Can Stated Preference Valuations Help Improve Environmental Decision Making?

Decisions about preservation, protection, or development of environmental “commodities” like ground water, atmospheric visibility, open space, wildlife, wetlands, and forests are often made without good information about the value of preservation relative to the cost. Clearly, the economic cost of preservation is often substantial. The cost of preserving wildlife habitat, for example, often totals thousands of dollars per acre. Difficult choices must be made because protection of habitat for one species may mean less money available to restore habitat for another. In order to make good choices, better information about the relative value of competing uses is necessary. But, much of the economic value derived from preservation of natural environments falls outside the normal workings of the market. In fact, research suggests that most of the value of preservation is often existence (or passive use) value that can only be measured using contingent valuation, CV, or related stated preference methods (see Loomis, 1996a). Stated preferences are also important in making decisions that do not involve existence values. Consider the problem of food safety. The potential benefit of irradiated meat and poultry, for example, is likely to be significant because this process reduces the probability of illness caused by salmonella and other pathogens. However, since irradiated meat is not generally available in the market, stated preference techniques offer an effective way to gauge consumer acceptance and willingness to pay for irradiation. Regardless of application, all stated preference techniques employ a survey instrument in which a hypothetical market for the item being valued is created. This market describes the item, reasons why payment is needed, and a payment vehicle. In the traditional contingent valuation approach, survey respondents are typically asked about the amount they are willing and able to pay for the commodity being valued. Other types of stated preference analysis like conjoint and contingent choice also employ a hypothetical market, but respondents are asked to rank, rate, or choose among "commodity packages" that typically contain several attributes, including price (Louviere, Henscher, & Swait, 2000).