Question

The contingent valuation method is, in general, superior to indirect methods for valuing non-market environmental goods and services because it is the only technique that can incorporate use as well as non-use values. Discuss (approximately 800 words)

Answer 1

Contingent Valuation is a survey based method of determining the economic value of a non market resource, that means those goods which cannot be traded in economic markets. thus it is mainly related to natural and environmental resources. Using the contingent method govt can estimate market values of environmental resources that can help them make new environmental policies, evaluation of existing policies and damage assessments. As it is a survey based method, variety of methods are taken to develop sample questionnaires.Then random individuals or geographically selected individuals are taken to fill up the questionnaires thus this method works with primary data or raw data. Survey questions are mainly based on hypothetical scenario. The main objective is to find out the market value of non marketable goods thus respondents are asked to estimate the amount of money they are willing to pay to retain , sustain, maintain or protect specific environmental non marketable resources.

On the other hand , other non market valuation methods like revealed preferences method- travel cost method and hedonic pricing model in many cases cannot provide the estimation needed for the environmental policies as they mainly rely on values leaving a ' behavioural trace', they can not be used to estimate those non use values,. along with this , these methods mainly concentrate on what has happened , it can limit their usefulness to estimate the economic value of environmental changes.

But survey based contingent valuation method, are able to provide proper estimated value of non market resources needed for environmental policy analysis. But the respondents should feel free about giving the answers and the questionnaires should provide a clear picture about the environmental outcomes that can help get more clear and concrete information about estimated non market resource value.