Module 5.3a Flashcards
Economic value is defined in terms of?
trade-off
If 1X = 100Y for some individuals, this means that no ___ and no ___ than the individual would be willing to exchange X for 100 units of Y.
more, less
According to Dupuit (1844), the “maximum sacrifice expressed in money which each consumer would be willing to make in order to acquire an object provides the measure of what?
Object’s utility
According to Marshall (1879), that which a person would be just willing to pay for any satisfaction rather than go without it is the economic measure of what?
Satisfaction
2 ways to define trade-off between X or Y
- Willingness to Pay
2. Willingness to Accept
The minimum amount of Y the person would be willing to accept as compensation to forego X
Willingness to accept
The maximum amount of Y the person would give to obtain X
Willingness to Pay
Cost is measured in terms of what?
Opprotunity cost
What does the price measure?
Cost
Refers to estimation of economic value
Valuation
3 things that shape costs
___ costs vs. ___ costs
- Policies
- Market Mechanisms
- Other events
Private, social
Efficient choice in the use of scarce resources. Compare the worth of various options. Economic valuation is about being able to judge the relative value of alternatives
Benefit Cost Analysis
Other term for BCA
Resource Allocation Decision
What is the assessment for resource pricing
Natural Resources Damage Assessment
Give one design of economic instruments
Payment for Ecosystem Services
Change caused by awareness raising
Behavioral change
Measure opportunities from the environment change
Valuation
What are the two distribution impacts?
Gainers and Losers
6 reasons to do valuations?
- BCA
- Resource Pricing
- Natural Resource accounting
- Designs of economic instruments
- Awareness raising
- Distribution impacts
2 types of economic values?
- Use value
2. Non-use value
3 types of use value?
- Direct
- Indirect
- Option
2 types of non-use values?
- Existence
2. Others
Direct Consumption of Primary Goods
Direct use
Secondary Goods and Services, Including Ecological
Indirect use
Future Consumption of Goods and Services
Option
No Consumption of Goods and Services
Existence
Others?
Bequest values
2 types of valuation methods
- Physical/production linkages (market valuation technique
2. Behavioral linkages
2 types of behavioral linkages
- Revealed preferences
2. Stated preferences
5 valuation methods under Physical linkages
- Market prices
- Replacement costs
- Damage costs
- Net factor income
- Production function approach
2 methods under revealed preferences
- Hedonic pricing
2. Travel cost
2 methods under stated preferences
- Contingent valuation method
2. Choice experiment method
Other term for physical linkages
Dose-response functions
In physical linkages, the value can be determined by observing the quantity of an _____ and multiplying it by its _____
environmental service/good, market price
Straightforward and inexpensive, but rarely sufficient as a stand-alone valuation technique and ignores costs of other inputs
Market prices
Not a “correct” measure of economic value, as it is not based on people’s preferences for the goods and services valued.
Replacement cost
In replacement costs, it is difficult to find ___ replacements of the goods and services valued.
exact
What method do these steps belong to?
- Identify services provided by the ecosystem.
- Assess the extent to which services are used.
- Identify man-made replacements to provide an equivalent level of service.
- Estimate costs of replacement through secondary sources or expert consultation)
Replacement cost
Useful for valuing ecosystems that provide some form of natural protection
Damage cost avoided
Most cases of avoided damage remain ___
hypothetical
What method do these steps belong to?
1) Identify protective services provided by the ecosystem.
2. Assess the extent to which protection would decline with ecosystem loss.
3. Identify the infrastructure, property, etc. that is affected by the change in protection.
4. Estimate the cost of damage.
Damage cost avoided
Identify the method pertained to
Pros:
1. Data sometimes easy to obtain
2. Straightforward, “easy” implementation and analysis
Cost-based approaches
Identify the method pertained to
Cons:
1. Limited to cases where market/shadow prices are available
2. Benefit is not equal to cost – second-best approach
3. Is the restored/replaced environment equivalent?
4. Is the value lower because it is no longer authentic?
5. Avoidance cost: damage is often hypothetical
Cost-based approaches
Values ecosystem services as an input in the production of a marketed good.
net factor income
Net factor income is the value of ____ minus ___ of other inputs.
output, costs
Net factor income is only a ___ approximation of value
rough
Net factor income suggests that all producer surplus is due to ______.
