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fonnral of Economic Persfreclivrns
8
4
Fall 1994
-Page 3-17
The Contingent Valuation Debate: Why Economists Should Care
Paul R Portney
The contingent valuation method involves the use of sample surveys (questionnaires) to elicit the willingness of respondents to pay for (generally) hypothetical projects or programs. The name of the method
refers to the fact that the values revealed by respondents are contingent upon the constructed or simulated market presented in the survey. A spirited (and occasionally mean-spirited) battle over such methods is currently being waged, involving competing factions within the federal government, economists and lawyers representing business and environmental groups, and interested academics...
demics as well. At issue is a seemingly quite specific question: should environmental regulations currently under development at both the Department of the Interior and the Department of Commerce sanction the use of the contingent valuation method in estimating the damage done by spills of oil, chemicals, or other substances covered by federal law? More generally, the debate raises broad questions about what economists have to say about the values that individuals place on public or private goods.
The two papers that follow this one make cases for and against the use of the contingent valuation method. My aim here is to provide an overview of the technique and the debate surrounding it. I also want to suggest why this debate should matter to economists, both professionally and in their roles as citizens and consumers.
Paul Porlney is Vice President and Senior Fellow at Resources for the Future, Washington, D.C.
The Origins of the Contingent Valuation Method
As is often the case, it is useful to start with a bit of history. t
The first published reference to the contingent valuation method apparently occurred in 1947, when Ciriacy-Wantrup wrote about the benefits of preventing soil erosion (Ciriary-Wantrup, 1947). He observed that some of these favorable effects (like reduced siltation of streams) were public goods, and suggested that one way to obtain information on the demand for these goods would be to ask individuals directly how much they would be willing to pay for successive increments. However, he never attempted to implement this idea directly.
It wasn't until almost two decades later that the contingent valuation method began to be applied...