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A Primer on Nonmarket Valuation

Table of Contents

Preface

Authors

Data for Ch. 5
(contingent valuation)

Data for Ch. 6
(attribute-based stated preference methods)

Data for Ch. 7
(paired comparisons)

Data for Ch. 9
(travel cost models)

Data for Ch. 10
(hedonic method)

Data for Ch. 12
(benefits transfer)

Discussion Papers

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"A Primer on Nonmarket Valuation"

Preface

Public policy should reflect an understanding of the public's values. This is especially true with respect to the environment. Because public values about the environment are not generally expressed in the marketplace, nonmarket valuation has become an important source of information for environmental decisionmaking. While interest has grown in measuring nonmarket values, the technical nature of the nonmarket valuation literature can overwhelm newcomers. This book provides clear descriptions of the most commonly used nonmarket valuation techniques along with the steps for implementation. Individuals working for natural resource agencies, attorneys and consultants involved with natural resource damage assessments, graduate students, and others will appreciate the practical tone of this book.

Our approach for developing this primer was to invite experienced, well-respected experts to write the chapters. The next step was to get the authors together to work toward a well-integrated book. The Rocky Mountain Research Station of the U.S. Forest Service organized two author workshops. At the first meeting each contributor presented an outline of his or her chapter; as a group we critiqued the outlines and worked to define a consistent structure that would be used to write all the chapters. At the second meeting each author presented his or her draft chapter and another author in the group served as a discussant. This process facilitated development of a cohesive text and provided peer review of all the chapters.

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The first section of the book, containing three chapters, provides background for the methodology sections that follow. The opening chapter explains the policy context of nonmarket valuation. The next chapter develops the economic theory that is the basis of nonmarket values. And because value estimates are only as good as the data upon which they are based, the third chapter describes the process of collecting nonmarket valuation data.

The valuation methods are presented in two sections, one section on stated preference methods and the other on revealed preference methods. Following a short introduction chapter, the section on stated preference methods includes three chapters-two covering widely used nonmarket valuation techniques (contingent valuation and attribute-based methods) and the other describing an emerging technique (the method of paired comparisons). The revealed preference section also includes an introduction chapter and three methods chapters. The methods chapters covered - the travel cost method, the hedonic method, and the defensive behavior and damage cost methods - each use "clues" from behaviors observed in markets to estimate nonmarket values. We expect readers will come away from these two sections with a thorough understanding of how to design and implement a nonmarket valuation study. The chapters also describe how to analyze the data and estimate values.

The final section of the book takes stock of the usefulness of nonmarket valuation. The first chapter in this section describes techniques for transferring values from existing studies to new situations. The next chapter discusses interesting situations in which nonmarket values were used to help make important natural resource and environmental decisions. The final chapter provides thoughts on the history, validity, and future of nonmarket valuation.

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As a companion to this book, we developed a website (www.fs.fed.us/nonmarketprimerdata) containing datasets, nonmarket valuation surveys, and links to publications based on the data. This website should aid readers who are curious about the format of nonmarket valuation surveys and the resulting data. The data on the website can be used to replicate statistical models reported in the linked publications.

We wish to express our gratitude for the help and support provided by the following people. This book has benefited greatly from the word processing skills of Kim Junkins. The companion website was designed and put together by Pam Froemke. Alexander Bujak carefully read and provided comments on every chapter for us. Fred Kaiser attended our second workshop and motivated all of us with his agency perspective on why this book is important.

Finally, we dedicate this book to George Peterson. After a distinguished teaching career at Northwestern University, George became a research project leader with the Rocky Mountain Research Station in Fort Collins, Colorado. Professionally, he is known as an award-winning professor, an innovative researcher, and an outstanding project leader. Among those of us fortunate enough to work with George, he is considered a fountain of wisdom and a dear friend.

Patty Champ, Kevin Boyle, and Tom Brown

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