Abstract
Few principles are more central to economic analysis than the sovereignty of consumer choice. Nonetheless economists’ acceptance of consumer choice has sometimes been suspended. The most recent example of this response to choices that does not adhere to simple economic models concerns peoples’ decisions involving environmental and natural resources elicited with contingent valuation (CV) surveys.1 Ignoring consumer sovereignty in these situations has been explained as necessary because the underlying choices are inconsistent with rational behavior.2 This argument overstates the power of economic theory to explain choices. Tests of the internal consistency of choices require auxiliary assumptions in addition to the simple axioms underlying revealed preference theory to formulate empirical hypotheses. As a consequence, these consistency tests actually evaluate composite hypotheses (the internal consistency condition plus the relevant auxiliary assumptions). Behavior judged as inconsistent based on an internal consistency condition could also arise from a violation in one or more of the required additional assumptions for the test. For example, testing internal consistency of choices using a subset of the commodities a household consumes requires that one assume separability of preferences.3
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Bishop, Richard C. and Thomas A. Heberlein, 1980. “Simulated Markets, Hypothetical Markets, and Travel Cost Analysis: Alternative Methods of Estimating Outdoor Recreation Demand” Working Paper No. 187, Department of Agricultural Economics, University of Wisconsin, Madison, December.
Bockstael, Nancy E., Kenneth E. McConnell, and Ivar Strand, 1991. “Recreation” in Measuring the Demand for Environmental Commodities, edited by J. Braden and C. Kolstad, (Amsterdam: North Holland), 227–270.
Carson, Richard T., 1995. “Contingent Valuation Surveys and Tests of Insensitivity to Scope,” Department of Economics, University of California, San Diego, unpublished paper,January.
Carson, Richard T., Robert C. Mitchell, Witchell W. Hanemann, Raymond J. Kopp, Stanley Presser and Paul A. Ruud, 1995, “Contingent Valuationn and Lost Passive Use: Damages from the Exxon Valdez.” discussion paper. Quality of the Environment Division, Resources for the Future.
Carson, Richard T., Nicholas E. Flores, and W. Michael Hanemann, 1991. “On the Nature of Compensable Value in a Natural Resource Damage Assessment.” Working paper. The American Economic Association meeting, New Orleans, LA, January.
Carson, Richard T., Jennifer Wright, Anna Alberini, Nancy Carson and Nicholas Flores, 1994. A Bibliography of Contingent Valuation Studies and Papers, Natural Resource Damage Assessment, Inc., La Jolla, Ca., March.
Carson, Richard T. and Robert Cameron Mitchell, 1995. “Sequencing and Nesting in Contingent Valuation Surveys,” Journal of Environmental Economics and Management (in press).
Desvousges, William H., F. Reed Johnson, Richard W. Dunford, Kevin J. Boyle, Sara P. Hudson, K. Nicole Wilson, 1992. Measuring Nonuse Damages Using Contingent Valuation: An Experimental Evaluation of Accuracy, RTI Monograph 92–1 (Research Triangle Park, N.C.: Research Triangle Institute, June).
Diamond, Peter A., 1994. Comments on the Proposed Rules for Natural Resource Damage Assessments: A Submission to the National Oceanic and Atmospheric Administration, September 16.
Diamond, Peter, 1995. “Testing the Internal Consistency of Contingent Valuation Survey” unpublished paper, Dept. of Economics, Massachusetts Institute of Technology, January.
Diamond, Peter A., Jerry A. Hausman, Gregory K. Leonard and Milke A. Denning, 1993. “Does Contingent Valuation Measure Preferences? Experimental Evidence” in J.A. Hausman editor Contingent Valuation: A Critical Assessment (Amsterdam: North Holland).
Diamond, Peter A. and Jerry A. Hausman, 1994. “Contingent Valuation: Is Some Number Better Than No Number,” Journal of Economic Perspectives, Vol. 8 (Fall): 45–64.
Freeman, A. Myrick III, 1993. The Measurement of Environmental and Resource Values: Theory and Methods (Washington, D.C.: Resources for the Future).
