Environmental Context

Valuing the Environment

Pricing the Environment

Valuing the

Measuring Social Welfare
Case for Valuation
Pricing the Environment
Case Against Valuation
Case Study: Biodiversity
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Can the environment be priced?
How is the environment valued?
Problems with Valuation




The measurement of environmental gains and losses can be made in money terms, although it is recognised that these gains and losses would not in reality be bought and sold on the market. The use of money as a measure enables economists to make choices and comparisons. Direct costs and benefits are the easiest to estimate. These might include estimating the value of production forgone because of environmental damage, the value of earnings lost through health problems associated with air and water pollution, health-care costs because of pollution, and the value of decreased growth and lowered quality of crops because of soil degradation.

However, even these direct monetary costs tend to underestimate the real costs and benefits provided by the environment. For example, improved health resulting from a cleaner and safer environment is worth more than just the medical bills saved. A clean beach is worth more than just the value of having healthier beach-goers. Direct costs do not measure the values that people put on the environment. Economists differentiate between different types of values. 'User' values cover benefits that individuals get from the environment, including those from recreation, sport, or just viewing pleasure. 'Option' values are potential user values&emdash;the value to a person who might use the environment in the future.

'Existence' values, only recently recognised by economists, are people's preferences that are outside 'use' values&emdash;such things as 'concern for, sympathy with and respect for the rights or welfare of non-human beings' (Pearce, Markandya & Barbie 1989, p. 61). For example, many people want to save endangered species and wilderness areas that they themselves will never see, nor hope to see. The economist's notion of 'existence' or 'intrinsic' values is different from the environmentalist's idea of intrinsic values, which are values that the environment might have quite apart from humans and how they might benefit from it. The question of whether birds, animals and ecosystems have any value outside their use to humans is a philosophical question that environmentalists and economists cannot agree on.

For most economists, the environment can be priced because option and existence values can be translated into the preferences of individuals for things like cleaner air and water, less noise and protection of wildlife; and those preferences in turn can be measured.

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© 2001 Sharon Beder