Biased Valuations, Damage Assessments, and Policy Choices: The Choice of Measure Matters

Date16 October 2007
DOIhttps://doi.org/10.1016/S0193-5895(07)23018-0
Published date16 October 2007
Pages345-358
AuthorJack L. Knetsch
BIASED VALUATIONS, DAMAGE
ASSESSMENTS, AND POLICY
CHOICES: THE CHOICE OF
MEASURE MATTERS
$
Jack L. Knetsch
Should the monetary value of the damages caused by an oil spill be
measured by how much people are willing to pay to avoid it or by the
minimum compensation they demand to accept it? Should a decision to
clean up the spill turn on how much people are willing to pay to have it done
or by the compensation necessary for them to agree not to have it done?
Should efforts to reduce global climate change be economically justified by
how much people would pay to avoid it or by the compensation required
not to deal with it?
The conventional view that underlies nearly all official and unof ficial
recommendations and studies of such issues, is that it does not matter which
metric is chosen to value environmental (or other) changes, because it is
assumed that all such measures will result in essentially the same estimates of
value. The intuition of most people, or at least o f most non-economists, is very
different. It seems quite obvious to them that different estimates will result
$
This is an expansion of a presentation at the ‘‘2006 Benefit-Cost Conference: What Can We
Do to Improve the Use of Benefit Cost Analysis?’’, University of Washington, May 2006, and
has benefited from comments by participants at this conference. Another version is scheduled to
appear in Ecological Economics.
Research in Law and Economics, Volume 23, 345–358
Copyright r2007 by Elsevier Ltd.
All rights of reproduction in any form reserved
ISSN: 0193-5895/doi:10.1016/S0193-5895(07)23018-0
345

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