I'm was recently asked "Why go through the trouble of measuring the value people place on things and why not just measure the amount of money people spend on things and use that as the measure of value?" We call this total amount of money spent the economic impact, and here is why using economic impacts as a measure of value is wrong:
The tally for Hurricane Katrina waste could top $2 billion next year because half of the lucrative government contracts valued at $500,000 or greater for cleanup work are being awarded with little competition.
That $2B went somewhere, so it benefited someone. But could the same money have been used more effectively? That is, could the same amount of money (resources) been used to provide a greater benefit? That's the question asked in economic valuation.