Ecosystem input
The approach in which environmental resource services are inputs in production (often unpaid for)
Production function
Values ecosystem services as inputs in production of commercially marketed goods
Production function
What is the method pertained to by the following steps
- Identify ecosystem service
- Identify production-related processes
- Determine the statistical relationship between inputs and output
- Estimate net revenues using the above production function “with conservation”
- Estimate net revenues using the above production function “without conservation”
- Calculate the change in net revenues
Production function method
Production function approaches reveal ___ environment
actual
Production function approaches are only useful for the valuation of ecosystem services that are ____ in the production of marketed goods (not for ____ values)
inputs, non-use
An approach in which method can be complicated since the price of marketed goods depends on many other factors
Production function approach
An indirect approach that looks at decisions people make in reaction to changes in environmental quality – in markets.
Revealed preference valuation methods
What type of use values does revealed preferences measure?
Direct use
The monetary value of environmental attributes
can be valued by comparing house prices with different surroundings
Hedonic pricing
Method pertained?
- Identify ecosystem service
- Collect data on sales and characteristics of associated good
- Estimate hedonic price function relating price with characteristics
Hedonic pricing method
2 Applications of hedonic pricing
- Property
2. Wages
Hedonic pricing looks at ___ behavior
actual
Prices for houses often readily available –
____ to obtain!!!
costly
Hedonic pricing can only value environmental services that affect ____ of marketed goods.
prices
Hedonic pricing captures _______ in environmental attributes
perceived differences
Hedonic pricing requires ____ level statistical expertise
High
For valuing recreational sites.
Travel cost method
Travel cost to a site can be regarded as the price of ____ to the site
access
Method pertained?
1. Identify ecosystem service
2. Define set of distance zones around the recreational site
3. Collect visitor information for each zone
4. Calculate average travel cost /time per
zone
5. Estimate statistical demand function
6. Collect (secondary) information from
each zone about visits
7. Estimate total benefit by calculating
the consumer surplus
Travel cost method
Travel cost method only measures ____ use value
direct
Elicit values directly through survey methods. Approach in which WTP is asked.
Stated preference valuation methods
Stated preference valuation methods is done in a _____ setting
Hypothetical
Stated preference valuation methods measure _____ value
non-use
Method of surveying respondents for their willingness to pay
Contingent valuation
5 Elicitation formats of contingent valuation
- Open-ended
- Payment card
- Referendum
- Single bounded dichotomous choice
- Double bounded dichotomous choice
Contingent valuation can value _____ goods
future
In choice modeling, the monetary value of ES can be estimated from the trade-offs people make between ____ and ___
environmental attributes, income
Determine individual preference across different levels of characteristics of a multi-attribute choice
Choice models/experiments
In choice models/experiments, consumers state choices over two or more ____ goods with ____ characteristics
hypothetical, different
Statistical analysis to establish a relationship
between characteristics and preference
Choice Models/Experiments
Method pertained:
- Identify ecosystem to be valued and relevant population
- Design the experiment (survey type, choice set, payment vehicle, pre-testing)
- Survey implementation
- Statistically analyze the results
Choice experiment
Choice experiments can measure what value/s?
use and non-use
Choice experiments can measure ____ economic values for many changes
marginal
In choice experiments, ___ knowledge is necessary
Econometric
Applies a value from one study site to a different policy site.
Value transfer
Value transfer is ___ and not as ____ as primary valuation.
difficult, accurate
4 types of value transfer
- Unit value transfer
- Adjusted unit value transfer
- Value function transfer
- Meta-analytic function transfer
Multiply the unit value from ‘study site’ by the quantity of environmental good or service at ‘policy site
Unit value transfer
Parameter values of the policy site are plugged into the value function
Value function transfer
Make simple adjustments to the transferred unit values to reflect differences in site characteristics.
Adjusted unit value transfer
Uses a value function estimated from multiple study results
Meta-analytic function transfer
What are the issues of monetary valuation?
- Technical issues
- Ethical issues
- Moral issues