Hanemann, W. Michael, 1991. “Willingness to Pay and Willingness to Accept: How Much Can They Differ?” American Economic Review Vol. 81 (June): 635–647.
Harrison, Glenn, 1990. “Expected Utility Theory and the Experimentalists,” Department of Economics, University of South Carolina, working paper, No. 90–04, September.
Hogarth, Robin M. and Melvin W. Reder, 1986. “Editors Comments: Perspectives from Economics and Psychology,” Journal of Business Special Supplement, The Behavioral Foundations of Economic Theory,edited by R.M. Hogarth and M.W. Reder, Vol. 59 (October): PP S185–S208.
Kreps, David M., 1990. A Course in Microeconomic Theory (Princeton, N.J.: Princeton Univ. Press).
Lucas, Robert E. Jr., 1986. “Adaptive Behavior and Economic Theory” Journal of Business Special Supplement, The Behavioral Foundations of Economic Theory, edited by R.M. Hogarth and M.W. Reder, Vol. 59 (October): 5401–5426.
Mohring, Herbert, 1971. “Alternative Welfare Gain and Loss Measures,” Western Economic Journal (December) 349–368.
Morey, Edward R., 1984. “Confuser Surplus,” American Economic Review, Vol. 74 (March) 163–173.
NOAA Panel on Contingent Valuation, 1993. Report, Federal Register, Vol. 58, No. 10, January 15, 4602–4614.
Palmquist, Raymond B., 1991. “Hedonic Methods” in Measuring the Demand for Environmental Quality, edited by J. Braden and C. Kolstad (Amsterdam: North Holland): 7–120.
Portney, Paul R., 1994. “The Contingent Valuation Debate: Why Economists Should Care,” Journal of Economic Perspectives, Vol. 8 (Fall): 3–18.
Samuelson, Paul A., 1938. “A Note on the Pure Theory of Cinsumer’s Behavior” Economica, Vol. 5, 61–71.
Smith, V. Kerry and William H. Desvousges, 1986. Measuring Water Quality Benefits (Boston: Kluwer Nijhoff).
Smith, V. Kerry and Laura Osborne, 1995. “Do Contingent Valuation Estimates Pass a ‘Scope’ Test? A Meta Analysis.” Center for Environmental and Resource Economics, Duke University, unpublished paper, revised, November.
Smith, V. K., Xiaolong. Zhang, and Raymond B. Palmquist, 1995. “The Economic Value of Controlling Marine Debris,” in J. Coe and D. Rodgers, editors Marine Debris (New York: Springer Verlag, forthcoming).
Snedecor, G. W. and W. G. Cochran, 1980, Statistical Methods, 7th edition (Ames, Iowa: Iowa State University Press).
Stewart, T.K., P. Middleton, and D. Ely. 1983. “Judgments of Visual Air Quality: Reliability and Validity.” Journal of Environmental Management 3: 129–145.
Stewart, T.K., P. Middleton, M. Downton, and D. Ely. 1984. “Judgments of Photographs Versus Field Observations in Studies of Perception and Judgment of the Visual Environment.” Journal of Environmental Psychology 4: 283–302.
Varian, Hal. R., 1988. “Revealed Preference With a Subset of Goods,” Journal of Economic Theory, Vol. 46 (October): 179–185.
White, Halbert., 1982. “Maximum Likelihood Estimation of Mispecified Models” Econometrica, Vol. 50 (January):1–76.
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 1997 Springer Science+Business Media New York
About this chapter
Cite this chapter
Kopp, R.J., Smith, V.K. (1997). Constructing Measures of Economic Value. In: Kopp, R.J., Pommerehne, W.W., Schwarz, N. (eds) Determining the Value of Non-Marketed Goods. Studies in Risk and Uncertainty, vol 10. Springer, Dordrecht. https://doi.org/10.1007/978-94-011-5364-5_5
Download citation
DOI: https://doi.org/10.1007/978-94-011-5364-5_5
Publisher Name: Springer, Dordrecht
Print ISBN: 978-94-010-6255-8
Online ISBN: 978-94-011-5364-5
eBook Packages: Springer Book Archive