When should the expenditures impact be used to evaluate a project and when should the economic value (MWTP) be used?
Whether one wants to use the economic value (MWTP) of a water quality improvement or the expenditures impact or both depends on the policy question that is being asked. If the purpose of the evaluation is to determine whether the benefits from investing in a project are worth the costs, the appropriate measure to use is MWTP. The MWTP measures what people are willing to give up (if they had to) to obtain the project. If this value exceeds the costs of the project, then policymakers know that by undertaking the project, they have provided people with a valuable good — the product they have provided is worth more than the cost. The MWTP measure is the standard measure used in cost-benefit analysis. If the question of interest is whether a local community should support a water quality improvement project, then how much increased economic activity a town or region might experience as a result would be of interest. One can imagine that this measure might be particularly important to a tow
