ABSTRACT
From the perspective of mainstream welfare economics, the environment should be preserved only if this improves human social welfare, allowing for costs in terms of consumption foregone. Cost-benefit analysis seeks to show whether or not this is the case by placing monetary values on the benefits from preservation and on the costs. Preservation is justified if the sum of monetary benefits across all members of society exceeds the sum of costs (e.g. Brent, 1996; Dixon et al., 1994; Pearce, 1995).1 Typically economists need to know individuals’ willingness to pay (WTP) for different levels of provision of environmental quality in order to use this approach. For standard consumer goods market prices gives information on WTP. However, environmental quality usually is not traded in markets. Various other measures have been suggested. Hedonic methods use proxy measures such as that component of property values which cannot be explained by non-environmental determinants like nearness to employment. Travel cost methods estimate WTP by the travel costs people are willing to incur in order to enjoy desirable environments, for example, the travel costs people will incur to visit national parks. These methods are of restricted applicability. For one thing they cannot answer questions about how much people are willing to pay to address truly national, let alone global, problems.
