As GDP is a measure of market capacity and not economic well-being, this report has been commissioned to more accurately understand the social progress indicators of any given state. Gross domestic product (GDP) is the most widely used measure of economic activity. There are international standards for its calculation, and much thought has gone into its statistical and conceptual bases. But GDP mainly measures market production, though it has often been treated as if it were a measure of economic well-being. Conflating the two can lead to misleading indications about how well-off people are and entail the wrong policy decisions. One reason why money measures of economic performance and living standards have come to play such an important role in our societies is that the monetary valuation of goods and services makes it easy to add up quantities of a very different nature. When we know the prices of apple juice and DVD players, we can add up their values and make statements about production and consumption in a single figure. But market prices are more than an accounting device. Economic theory tells us that when markets are functioning properly, the ratio of one market price to another is reflective of the relative appreciation of the two products by those who purchase them. Moreover, GDP captures all final goods in the economy, whether they are consumed by households, firms or government. Valuing them with their prices would thus seem to be a good way of capturing, in a single number, how well-off society is at a particular moment. Furthermore, keeping prices unchanged while observing how quantities of goods and services that enter GDP move over time would seem like a reasonable way of making a statement about how society’s living standards are evolving in real terms. As it turns out, things are more complicated. First, prices may not exist for some goods and services (if for instance government provides free health insurance or if households are engaged in child care), raising the question of how these services should be valued. Second, even where there are market prices, they may deviate from society’s underlying valuation. In particular, when the consumption or production of particular products affects society as a whole, the price that individuals pay for those products will differ from their value to society at large. Environmental damage caused by production or consumption activities that is not reflected in market prices is a well-known example.

https://andrewoswald.com/docs/stiglitz20report_commission20final20200920sept.pdf

Report by the commission on the measurement of economic performance and social progress

https://mimoza.marmara.edu.tr/~mtekce/Dinda_2004.pdf

Environmental Kuznets Curve Hypothesis: A Survey

Capitalism and Freedom

The ability to place a monetary value on the consequences of pollution discharges is a cornerstone of the economic approach to the environment. If this cannot be done, it undercuts the use of economic principles, whether to determine the optimal level of pollution or to implement this via Pigouvian taxes or Coase-style liability rules. Sometimes, the valuation involves a straightforward application of methods for valuing market commodities, as when sparks from a passing train set fire to a wheat field. Often, however, the valuation is more difficult. Outcomes such as reducing the risk of human illness or death, maintaining populations of native fish in an estuary, or protecting visibility at national parks are not themselves goods that are bought and sold in a market. Yet, placing a monetary value on them can be essential for sound policy. The lack of a market to generate prices for such outcomes is no accident. Markets are often missing in such cases because of the nonexcludable or nonrival nature of the damages: for those affected by it, pollution may be a public good (or bad). The public good nature of the damages from pollution has several consequences. It explains, for example, why the damages are sometimes large—only a few people may want to own a sea otter pelt, say, but many may want this animal protected in the wild. It also explains why market prices are inappropriate measures of value. In the presence of externalities , market transactions do not fully capture preferences. Collective choice is the more relevant paradigm. This is precisely what Ciriacy-Wantrup (1947) had in mind when he first proposed the contingent valuation method. Individuals should be interviewed

https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.8.4.19

Valuing the Environment through Contingent Valuation

Survival Analysis: Techniques for Censored and Truncated Data (2nd ed.) (Book)

Spike models allow for a nonzero probability of zero willingness to pay in referendum-style contingent valuation experiments. They include many of the often used models as special cases and allow various analyses that are not possible in standard applications. In this paper, the economic rationale for the spike models and their estimation techniques are discussed, and empirical illustrations are provided. One study suggests that mean willingness to pay is zero, and both studies strongly suggest that median WTP is zero. These results have some bearing on the continuing debate of the incentive properties of hypothetical surveys and the construction of scenarios in contingent valuation experiments.

Spike Models in Contingent Valuation

ronmental goods. The idea of asking the individual to accept or reject a given price for an environmental good-rather than asking him/her to state his/her reservation price exactly-was introduced in the literature by Bishop and Heberlein (1979). Hanemann (1984) showed how this particular technique of preference revelation could be integrated into economic theory by using the Random Utility Maximization (RUM) model. A salient feature of the studies published to date is the use of a specific parametric statistical model to derive descriptive measures like mean or median Willingness to Pay (WTP) from the discrete response valuation experiment. The purpose of this article is to introduce a non-parametric estimator suitable for discrete response valuation experiments. There are two significant advantages of the approach suggested here; first, no distribution assumption is necessary and, second, it is very simple to use-in fact, the computations can be done "on the back of an envelope." The paper is structured as follows: Section II outlines three different (parametric) approaches suggested in the literature, i.e., Bishop and Heberlein (1979), Hanemann (1984), and Cameron (1988). Section III introduces the non-parametric estimator and gives a brief description of the data used to illustrate the methods. Section IV compares the estimators, followed by concluding remarks.

A non-parametric approach to the estimation of welfare measures in discrete response valuation studies.

We estimated the income elasticity of environmental improvements for a number of European data-sets. The value of this parameter is consistently found to be less than one, with few exceptions. Our findings are compared with state-of-the-art contingent valuation studies from other countries. We also compared our findings with those reported in the literature on charitable donations and corporate donations. These studies show a similar pattern; donations decrease as a percentage of income, as income increases.

Is the income elasticity of environmental improvements less than one

In the case of private goods, individuals reveal their preferences in the market place. No similar market mechanism exists in the case of public goods. However, one obvious possibility is to ask people about their maximal willingness to pay for public goods or government expenditure (Johansson 1987, 1990, Miller). In some recent contingent market valuation studies people instead have been asked to accept or reject a specified amount of money for a change in the provision of a public good; different subsamples are confronted with different "bids." The resulting "yes" and "no" responses usually are analyzed by logit or probit techniques (e.g., Johansson and Kristrom). This raises the question of how to compute the average willingness to pay when only yes and no responses are available. This point was advanced by Hanemann in his seminal 1984 paper on welfare evaluations with discrete responses; see also Hanemann (1987). However, we believe a minor imperfection in Hanemann's presentation may confuse and mislead practitioners. Hanemann's approach assumes that negative bids cannot occur but at the same time gives the impression that it also applies to models that allow for negative bids. We also extend Hanemann's discussion of the choice of money measure in cost-benefit analysis.

Welfare Evaluations in Contingent Valuation Experiments with Discrete Response Data: Comment

Uncertainty is pervasive in analysis of climate change. How should economists allow for this? And how have they allowed for it? This paper reviews both of these questions.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID302399_code020320670.pdf?abstractid=302399&rulid=10032050&mirid=3

Bengt Kriström

Papers

Spike Models in Contingent Valuation

A non-parametric approach to the estimation of welfare measures in discrete response valuation studies.

Is the income elasticity of environmental improvements less than one

Welfare Evaluations in Contingent Valuation Experiments with Discrete Response Data: Comment

Uncertainty and Climate Change