VALUING PUBLIC-GOODS - THE PURCHASE OF MORAL SATISFACTION

Contingent valuation surveys in which respondents state their willingness to pay (WTP) for public goods are coming into use in cost-benefit analyses and in litigation over environmental losses. The validity of the method is brought into question by several experimental observations. An embedding effect is demonstrated, in which WTP for a good varies depending on whether it is evaluated on its own or as part of a more inclusive category. The ordering of various public issues by WTP is predicted with significant accuracy by independent ratings of the moral satisfaction associated with contributions to these causes. Contingent valuation responses reflect the willingness to pay for the moral satisfaction of contributing to public goods, not the economic value of these goods. © 1992.