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Are There Environmental Limits to Cost Benefit Analysis?

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  • Nick Hanley

Abstract

This paper considers the problem areas found in applying cost-benefit analysis (CBA) to projects involving environmental costs or benefits. This is particularly relevant given recent moves by the UK government to include environmental valuations in CBA exercises, and in other related appraisal activities, following the publication of the Pearce Report. The paper argues that a major problem lies in placing monetary values on non-market goods. The paper also addresses the problems of (i) differences between citizen and consumer values; (ii) complexity of ecosystems; (iii) irreversibility and uniqueness; and (iv) intergenerational equity and discounting. The extent to which CBA is an institution open to capture is also discussed. Copyright Kluwer Academic Publishers 1992

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Bibliographic Info

Paper provided by University of Stirling, Division of Economics in its series Working Papers Series with number 90/6.

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Date of creation: Sep 1990
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Handle: RePEc:stl:stlewp:90/6

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Postal: Division of Economics, University of Stirling, Stirling, Scotland FK9 4LA
Phone: +44 (0)1786 467473
Fax: +44 (0)1786 467469
Web page: http://www.econ.stir.ac.uk/
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References

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  1. Porter, Richard C., 1982. "The new approach to wilderness preservation through benefit-cost analysis," Journal of Environmental Economics and Management, Elsevier, vol. 9(1), pages 59-80, March.
  2. Brookshire, David S, et al, 1982. "Valuing Public Goods: A Comparison of Survey and Hedonic Approaches," American Economic Review, American Economic Association, vol. 72(1), pages 165-77, March.
  3. Timothy J. Bartik, 2008. "Evaluating the Benefits of Non-marginal Reductions in Pollution Using Information on Defensive Expenditures," Book chapters authored by Upjohn Institute researchers, in: Joseph Herriges & Catherine L. Kling (ed.), Revealed Preference Approaches to Environmental Valuation, volume 0, pages 459-475 W.E. Upjohn Institute for Employment Research.
  4. Alistair Munro & Nick Hanley, 1991. "Shadow Projects and the Stock of Natural Capital: A Cautionary Note," Working Papers Series 91/8, University of Stirling, Division of Economics.
  5. Olson, Mancur & Bailey, Martin J, 1981. "Positive Time Preference," Journal of Political Economy, University of Chicago Press, vol. 89(1), pages 1-25, February.
  6. Adamowicz, Wiktor L. & Graham-Tomasi, Theodore, 1991. "Revealed preference tests of nonmarket goods valuation methods," Journal of Environmental Economics and Management, Elsevier, vol. 20(1), pages 29-45, January.
  7. Brown, S. P. A., 1983. "A note on environmental risk and the rate of discount," Journal of Environmental Economics and Management, Elsevier, vol. 10(3), pages 282-286, September.
  8. Hanley, N D, 1989. " Valuing Non-market Goods Using Contingent Valuation," Journal of Economic Surveys, Wiley Blackwell, vol. 3(3), pages 235-52.
  9. Nick Hanley & Alistair Munro, 1991. "Design Bias in Contingent Valuation Studies: The Impact of Information," Working Papers Series 91/13, University of Stirling, Division of Economics.
  10. Gregory, Robin, 1986. "Interpreting measures of economic loss: Evidence from contingent valuation and experimental studies," Journal of Environmental Economics and Management, Elsevier, vol. 13(4), pages 325-337, December.
  11. Solow, Robert M, 1974. "The Economics of Resources or the Resources of Economics," American Economic Review, American Economic Association, vol. 64(2), pages 1-14, May.
  12. Norgaard, Richard B., 1989. "The case for methodological pluralism," Ecological Economics, Elsevier, vol. 1(1), pages 37-57, February.
  13. John Hartwick, 1976. "Intergenerational Equity and the Investing of Rents from Exhaustible Resources," Working Papers 220, Queen's University, Department of Economics.
  14. Hanley, Nick, 1990. "The Economics of Nitrate Pollution," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 17(2), pages 129-51.
  15. Kevin J. Boyle, 1989. "Commodity Specification and the Framing of Contingent-Valuation Questions," Land Economics, University of Wisconsin Press, vol. 65(1), pages 57-63.
  16. Hartman, Robert W., 1990. "One thousand points of light seeking a Issue: A case study of CBO's search for a discount rate policy," Journal of Environmental Economics and Management, Elsevier, vol. 18(2), pages S3-S7, March.
  17. Lind, Robert C., 1990. "Reassessing the government's discount rate policy in light of new theory and data in a world economy with a high degree of capital mobility," Journal of Environmental Economics and Management, Elsevier, vol. 18(2), pages S8-S28, March.
  18. Nelson, Robert H, 1987. "The Economics Profession and the Making of Public Policy," Journal of Economic Literature, American Economic Association, vol. 25(1), pages 49-91, March.
  19. Pope, C. III & Perry, Greg, 1989. "Individual versus social discount rates in allocating depletable natural resources over time," Economics Letters, Elsevier, vol. 29(3), pages 257-264.
  20. Hanley, Nick & Craig, Stephen, 1991. "Wilderness development decisions and the Krutilla-Fisher model: The case of Scotland's 'flow country'," Ecological Economics, Elsevier, vol. 4(2), pages 145-164, November.
  21. Costanza, Robert, 1989. "What is ecological economics?," Ecological Economics, Elsevier, vol. 1(1), pages 1-7, February.
  22. John M. Hartwick, 1990. "Natural Resources, National Accounting and Economic Depreciation," Working Papers 771, Queen's University, Department of Economics.
  23. Knetsch, Jack L., 1990. "Environmental policy implications of disparities between willingness to pay and compensation demanded measures of values," Journal of Environmental Economics and Management, Elsevier, vol. 18(3), pages 227-237, May.
  24. Smith, V. Kerry, 1990. "Valuing amenity resources under uncertainty: A skeptical view of recent resolutions," Journal of Environmental Economics and Management, Elsevier, vol. 19(2), pages 193-202, September.
  25. Prince, Raymond, 1985. "A note on environmental risk and the rate of discount: Comment," Journal of Environmental Economics and Management, Elsevier, vol. 12(2), pages 179-180, June.
  26. Marvin Duncan & Ann Laing, 1980. "Western water resources: coming problems and the policy alternatives," Economic Review, Federal Reserve Bank of Kansas City, issue Feb, pages 14-22.
  27. John C. Harsanyi, 1955. "Cardinal Welfare, Individualistic Ethics, and Interpersonal Comparisons of Utility," Journal of Political Economy, University of Chicago Press, vol. 63, pages 309.
  28. Seip, K. & Strand, J., 1990. "Willingness To Pay For Environmental Goods In Norway: A Contingent Valuation Study With Real Payment," Memorandum 12/1990, Oslo University, Department of Economics.
  29. Pearce, David, 1976. "The Limits of Cost-Benefit Analysis as a Guide to Environmental Policy," Kyklos, Wiley Blackwell, vol. 29(1), pages 97-112.
  30. Kling, Catherine L., 1988. "Comparing welfare estimates of environmental quality changes from recreation demand models," Journal of Environmental Economics and Management, Elsevier, vol. 15(3), pages 331-340, September.
  31. Karl C. Samples & John A. Dixon & KMarcia M. Gowen, 1986. "Information Disclosure and Endangered Species Valuation," Land Economics, University of Wisconsin Press, vol. 62(3), pages 306-312.
  32. Arrow, Kenneth J & Lind, Robert C, 1970. "Uncertainty and the Evaluation of Public Investment Decisions," American Economic Review, American Economic Association, vol. 60(3), pages 364-78, June.
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Citations

