~f~MARKET VALUATIONMonetary value that a consumer places on:A change in access to a market commodity (being able to buy it at price p, rather than notbeing able to buy it at all)A change in the price of a commodityA change in the quantity available (if the quantity available is fIXed)A change in the quality of the commodityA change in the person's disposable incomeNONMARKETVALUATIONAssessing the monetary value that a person places on an item that he may care for. Thisregardless of whether the item can be purchased through a market.Examples: Valuing clean air, clean water, good health, etc,THE CONTRAST BETWEEN AIR AND WATER POLLUTIONThe major component of air pollution control is human healtheffects.The major component of water pollution control is recreation andecological impacts"""""""", '~VV.l:'IV1J)!:.1~ l, J.UU"~~o..\:;(.'. BY.Johf1; HeilP.t:.iri -.more- frequen.tly. and. recreational. reve-...-Associated Press nue would rIse, the report ~ays. 111e.Klamath's major tributaries are Northern.WASHINGTON -Returning water to. California. rivers -the Trinity, Shasta,the Klamath River for. recreational users Scott and Salmon..would reap more econ.o~ic benefits than. The (nearly 40-page draft report wasdiverting it. for farmer.s, .loggers and hy- released .by the U.S. Geologi~l Surveydropower producers, accordi~g to a re- only after the .Wall Street Journal wroteport by the U.S. Geological.S~.rvey. .about it.'The agency had not pre\iJuslyThe Klamath ha.s become the focus of;. considered the findings by its economist,an emotional tug-ot-wa'r between,com~ Aaron Dougla~, and a $tatistics. c.)ns~ll-mercial angl~rs; .Native .Ameri~an tri,l>es laI1t,~ Andrew Sleeper, both in .-Fort Col-and environme:ntal:groups .wl~o want, to.: lins, ready for. public.:release,.according .force the government;: to ..releas.e more. to spokeswoman .Carolyn Beil.. ; .water and farmers. who~, experienced a ...Environmentr.lists said Friday,. howev-,shortage of irrigation water last year due.. er, that the Bush a~.!l1inistratio,i had ~)eento record drought. Ea~lier- this year, Inte- refusing to releas.e it to ~~:le .pu.blic. .rior Secretary Gale .Nort~Ii ; ordered the. ((Without ac~ess .to a~.l the g,ood .da~adiversion of water fro:n .:-the' river stTad~ .ttat are available, the effor.t to find lastingdling the Califqrnia-Oregon state line. solutions. in the Klamath is doomed'.toThe repor.t put~ the economic value of ' ' fail,~" said Jim Waltma~ of the Wildernessoutdoor pursuits .such as fishing and SocIety. .'. .boating along the ~lamath and its. major No~t.on came under fl~~ fro~ envIton-tributaries at $4.3 'Dillion annually. .mentalIsts and. t~~a! IndIan trIbe lea.ders..' .." , .when she dec1ded m March to redlvert.However,."$4 billion of t~at i.s ~ased .on ; ,'water from the ri~~r to i. 400 farms on ,tnethe assumption'that that p':e~p~~'s:recre- Klamath Reclamation Project along; ~hea.tion time is as ~conomically ~al.uable as state line east of the Ca.scade Range...~t1~~ spent wo~~ng. rhe re~almng $30~;. .Her decision, comiQg.after a nationalmIl11on a year 1S based on actual expendI-:' panel of scientists said there wasn'(anytures; .,proof fish would be harmed as a result,rrhe :w:';port P1:lts the econorl;1.ic...Yalue of. appeased farmers who'~ protested wh:enfarming, logging. and hydropower in the. the U.S. Bureau of Reclamation said thebasinat-$4.9-billion in onetime payment~.: water was needed to protect the ri'/~r's'The. report does.not provide a figure. sucker fish and downstream salmon. Nor-for what farms and industries generate. ton later directed that more water be putfor the region each year. .back in the river temporarily to-help. the.If water levels in the Klamath.'went. fish: Calls for comment from spokesmenback to normal, more people would visit" for Norton were not returned Friday..."..-~.~~ IJ.\. M.(1)t1'--IVALUATION",9';~~~JfittfClasses and Characteristics of GoodsTable 3.1ExamplesClass of goodCharacteristicsPure pri\';lteIndividual property rights_-\bilir)' to exclude potential consumersTraded freely in competitive markersAgriculrural produccsAucomobilesFinancial servicesQu3si-pri ,'arePublic librariesRecrearion in parksTV frequenciesIndividual properry righrs,-\biliry ro exclude porenrial consumersNor freely rraded in comperirive markersPure publicCollective property rightsCannot exclude potential consumersNor traded in any organized markerAir visibiliryEnvironmenral risksNarional defenseA crucial implication of the distinction between a private goodand a public good is that the latter can be valued by many peoplesimultaneously.q~First, one has to pay attention to the ethical foundation underlyingnonmarket valuation.Distinguish two alternative approaches(A) Deontological approach: nature matters in its own right.(B) Anthropocentric approach: nature matters only to the extentthat (some) people value it.It is the latter view that justifies the use of economics in this context.e.g.,-people who are well informed-people who have adequate wealth-future'generationsEconomics is inherently anthropocentric in its focus.There are two facets to economics:-Predicting/explaining people's behavior-Measuring people's preferencesNon-market valuation is crucially about the latter.ECONOMIC CONCEPT OF VALUE,How does the economic concept of value relate to what other peoplemean when they say something has great value?THE RELATIONMARKET PRICEBETWEENECONOMICVALUE ANDA common line of reasoning equates economic value with marketprice. The economic value of something is the price you pay to get it;if it sells for $7 lIb, then $7 lib is its economic value'This i_dea is still deepJy ingrained among non-economistsIt was the dominant view among economists for much of -the timefrom the Marginal Revolution of the 1870's until recently, and it stilllies very close to the surface of many economists' thinking.IMPLICATION: If an item does not have a market price (e.g.,because there is no market), it has no economic value. It should beclassified as