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The International Handbook on Non-Market Environmental Valuation

The International Handbook on Non-Market Environmental Valuation

Elgar original reference

Edited by Jeff Bennett

Non-market environmental valuation (NMEV) is undergoing a period of increased growth in both application and development as a result of increasing recognition of the role of economics in environmental policy issues. Against this backdrop, The International Handbook on Non-Market Environmental Valuation brings together world leaders in the field to advance the development and application of NMEV as a tool for policy-making.

Chapter 7: Consequentiality and Contingent Values: An Emerging Paradigm

Gregory L. Poe and Christian A. Vossler

Subjects: economics and finance, environmental economics, valuation, environment, environmental economics, valuation

Extract

Gregory L. Poe and Christian A. Vossler In recent years a new paradigm has emerged with respect to the concept of ‘hypothetical bias’ in contingent valuation. Following Bohm’s (1972) seminal public goods experiments, empirical criterion validity tests of contingent valuation have sought to compare hypothetical (‘stated’) survey responses against the criterion of actual (‘revealed’) economic commitments to public goods: ‘Hypothetical bias is said to exist when values that are elicited in a hypothetical context, such as a survey, differ from those elicited in a real context, such as a market’ (Harrison and Ruström, 2008, p. 752). Whereas occasional research has found that hypothetical, stated values can be lower than actual commitments, reviews of hypothetical versus actual public goods contributions (for example, Harrison and Ruström, 2008; Murphy and Stevens, 2004) and meta-analyses of these data suggest ‘that people tend to overstate their actual willingness to pay in hypothetical situations’ (List and Gallet, 2001, p. 241; see also Little and Berrens, 2004; Murphy et al., 2005). These conclusions translate into what appears to be the conventional wisdom regarding contingent valuation (CV): ‘A fundamental concern of any CV study is hypothetical bias. Respondents have a well-established tendency to state willingness to pay values that are significantly greater than those revealed in real-market interactions’ (Aadland et al., 2007). In a series of conference presentations, working papers, and a journal article, Richard Carson and Theodore Groves and co-authors (for example, Carson and Groves, 2007; Carson et al., 1997, 1999) present an alternative paradigm...

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