Critique of Contingent Valuation and Travel Cost Methods for Valuing Natural Resources and Ecosystems
Date of this Version
In July 1989 the U.S. District Court of Appeals in Washington, D.C. disallowed the method that had been established by the U.S. Department of Interior (DOI) for determining what a corporation would pay in the case of injury to an ecosystem from hazardous waste spills [Ohio v. Interior 1989]. The DOI method was based on neoclassical methodology and appraisal techniques. The Court ruled that "restoration is the proper remedy for injury to property where measurement of damages by some other method will fail to compensate fully for the injury," and that "natural resources have value that is not readily measured by traditional means" [Ohio v. Interior 1989, pp. 456-57]. One traditional means that the courts found would not compensate fully for injury is the utilization of market prices. As the court stated, "it is unreasonable to view market price as the exclusive factor, or even the predominant one. From the bald eagle to the blue whale and snail darter, natural resources have values that are not fully captured by the market system" [Ohio v. Interior 19891. Thus "DOI erred by establishing 'a strong presumption in favor of market price and appraisal methodologies' 51 Fed. Reg. 27, 720 (1986)" [Ohio v. Interior 19891. While ruling against the dependence on market means for measuring injury from hazardous spills, the Court did not explicitly rule on the contingent valuation method (CVM) and the travel cost method (TCM) as appraisal methodologies for the valuation of natural resources and ecosystems. These methodologies, both of which are based on neoclassical ideology, attempt to place a market valuation on the natural environment that is not included in market exchange.
Published by Journal of Economic Issues Vol. XXV, No.3, September 1991. Copyright © 1991 Journal of Economic Issues. Used by Permission.