ABSTRACT
One criticism of the compensating wage differential approach to estimating the value of the QOL is that it is almost irrefutable and therefore untestable. It assumes individuals move to where their total real income is highest. Therefore if they do not move from low-wage areas like Montana something must be contributing to their total real income which compensates for the lower money wages. We label that hypothesized "something" the higher QOL and are forced by our assumption that individuals move until total real incomes at the margin are identical everywhere in the country to conclude that the compensating flow of environmental values is exactly equal to the difference in wages. The logic here is impeccable but the empirical content very, very low. The argument is built almost entirely upon a pyramid of assumptions. Although most economists may be comfortable with this sort of logical argument, many others may be quite uncomfortable with the scientific standing of the conclusions.
