Existence Value and the Contingent Valuation Method

JOHN QUIGGIN Department of Economics James Cook University People express concern about the possible extinction of animal species which they will never see, about damage to wilderness areas they will never visit, and so on. Such concerns are often interpreted by economists in terms of ‘existence’ or ‘passive use’ values. Three views have been proposed regarding the appropriate way of dealing with existence values in benefit–cost analysis. First, the existence values and concerns about environmental preservation that are not related to use may be disregarded. Second, concerns about environmental preservation may be taken into account, but not interpreted as existence values or evaluated in monetary terms. Third, the benefit–cost analysis may be modified to incorporate monetary estimates of existence values. Advocates of the third approach have developed a range of techniques for eliciting existence values, collectively referred to as the contingent valuation method. In this paper, the concept of existence value and the techniques of contingent valuation are surveyed, with the aim or providing a basis for comparisons of the three approaches described above.