IDEAS home Printed from
   My bibliography  Save this paper

Economic valuation and the natural world


  • Pearce, David


Economic valuation is controversial largely because its purpose has not been clearly conveyed to non-economists. The purpose of valuation of the natural world is to elicit measures of human preferences for, or against, environmental change. As a procedure, it thus faces two immediate limitations. First, economic values are not the same as intrinsic values - values in things rather than values of things. Economic valuation makes no claim to measure intrinsic values, although through the concept of existence value it may be capable of capturing human perceptions of intrinsic value. Second, measuring preferences focuses on efficiency gains and losses from environmental change. It says little about the distribution of costs and benefits within a time period or between time periods. Within a time period, the use of efficiency gains and losses as a guide to policy or project evaluation assumes that the prevailing distribution of income is socially acceptable, since it is that distribution which weights the measures of willingness to pay. Between time periods, the use of another efficiency concept - the discount rate - biases the outcomes of evaluation in favor of the present, and against future, generations where future costs and benefits are both distant and significant. But economic valuation is useful in several contexts. Project and program appraisal cannot be comprehensive or adequate without it. National environmental policy priorities will be better informed if economic values are known with some degree of certainty. The entire objective of sustainable development almost certainly cannot be interpreted without some idea of the value of environmental services and assets. Empirical work on valuation remains limited, even in the developed world. It is fairly new in the developing world, although many project evaluations have used some form of indirect valuation. Its importance for the development process is that revealed economic values for environmental conservation and environmentally improving projects and policies have often been found to be large. Valuation demonstrates that there is an economic case for protecting the environment and can help improve decision making. In so doing, it could make public choices more cost-efficient, thus allowing limited public income to be optimally spent.

Suggested Citation

  • Pearce, David, 1992. "Economic valuation and the natural world," Policy Research Working Paper Series 988, The World Bank.
  • Handle: RePEc:wbk:wbrwps:988

