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Deciding between development and preservation of a natural asset: a way out of the impasse?

  • Schilizzi, Steven
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    Many environmental policy issues involve conflicts between nature conservation and economic development. The economic rationale behind deciding among alternative options is predicated on some form of benefit-cost analysis (BCA). Key issues to date have been non-market valuation, the effectiveness of the precautionary principle or safe minimum standard, discounting, uncertainty, and how the decision making process implements BCA results. To date, no satisfactory mechanism seems to have been found that reconciles conflicting interests with social welfare, the Hicks-Kaldor criterion falling short. This is because BCA has been conceived of and implemented within a technocratic process, which impinges on all aspects of benefit-cost definition and BCA results, leading to economically arbitrary and socially indeterminate outcomes. An alternative model is proposed, applied to discrete, partly excludable, non-rival but congestible public goods. It is based on mechanism design theory, leading to a democratic, rather than technocratic, social choice mechanism. BCA and optimal mechanism design are combined in a way that renews provision and distribution of information and revelation of social preferences. The role of stated preference techniques, such as contingent valuation, is radically redefined. The model is referred to an Australian case of mining in a National Park.

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    Paper provided by Australian Agricultural and Resource Economics Society in its series 1999 Conference (43th), January 20-22, 1999, Christchurch, New Zealand with number 124547.

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    Date of creation: 1999
    Date of revision:
    Handle: RePEc:ags:aare99:124547
    Contact details of provider: Postal: AARES Central Office Manager, Crawford School of Public Policy, ANU, Canberra ACT 0200
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    1. John Loomis & Thomas Brown & Beatrice Lucero & George Peterson, 1996. "Improving Validity Experiments of Contingent Valuation Methods: Results of Efforts to Reduce the Disparity of Hypothetical and Actual Willingness to Pay," Land Economics, University of Wisconsin Press, vol. 72(4), pages 450-461.
    2. Hege Medin & Karine Nyborg & Ian Bateman, 1998. "The Assumption of Equal Marginal Utility of Income: How Much Does it Matter?," Discussion Papers 241, Statistics Norway, Research Department.
    3. Olof Johansson-Stenman, 1998. "The Importance of Ethics in Environmental Economics with a Focus on Existence Values," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 11(3), pages 429-442, April.
    4. Vivien Foster & Ian J. Bateman & David Harley, 1997. "Real And Hypothetical Willingness To Pay For Environmental Preservation: A Non-Experimental Comparison," Journal of Agricultural Economics, Wiley Blackwell, vol. 48(1-3), pages 123-137.
    5. Champ, Patricia A. & Bishop, Richard C. & Brown, Thomas C. & McCollum, Daniel W., 1997. "Using Donation Mechanisms to Value Nonuse Benefits from Public Goods," Journal of Environmental Economics and Management, Elsevier, vol. 33(2), pages 151-162, June.
    6. Leonard Shabman & Kurt Stephenson, 1996. "Searching for the Correct Benefit Estimate: Empirical Evidence for an Alternative Perspective," Land Economics, University of Wisconsin Press, vol. 72(4), pages 433-449.
    7. Lunander, Anders, 1998. "Inducing Incentives to Understate and to Overstate Willingness to Pay within the Open-Ended and the Dichotomous-Choice Elicitation Formats: An Experimental Study," Journal of Environmental Economics and Management, Elsevier, vol. 35(1), pages 88-102, January.
    8. Deborah Vaughn Nestor, 1998. "Policy Evaluation with Combined Actual and Contingent Response Data," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(2), pages 264-276.
    9. Frykblom, Peter, 1997. "Hypothetical Question Modes and Real Willingness to Pay," Journal of Environmental Economics and Management, Elsevier, vol. 34(3), pages 275-287, November.
    10. Helen R. Neill & Ronald G. Cummings & Philip T. Ganderton & Glenn W. Harrison & Thomas McGuckin, 1994. "Hypothetical Surveys and Real Economic Commitments," Land Economics, University of Wisconsin Press, vol. 70(2), pages 145-154.
    11. M. Shechter & B. Reiser & N. Zaitsev, 1998. "Measuring Passive Use Value: Pledges, Donations and CV Responses in Connection with an Important Natural Resource," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 12(4), pages 457-478, December.
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