Environmental Engineering Reference
In-Depth Information
Also important is the 'complete information' condition, requiring not
only that prices be widely known, but also that they rel ect the full implica-
tions of any reallocation of resources. It is clear from the discussion above
that in the case of managed landscapes, such knowledge is available only
in partial and uncertain form, and is not rel ected in actual market prices.
The ef ect of such uncertainty is discussed below.
The so-called 'rationality condition' may also be violated for environ-
mental goods such as managed landscapes and associated biodiversity.
The link between market ei ciency and the (constrained) satisfaction of
the wants of individuals and of the society of which they are members relies
upon a number of assumptions about the nature of individuals' prefer-
ences. Rationality of preferences includes the ability and willingness always
to make comparisons between goods. We will see below that stated prefer-
ences for environmental resources can include a refusal to do this, on the
grounds that a biological resource should be preserved 'in its own right'. To
the extent that individuals do not in fact have 'rational' preferences, market
outcomes will tend to deviate from socially desired outcomes.
Valuing biodiversity
The main point that is frequently made by environmental economists
working on valuation with regard to market and policy failure is that
private resource users do not attribute sui cient weight to biodiversity.
Valuation, it is argued, aims to redress this imbalance and sets out to
determine what weight should be given to biodiversity in the interests of
society as a whole.
The literature indicates that a variety of methods have been employed to
estimate wildlife values in managed landscapes. Studies on wildlife value
have focused on their use and non-use values. These values are based on
an individual's willingness to pay (WTP) or willingness to accept (WTA)
compensation. Gross willingness to pay might include the cost of travel,
purchase of equipment to participate in the recreation activity, actual fees
associated with the activity and consumer surplus. The concept of 'total
economic value' (TEV) has been used to describe the components of value
as shown in Figure 4.3. Use values associated with managed landscapes
refer to the actual and/or planned use of a service by an individual and
include recreational activities such as bird watching or hunting. Use values
also include the following: option value, that is, the value of the option
to guarantee use of the service by the individual in the future (Weisbrod,
1964); and quasi-option value, that is, the value of future information
protected by preserving the resource now, given the expectation of future
growth in knowledge relevant to the implications of development (Arrow
and Fisher, 1974; Perman et al., 2003).
