environ-
mental inputs, such as water, air quality and soil. The results of these non-demand
approaches can thus be used to demonstrate the importance of these inputs to
agriculture, but also to appraise pollution control options.
Demand Approaches: Revealed Preference
and Stated Preference Methods
Demand curve approaches are broadly divided into revealed preference and stated
preference methods. The first type of approach seeks to elicit preferences for biological
assets by examining the purchases of related goods in the private market place.
In other words, revealed preference methods use market information (such as travel
costs or the price of housing) as a proxy to estimate the benefits from biological
assets. Stated preference methods consider a change in environmental quality or in
biodiversity and, by using survey techniques, they seek to directly measure the value
of these changes (Perrings
1995
; Garrod and Willis
1999a
; van der Heide et al.
2003)
.
As such, these methods derive a value by simulating, or constructing a hypothetical
market for the biological asset in question. Although economists are generally much
more comfortable with valuations based on actual transactions and observed
behaviour in markets than those given in response to survey questionnaires
(Heal
2000)
, for some public goods there are simply no accurate means of inferring
preferences from observations. In such circumstances, there are no viable alternatives
to asking individuals how much they would be willing to pay for a biological asset or
accept in compensation for its loss in a hypothetical situation of payment.
Travel Cost Method
The travel cost method (TCM), a revealed preference method, is one of the oldest
valuation methods employed by environmental economists (Clawson and Knetsch
1966)
. It is especially useful for assessing the value of outdoor recreation in natural
