Valuing the environment: Economic theory and applications

Resource use decisions entail the comparison of a range of diverse consequences associated with each possible use. Many means exist to simplify comparison of otherwise incommenurable values. The move toward a 'more market' economy indicates however, that financial considerations will be given more weight than previously in determining resource allocations. This is consistent with our observation of trends in many countries. Many consequences of resource uses are not incorporated in market prices, either because of imperfections in markets which mean that some values are not fully captured, or because a market does not exist at all. Because of their public nature many goods are supplied free, or at nominal rates, by government, or can only be maintained by government intervention. This is certainly the case for many environmental goods which are available for all to use or appreciate; examples include: clean air, national parks, wild and scenic rivers, wildlife populations, scenic landscapes and quiet. The valuation of New Zealand's natural resources has become a priority task in view of the new economic policies. In particular, questions are being asked about the economic and welfare significance of changes in natural resource management which are not reflected by market prices. There exists a need to provide decision makers with information on non-market values. In response to this need, the Centre for Resource Management has an ongoing research and teaching programme aimed at advancing knowledge for the management of New Zealand's resources. In December 1985 the Centre hosted a workshop at the University of Canterbury in non-market valuation methods and their use in environmental planning. The objective of this four-day workshop was to advance understanding of these methods and how they might be used in planning. Because of the limited knowledge of non-market valuation methods in New Zealand the workshop covered a range of topics, from the need for these methods, their non-technical description, likely areas of implementation, advanced description and economic theory of methods, problems in applying results to decision making, and case study examples. This book is a comprehensive review of theory, the major methods, and their application. It is based on contributions to the workshop which address a wide range of concerns for the application of non-market valuation in New Zealand. These concerns can be classified into three broad areas: the need for non-market values, how the information could be used, and the methods for estimating non-market values. Papers will be found which address each of these concerns, making this a useful reference source for those involved in all aspects of public resource administration, those holding public office, students, academics, and those charged with valuing our natural resources.