EXAMPLE 4.1 Leave No Behavioral Trace: Using the Contingent Valuation Method to Measure Passive-Use Values Until the Exx

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Example 4 1 Leave No Behavioral Trace Using The Contingent Valuation Method To Measure Passive Use Values Until The Exx 1 (318.01 KiB) Viewed 43 times

EXAMPLE 4.1 Leave No Behavioral Trace: Using the Contingent Valuation Method to Measure Passive-Use Values Until the Exxon Valdez tanker spilled Go to page 10 is of crude oil into Prince William Sound in Alaska, the calculation of nonuse (or passive-use) values was not a widely researched topic. However, following the 1989 court ruling in Ohio v. U.S. Department of the Interior that said lost passive-use values could now be compensated within natural resources damages assessments and the passage of the Oil Pollution Act of 1990, the estimation of nonuse and passive-use values became not only a topic of great debate, but also a rapidly growing research area within the economics community. One study (Carson et al., 2003) discusses the design, implementation, and results of a large survey designed to estimate the passive-use values related to large oil spills. In particular, the survey asked respondents their willingness to pay to prevent a similar disaster in the future by funding an escort ship program that would help prevent and/or contain a future spill. The survey was conducted for the State of Alaska in preparation for litigation in the case against the Exxon Valdez. The survey followed the recommendations made by the NOAA panel for conducting contingent valuation surveys and for ensuring reliable estimates. It relied upon face-to- face interviews and the sample was drawn from the national population. The study used a binary discrete-choice (yes/no) question where the respondent was asked whether he or she would be willing to pay a specific amount, with the amount varying across four versions of the survey. A one-time increase in taxes was the chosen method of payment. They also avoided potential embedding bias (where respondents may have difficulty valuing multiple goods) by using a survey that valued a single good. The survey contained pictures, maps, and background information to make sure the respondent was familiar with the good he/she was being asked to value. Using the survey data, the researchers were able, statistically, to estimate a valuation function by relating the respondent's willingness to pay to respondent characteristics. After multiplying the estimate of the median willingness to pay by the population sampled, they reported aggregate lost passive-use values at $2.8 billion (in 1990 dollars). They point out that this number is a lower bound, not only because willingness to accept compensation would be a more appropriate measure of actual lost passive-use from the spill (see Debate 4.2), but also because their median willingness to pay was less than the mean. The Exxon Valdez spill sparked a debate about the measurement of nonuse and passive-use values. Laws put into place after the spill now ensure that passive-use values will be included in natural resource damage assessments. Should other parts of the world follow suit?