Zuh? Paul Glimcher and Michael A. Livermore in the NY Times:
THE United States government recently announced an $18.7 billion settlement of claims against the oil giant BP in connection with the Deepwater Horizon oil rig explosion in April 2010, which dumped millions of barrels of oil into the Gulf of Mexico. Though some of the settlement funds are to compensate the region for economic harm, most will go to environmental restoration in affected states.
Is BP getting off easy, or being unfairly penalized?
This is not easy to answer. Assigning a monetary value to environmental harm is notoriously tricky. There is, after all, no market for intact ecosystems or endangered species. We don’t reveal how much we value these things in a consumer context, as goods or services for which we will or won’t pay a certain amount. Instead, we value them for their mere existence. And it is not obvious how to put a price tag on that.
In an attempt to do so, economists and policy makers often rely on a technique called “contingent valuation,” which amounts to asking individuals survey questions about their willingness to pay to protect natural resources. The values generated by contingent valuation studies are frequently used to inform public policy and litigation. (If the government had gone to trial with BP, it most likely would have relied on such studies to argue for a large judgment against the company.)
Contingent valuation has always aroused skepticism. Oil companies, unsurprisingly, have criticized the technique. But many economists have also been skeptical, worrying that hypothetical questions posed to ordinary citizens may not really capture their genuine sense of environmental value. Even the Obama administration seems to discount contingent valuation, choosing to exclude data from this technique in 2014 when issuing a new rule to reduce the number of fish killed by power plants.
Do we respond to contingent valuation studies the way we respond to all other known classes of economic decisions? Or do we behave differently when environmental value is involved?
To find out, we conducted a study, just published in the journal PLOS One, that compared, at a neurological level, how people responded in both situations.
In the budding field of neuroeconomics, researchers have found striking similarity in the brain structures responsible for valuation across a host of different kinds of decision making. Our study used functional magnetic resonance imaging to examine activity in the brain’s valuation areas when subjects were asked to value environmental proposals (for example, protection of sea turtles, cleanup of the Gowanus Canal in New York), snack foods (e.g., tortilla chips), consumer goods (e.g., “The Simpsons: Complete Sixth Season” DVD, a Moleskine notebook) and time spent on daily activities (e.g., jogging, doing laundry).
Across all four types of questions, neural activity indicated that participants were paying attention. But when it came to putting values on things, we found differences. Specifically, when people put values on consumer goods, foods and time spent on daily activities, this was correlated with neural signals in the traditional valuation areas of the brain. But when people answered survey questions about the value of environmental proposals, their brain activity was uncorrelated with these areas.
The takeaway was clear: The brain did not respond to contingent valuation studies the way it did to all other known classes of economic behavior.
This means that contingent valuation does not line up with what we know about the neural basis of ordinary economic decision making. However, we do not yet know how it fails to line up. Contingent valuation may overestimate environmental valuation; it may underestimate it; it may overestimate sometimes and underestimate at other times. ...
Here is the PLOS One abstract:
Environmental public goods—including national parks, clean air/water, and ecosystem services—provide substantial benefits on a global scale. These goods have unique characteristics in that they are typically “nonmarket” goods, with values from both use and passive use that accrue to a large number of individuals both in current and future generations. In this study, we test the hypothesis that neural signals in areas correlated with subjective valuations for essentially all other previously studied categories of goods (ventromedial prefrontal cortex and ventral striatum) also correlate with environmental valuations. We use contingent valuation (CV) as our behavioral tool for measuring valuations of environmental public goods. CV is a standard stated preference approach that presents survey respondents with information on an issue and asks questions that help policymakers determine how much citizens are willing to pay for a public good or policy. We scanned human subjects while they viewed environmental proposals, along with three other classes of goods. The presentation of all four classes of goods yielded robust and similar patterns of temporally synchronized brain activation within attentional networks. The activations associated with the traditional classes of goods replicate previous correlations between neural activity in valuation areas and behavioral preferences. In contrast, CV-elicited values for environmental proposals did not correlate with brain activity at either the individual or population level. For a sub-population of participants, CV-elicited values were correlated with activity within the dorsomedial prefrontal cortex, a region associated with cognitive control and shifting decision strategies. The results show that neural activity associated with the subjective valuation of environmental proposals differs profoundly from the neural activity associated with previously examined goods and preference measures.
Khaw, Mel W., Denise A. Grab, Michael A. Livermore, Christian A. Vossler, and Paul W. Glimcher. "The Measurement of Subjective Value and Its Relation to Contingent Valuation and Environmental Public Goods." PloS one10, no. 7 (2015): e0132842.
This is a cromulent study with results (below) that aren't totally surprising. Of course the dorsomedial prefrontal cortex will embiggen with the Simpsons 6th season! So, instead of environmental vs other goods, my experimental design would divide the goods up according to private vs public goods like we explain it in intro micro:
- Rival, excludable: private good (e.g, pizza)
- Rival, nonexcludable: common pool resource (e.g., fisheries)
- Nonrival, excludable: club good (e.g., private park)
- Nonrival, nonexcludable: public good (e.g, air quality, national defense)
Use of the crayola oblongata method applied in the sophistimacated doowhackey would beginulate a craptacular advance in the CVM knowledgeum. Anything less would be a traumedy.