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Cited by:
  1. Strijker, Dirk & Sijtsma, F.J. & Bettels, K., 2000. "Evaluating Nature Conservation: The Case of Meadow Birds in The Netherlands," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 1(2), August.
  2. Clem Tisdell, 2005. "Linking Policies For Biodiversity Conservation With Advances In Behavioral Economics," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 50(sp), pages 449-462.
  3. Richard Howarth & Richard Norgaard, 1993. "Intergenerational transfers and the social discount rate," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 3(4), pages 337-358, August.
  4. repec:hal:wpaper:halshs-00835669 is not listed on IDEAS
  5. William J. Vaughan & Sergio Ardila, 1993. "Economic Analysis of the Environmental Aspects of Investment Projects," IDB Publications 25438, Inter-American Development Bank.
  6. Morimoto, Risako & Hope, Chris, 2005. "Making the case for developing a silent aircraft," Transport Policy, Elsevier, vol. 12(2), pages 165-174, March.
  7. Delucchi, Mark A., 1997. "The Annualized Social Cost of Motor-Vehicle Use in the U.S., 1990-1991: Summary of Theory, Data, Methods, and Results," University of California Transportation Center, Working Papers qt43s6n28v, University of California Transportation Center.
  8. Zylicz, Tomasz, 2010. "Goals and Principles of Environmental Policy," International Review of Environmental and Resource Economics, now publishers, vol. 3(4), pages 299-334, May.
  9. Nick Hanley & Clive Spash & Lorna Walker, 1995. "Problems in valuing the benefits of biodiversity protection," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 5(3), pages 249-272, April.
  10. Martin Luckert & Wiktor Adamowicz, 1993. "Empirical measures of factors affecting social rates of discount," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 3(1), pages 1-21, February.
  11. Gamini Herath, 2006. "Sustainable Development and the Precautionary Principle: the Australian Experience," Economics Series 2006_15, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
  12. D. Strijker & F. Sijtsma & D. Wiersma, 2000. "Evaluation of Nature Conservation," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 16(4), pages 363-378, August.
  13. repec:hal:ciredw:halshs-00835669 is not listed on IDEAS
  14. Nicolas Bouleau, 2012. "Limits To Growth And Stochastics," Post-Print halshs-00782948, HAL.
  15. STÅLE Navrud & GERALD Pruckner, 1997. "Environmental Valuation – To Use or Not to Use? A Comparative Study of the United States and Europe," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 10(1), pages 1-26, July.
  16. Thomas Sterner, 1994. "Discounting in a world of limited growth," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 4(5), pages 527-534, October.

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