We're continuing our series on how to include monetary values for environmental and natural resources in benefit cost analysis. Previously we've looked at the theory and the value of recreation. Today let's take a look at one way in which values for changes in health risks are estimated: the averting behavior method.
From Glenn Blomquist's[1] "Self Protection and Averting Behavior" NCEE Working Paper abstract comes some examples of averting behavior:
Individuals can be observed in a variety of activities that affect their health and safety. Protective behavior is evident in motorist choice of automobile type, safety equipment such as seat belts, and speed of travel. Choices concerning safety helmets, cigarette smoking and installation of fire alarms change risks of death that individuals experience. Choice of residence when housing markets encompass Superfund sites influences the amount of risk that individuals face. Visits to health clinics for preventive care can reduce risks to health.
The averting behavior method begins with the notion that people try to protect themselves when faced with environmental risk. For example, the negative economic effects of unsafe drinking water include changes in well-being in terms of medical costs, lost earnings, lost production in the home, lost leisure time, and medical expenditures. Averting behavior studies begin with the assumption that people make choices in order to maximize their level of well-being when faced with increased health risks.
Averting behavior requires expenditures that would not be made if not faced with the environmental health risk. For example, the purchase of bottled water or water filters may only be made when faced with the risk of contaminated drinking water. These increased expenditures provide an estimate of the economic benefits of environmental policy that reduces the drinking water risk. These expenditures are relatively easy to estimate, you simply ask someone in a survey setting.
[1] Glenn was my dissertation chair at the University of Kentucky. I'll come back to this paper when we work up the courage to discuss the "value of statistical lives."