CONCEPTS AND MEASURES OF THE ECONOMIC VALUE OF ENVIRONMENTAL-QUALITY - A REVIEW

In recent years, considerable advances have been made in the theory and measurement of the economic value of environmental quality. Theoretically appropriate measures of the economic value of environmental quality include Hicksian compensating surplus and equivalent surplus. These economic value measures are known as exact welfare measures. Techniques for estimating exact welfare measures include the Marshallian consumer's surplus approximation approach, integrability approach, utility specification approach, experimental market approach, and the policy referendum approach. The first three approaches have been applied using the travel cost method. The experimental market approach and policy referendum approach have been applied using laboratory experiments and field contingent valuation surveys. Value estimates reported in this paper include the economic value of air quality, water quality, and landscape aesthetics. The magnitude of the values reported suggests that environmental quality is of considerable economic value to individuals. Thus, it is important to consider individual economic values when conducting benefit-cost analyses of policies and programs which affect environmental quality. The valuation of environmental quality using exact welfate measure theory and techniques is likely to expand in the future. © 1990 Academic Press Limited.