The International Yearbook of Environmental and Resource Economics 2004/2005
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The International Yearbook of Environmental and Resource Economics 2004/2005

A Survey of Current Issues

Edited by Tom Tietenberg and Henk Folmer

This major annual publication provides a state-of-the-art survey of contemporary research on environmental and resource economics by some of the leading experts in the field.
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Chapter 1: Fifty years of contingent valuation

V. Kerry Smith


V. Kerry Smith* I. INTRODUCTION Econometric analyses and testing of economic models began during the last 50 years. Contingent valuation (CV) developed over the same time period.1 CV uses survey questions to elicit information that allows economic values for non-market resources to be estimated. Today contingent valuation occupies a strange position in economics. A significant component of the CV research, in both the USA and Europe, has been conducted to evaluate policy alternatives (see Carson, 2003). Little of this work has been associated with litigation. Yet in considering the relevance of CV estimates, the US Office of Management and Budget’s (2003) draft guidance for preparing benefit–cost analysis as part of the evaluation of regulations reiterates several of the criteria for a reliable study that were recommended by the National Oceanic and Atmospheric Administration’s (NOAA) Panel. The NOAA Panel was charged, in the early 1990s, with responsibility for evaluating contingent valuation for use in natural resource damage assessments.2 Current research on contingent valuation has pursued methodological issues in the structure of choice and open-ended valuation questions (Cameron et al., 2002), experimental design (Kanninen, 2002), interrelationships between public goods (Bateman et al., 2004), as well as numerous policy issues ranging from estimating the willingness to pay for reductions in risk of premature death (Krupnick et al., 2002 and Alberini et al., 2001) to managing waste from large-scale hog operations (Mansfield and Smith, 2002). Many of the issues raised in early contingent valuation surveys have been ‘rediscovered’ under the label of behavioral...

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