How is the Environment Valued?
Willingness to pay Opportunity costs Use of proxies Source of cartoon: Bowers 1990 Willingness to pay (contingent valuation) Market demand can be derived from surveys to find out how much people are willing to pay to preserve or improve the environment, how much they are willing to pay to visit a particular environment, or how much monetary compensation a person is willing to accept for loss of environmental amenity (‘willingness to sell’). Both methods – ‘willingness to pay’ and ‘willingness to sell’ – have problems associated with them. They are based on surveys that are likely to be inaccurate, because people may inflate or deflate the amounts they are willing to pay or accept. With willingness to pay (also known as ‘contingent valuation’), it is thought that people will understate the amount they would pay if they think there is a chance they might actually have to pay that amount. This is because people know that, if others pay and they do not, they will get the benefit anyway – t