The 2010 Nobel Memorial Prize in Economic Science was awarded on Monday to Peter A. Diamond, Dale T. Mortensen and Christopher A Pissarides for their work on markets where buyers and sellers have difficulty finding each other, in particular in labor markets.
That's all well and good, but in Env-Econ circles (can two people make a circle?), Diamond is better known for his post-Exxon Valdez critique of contingent valuation appearing in the Journal of Economic Perspectives (co-written with Jerry Hausman): "Contingent Valuation: Is Some Number Better than No Number?" The article was part of a three article series in the JEP critiquing the seminal NOAA Blue Ribbon Panel on Contingent Valuation report which laid out the guidelines and protocols for valid preference elicitation surveys in cases of environmental damages. In the article, Diamond and Hausman conclude:
It is impossible to conclude definitely that surveys with new methods (or the latest survey that has been done) will not pass internal consistency tests. Yet, we do not see much hope for such success. This skepticism comes from the belief that the internal consistency problems come from an absence of preferences, not a flaw in survey methodology. That is, we do not think that people generally hold views about individual environmental sites (many of which they have never heard of); or that, within the confines of the time available for survey instruments, people will focus successfully on the identification of preferences, to the exclusion of other bases for answering survey questions. This absence of preferences shows up as inconsistency in responses across surveys and implies that the survey responses are not satisfactory bases for policy.
*I'm taking lessons on how to write a biased headline.