The Economic Valuation of the Environment and Public Policy

The Economic Valuation of the Environment and Public Policy

A Hedonic Approach

New Horizons in Environmental Economics series

Noboru Hidano

The importance of the hedonic valuation approach in public policy evaluation and environmental value estimation is now widely accepted. This book is especially designed to illustrate the basic assumptions of the hedonic approach and highlight the strengths and weaknesses associated with it. Combining rigorous theoretical analysis, detailed empirical studies and an extensive history of hedonic valuation, the book is both a good introductory text to the field and a precise yet comprehensive aid for professionals and practitioners alike.

Chapter 2: The Hedonic Approach

Noboru Hidano

Subjects: environment, environmental sociology, politics and public policy, public policy


DEVELOPMENT OF THE HEDONIC CONCEPTION There are several arguments over who first tackled the hedonic approach. Andrew Court proved by the hedonic method in 1939 that the price of an automobile after the Great Depression of 1929 declined greatly when compared with the prices before the depression, but Waugh, of Harvard University, had already done work in this area in 1927. According to Colwell and Dilmore (1999), G.C. Hass in 1922 and H.A. Wallace in 1926 might also be named as frontrunners in hedonic history. The history of the hedonic approach is also discussed by Goodman (1998). Waugh (1929) gathered data on the prices of agricultural products, such as asparagus, from Boston market during May and July 1927, and tried to explain the determinants of the price differences for the average prices of a bundle of asparagus, estimating the parameters of regression: composite priceϭf (attributes). The actual equation he identified is: Price of bundle of asparagus i traded at t over the average price of bundle of asparagus at t ϭ0.138 (length of green in inches) Ϫ 1.534 (number of sticks of asparagus in a bundle as a proximity of diameter) Ϫ 0.296 (variance of the diameter of pieces of asparagus)ϩconstant. (2.2) Then the determinant of the coefficient (R2) is 0.58. He found that, in addition to the thickness and the variance of the thickness of the 9 (2.1) 10 The economic valuation of the environment and public policy asparagus in a bundle, the length of green...

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