Determining the Value of Non-Marketed Goods: Economic, Psychological, and Policy Relevant...

Kopp, Raymond J., Werner W. Pommerehne, and Norbert Schwarz. Boston: Kluwer Academic Publishers, 1997, 333 pp., price unknown.

This interesting collection of papers has its roots in a 1994 conference on contingent valuation (CV) organized by two of the editors: Werner Pommerehne (to

whom the volume is dedicated) and Norbart Schwarz. The chapters are divided into three sections. The first section reviews CV theory and provides background on the development of the academic literature. The second section focuses on specific issues in the general debate concerning CV validity, including scope tests, consistency with economic theory, survey design, and replicability of the results. The final third of the volume contains discussion of applications of the method. I will attempt to provide potential readers with a flavor of the material in each of the chapters, although please keep in mind that much will be missed in such a short review.

Following an introductory chapter, Ray Kopp and Katherine Pease (chap. 2) argue that the furor over the contingent valuation method has little to do with the method and a lot to do with what is being measured: passive use values. They make a compelling case for this view throughout the chapter with an in-depth description and assessment of the recent political and legal history of the CV debate, from the legislation that generated a need to measure passive-use values through the NOAA panel. Such reading is fascinating for an academic economist with little first-hand knowledge of the realities of the political and legal process of rule making and policy implementation. In addition, the discussion helps to put the evolution of the academic literature on CV over this period of time in context.

In chapter 3, Rich Bishop, Patty Champ, Tom Brown, and Dan McCollum consider how CV can be deemed to be reliable and valid. To do so, they re-examine what they refer to as the "three C's" of validity: content, construct, and criterion. They note that readers of Mitchell and Carson's illustrious CV book will be well familiar with these terms. Bishop et al.'s contribution is to update the reader on the current evidence on these fronts and to assess the evidence with a practitioner's insight.

The final chapter in the background section of the book is by Kip Viscusi. The devotion of a chapter to the specific treatment of valuing risk reduction is more than appropriate given that substantial numbers of environmental "goods" come in the form of risk reduction. Viscusi provides a concise assessment of the use of CV to value risk changes, focusing on the anomalies such as large divergences between willingness to pay (WTP) and willingness to accept (WTA) that have caused so much concern in this literature. As an alternative, he suggests that nonmonetary values may merit more consideration such as death risk via automobile accidents. In many cases, he argues that the rate at which individuals would be willing to trade off various health risks against the risk of dying in an automobile accident will provide policy makers with enough information to choose between alternative programs without the additional step of monetary values. This is a sensible suggestion, although to be completely satisfying it requires that surveys that elicit such trade-offs can be shown to be more valid than those seeking monetary trade-offs.

Chapters 5 and 6 together take a compelling look at the issue of "scope" in CV surveys. A primary argument in the anti-CV camp is that CV results do not show the expected sensitivity to magnitude of the proposed environmental (or other) change. Ray Kopp and Kerry Smith take on the theoretical arguments made by this camp, noting in particular the reliance of their theoretical arguments on specific maintained hypotheses such as perfect substitution. They consider two studies specifically designed to consider scope effects in CV and report the results, finding general support for scope sensitivity.

In chapter 6, Richard Carson takes on the empirical component of the scope claim: that CV studies have typically shown insensitivity to scope. In contrast, he makes a compelling case that the vast majority of CV surveys where scope issues can be investigated clearly indicate that sensitivity to scope is present. After reading these two chapters, my intellectual curiosity wanted to hear rebuttal arguments, but, frankly, I doubt they would be very convincing. In retrospect, it is amazing how much concern about CV the scope debate generated, when there was so little substance to it. I plan to assign these two chapters in my graduate environmental economics class.

Gears switch considerably in chapters 7 and 8. Norbert Schwarz and Baruch Fischoff provide a view of contingent valuation survey methods from the perspective of psychologists. In chapter 7, Schulz focuses on the process by which respondents form values and, more generally, on the context-dependence aspect of contingent valuation surveys. Fischoff provides a comparative-disciplines view of contingent valuation, reporting on how psychologists evaluate their own survey research relative to how economists report and evaluate CV research. He recommends specific ways in which psychologists and economists might better work together on CV design and interpretation. One leaves this chapter feeling that the difficulties of bridging these two disciplines are substantive.

Chapter 9 takes us back to the scope issue; Dale Whittington, KyengAe Choe, and Donald Lauria report the results of a split-sample CV study investigating scope, where some respondents were given "time to think" (one to two days). The answers from the "time to think" treatment were compared with CV respondents given traditional treatments via OLS, Tobit, and Probit models. Since they use a discrete choice CV approach, it is unclear why OLS or Tobit might be appropriate estimators. based on the Probit results, "time to think" generated results that are consistent with scope effects.

In chapter 10, Bengt Kristrom considers a variety of "practical problems" encountered by CV researchers and suggests a few innovative solutions. Such sticky topics discussed include nonresponse bias, response rates, the many issues involved in constructing the CV scenario, optimal bid design, and alternative estimators for close-ended CV questions. Although the discussion in this chapter covers familiar ground, it is a useful overview and touches on state-of-the-art methods, particularly regarding estimation.

In chapter 11, Stale Navrud reports the results of a CV survey when videos are used to communicate the aesthetic effects of hydroelectric development. The results are compared to responses generated by the use of photos alone and the combination of videos and photos. The results and discussion in the text will provide useful guidance for CV researchers considering alternative communication devices.

In the final chapter of the volume, Werner Pommerehne and Albert Hart boldly consider the WTA of Swiss residents for the siting of a nuclear waste repository in their community. They put in a strong plug for recent nonparametric approaches to estimation but end up using a probit model for their own work. Although somewhat critical of CV, the authors conclude with a positive assessment.

Finally, an irritating point: throughout the book there are numerous typos and line spacing errors. Figure 1 is completely missing in chapter 4 and chapter 10 is so full of typos in equations that it is difficult to concentrate on the content of the material. Despite this annoyance, overall the chapters in this volume provide several rich additions to the important research agenda of nonmarket valuation.

Catherine Kling Iowa State University