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Bergstrom, John C. & Stoll, John R. & Titre, John P. & Wright, Vernon L., 1990. "Economic value of wetlands-based recreation," Ecological Economics, Elsevier, vol. 2(2), pages 129-147, June.
    2. Nordhaus, William D, 1991. "A Sketch of the Economics of the Greenhouse Effect," American Economic Review, American Economic Association, vol. 81(2), pages 146-150, May.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. García-Amado, Luis Rico & Pérez, Manuel Ruiz & Escutia, Felipe Reyes & García, Sara Barrasa & Mejía, Elsa Contreras, 2011. "Efficiency of Payments for Environmental Services: Equity and additionality in a case study from a Biosphere Reserve in Chiapas, Mexico," Ecological Economics, Elsevier, vol. 70(12), pages 2361-2368.
    2. Nicola Lansdell & Lata Gangadharan, 2003. "Comparing Travel Cost Models And The Precision Of Their Consumer Surplus Estimates: Albert Park And Maroondah Reservoir," Australian Economic Papers, Wiley Blackwell, vol. 42(4), pages 399-417, December.
    3. Easter, K. William & Archibald, Sandra O., 1998. "Benefit-Cost Analysis In U.S. Environmental Regulatory Decisions," Conference Papers 14475, University of Minnesota, Center for International Food and Agricultural Policy.
    4. Voxi Heinrich S. Amavilah, 2005. "The National Wealth of Selected Countries - A Descriptive Essay," Development and Comp Systems 0508007, University Library of Munich, Germany.
    5. Bright E. Okogu & Fatih Birol, 1994. "Valuing Carbon Sequestration Services of Developing Countries' Forests," Development Policy Review, Overseas Development Institute, vol. 12(4), pages 355-368, December.
    6. Raffaello Gervigni, 1998. "Incremental Cost in the Convention on Biological Diversity," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 11(2), pages 217-241, March.
    7. Alessandra Arcuri, 2005. "A Different Reason for “De-Coasing” Environmental Law and Economics," European Journal of Law and Economics, Springer, vol. 20(2), pages 225-246, September.
    8. Rafat Alam & Nguyen Quyen, 2018. "The conversion of biodiversity-rich land and ecosystem services," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 20(1), pages 157-178, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Stern, Nicholas, 2018. "Public economics as if time matters: Climate change and the dynamics of policy," Journal of Public Economics, Elsevier, vol. 162(C), pages 4-17.
    2. Allen, James C. & Bergstrom, John C., 2003. "Measuring Values For Wetlands Protection In A Developing Country From Domestic And International Citizen Groups," 2003 Annual meeting, July 27-30, Montreal, Canada 22009, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. Fankhauser, Samuel & Kverndokk, Snorre, 1996. "The global warming game -- Simulations of a CO2-reduction agreement," Resource and Energy Economics, Elsevier, vol. 18(1), pages 83-102, March.
    4. Hermine Vedogbeton & Robert J. Johnston, 2020. "Commodity Consistent Meta-Analysis of Wetland Values: An Illustration for Coastal Marsh Habitat," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 75(4), pages 835-865, April.
    5. Simonis, Udo E., 1996. "Klimaprotokoll - zu den Verteilungsproblemen der Weltumweltpolitik," EconStor Open Access Articles, ZBW - Leibniz Information Centre for Economics, pages 37-61.
    6. Wolfgang Buchholz & Kai Konrad, 1994. "Global environmental problems and the strategic choice of technology," Journal of Economics, Springer, vol. 60(3), pages 299-321, October.
    7. Caetano, Marco Antonio Leonel & Gherardi, Douglas Francisco Marcolino & Yoneyama, Takashi, 2013. "A constraint satisfaction method applied to the problem of controlling the CO2 emission in the Legal Brazilian Amazon," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(21), pages 5322-5329.
    8. Svendsen, Gert Tinggaard, 1998. "A general model for CO2 regulation: the case of Denmark," Energy Policy, Elsevier, vol. 26(1), pages 33-44, January.
    9. Philippe De Lombaerde & Anja de Kimpe, 2000. "Global trade interdependence and the Co2 emission elasticity with respect to economic growth in Japan, the United States and western Europe," Ensayos de Economía 009472, Universidad Nacional de Colombia Sede Medellín.
    10. Ariste, Ruolz & Lasserre, Pierre, 2001. "La gestion optimale d’une forêt exploitée pour son potentiel de diminution des gaz à effet de serre et son bois," L'Actualité Economique, Société Canadienne de Science Economique, vol. 77(1), pages 27-51, mars.
    11. Makropoulou, Vasiliki & Dotsis, George & Markellos, Raphael N., 2013. "Environmental policy implications of extreme variations in pollutant stock levels and socioeconomic costs," The Quarterly Review of Economics and Finance, Elsevier, vol. 53(4), pages 417-428.
    12. Pittel, Karen & Rübbelke, Dirk T.G., 2008. "Climate policy and ancillary benefits: A survey and integration into the modelling of international negotiations on climate change," Ecological Economics, Elsevier, vol. 68(1-2), pages 210-220, December.
    13. Xepapadeas, A., 1995. "Induced technical change and international agreements under greenhouse warming," Resource and Energy Economics, Elsevier, vol. 17(1), pages 1-23, May.
    14. Bergstrom, John C. & Dorfman, Jeffrey H. & Loomis, John B., 2003. "Estuary Management And Recreational Fishing Benefits," Faculty Series 16694, University of Georgia, Department of Agricultural and Applied Economics.
    15. Richard S.J. Tol, 2020. "Selfish Bureaucrats and Policy Heterogeneity in Nordhaus’ DICE," Working Paper Series 0220, Department of Economics, University of Sussex Business School.
    16. Wallace E. Oates & Paul R. Portney, 1992. "Economic Incentives and the Containment of Global Warming," Eastern Economic Journal, Eastern Economic Association, vol. 18(1), pages 85-98, Winter.
    17. Elbasha, Elamin H. & Roe, Terry L., 1995. "Environment in Three Classes of Endogenous Growth Models," Bulletins 7474, University of Minnesota, Economic Development Center.
    18. Bockstael, N. & Costanza, R. & Strand, I. & Boynton, W. & Bell, K. & Wainger, L., 1995. "Ecological economic modeling and valuation of ecosystems," Ecological Economics, Elsevier, vol. 14(2), pages 143-159, August.
    19. Toledo, David & Briceño, Tania & Ospina, German, 2018. "Ecosystem service valuation framework applied to a legal case in the Anchicaya region of Colombia," Ecosystem Services, Elsevier, vol. 29(PB), pages 352-359.
    20. Robert Shum, 2014. "China, the United States, bargaining, and climate change," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 14(1), pages 83-100, March.


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:988. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.