ABSTRACT
In the first section of this chapter, I present a simple general equilibrium model of an economy with nonmarket environmental and resource service flows to show how the values of these flows emerge as shadow prices from the solution to a welfare maximization problem. In the second section, I describe in general terms the major types of methods for estimating values and benefits. In the third section, I discuss some theoretical frameworks used to model revealed preference models. In the fourth section, I present a simple model to illustrate the relationships between physical and biological changes in environmental and resource systems and the changes in well-being and values realized by the people affected by these changes. These models help to make clear the kinds of data required to carry out resource evaluations and to show the roles of economists and physical and biological scientists in the evaluation process. The fifth section describes the noneconomic foundations of resource valuation. I conclude this chapter with discussions of the nature of cost in welfare theory and the appropriate treatment of uncertainties in the measurement of values.
