Environmental valuation is the branch of environmental economics in which researchers estimate the economic value of environmental goods and services. Environmental valuation has been practiced for decades. However, there are some ideas in the field of environmental valuation held by many environmental economists and nonenvironmental economists that appear to be outdated. This article discusses three such ideas: 1) that it is better to estimate willingness-to-pay values than willingness-to-accept values; 2) that stated preference valuation methods are questionable because they are based on hypothetical choices rather than real choices; and 3) that it is better to use a repeated-choice question format than a single choice format in choice experiments. We discuss the origins of each idea and why the idea became prevalent in the first place.We then review recent literature, which casts doubt on the idea. We conclude with a reminder for researchers—in environmental economics and in other economic fields—to periodically reassess ideas they currently hold in light of recent research developments and in light of the context in which they are used.
I agree with each of the three points.
Adam in the comments says: "You agree that the three points are valid critisms, or you agree that they are outdated?" So, here is some explanation:
- If there are reasons why WTA is theoretically preferred, and WTP and WTA are expected to differ, then one should attempt to estimate WTA for the loss (in addition to WTP to avoid the loss)
- Hypothetical choices contain too much information, some of it unobtainable with revealed preference data, to dismiss it out of hand.
- I'm being a bit disingenuous with my agreement on this one. I don't think the implications of repeated questions in choice experiments has been explored enough to blindly accept the practice. In contrast, repeated questions in CVM studies are frowned upon (sometimes for good reason). I just had a revise and resubmit rejected at JEEM (grrr) and repeated questioning was one of the reasons given, even though the variation across questions was similar to choice experiments (i.e., the bid amount didn't change). My hunch is that many choice experiment studies won't pass a scope test if only the first question is used, which is the standard upon which CVM studies are judged. That said, I think it would be a shame if we go to all the trouble to develop a hypothetical choice scenario, ask one question and move on to the next section of the survey.