Handbook on Experimental Economics and the Environment
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Handbook on Experimental Economics and the Environment

Edited by John A. List and Michael K. Price

Laboratory and field experiments have grown significantly in prominence over the past decade. The experimental method provides randomization in key variables therefore permitting a deeper understanding of important economic phenomena. This path-breaking volume provides a valuable collection of experimental work within the area of environmental and resource economics and showcases how laboratory and field experiments can be used for both positive and normative purposes.
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Chapter 4: Behavioral foundations of environmental economics and valuation

John K. Horowitz, Kenneth E. McConnell and James J. Murphy


For at least 60 years, economists have worked on empirical approaches to measuring the value of nonmarket goods and services. In its beginnings, this research employed models of revealed preferences, such as the travel cost approach for recreation or the hedonic property value model for air pollution. Economists pursued valuation based on revealed preferences because they were initially interested in what now, from our vantage, appears to be a narrow range of nonmarket services – those services for which revealed preference approaches could be applied. Further, given the profession’s early suspicion of attitudinal surveys, efforts to use any sort of stated preference approach would have met with even more intense opposition than they faced decades later. As economists became interested in the valuation of a wider range of nonmarket services the shortcomings of revealed preferences became more apparent. Revealed preference techniques could be used as long as the behavior of interest led to the correct welfare measure and was observable, but in numerous circumstances observed behavior was not available.

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