The idea of the contingent valuation method for measuring the value of non-marketed goods, proposed by Ciriacy-Wantrup in 1947, found its first application in a study by Davis (1963) at the beginning of 1960's on valuing recreational benefits of forests. Since then, contingent valuation and related methods like choice experiments have become a standard part of forest economists' toolkits. During their history, the pros and the cons of methods of valuing non-marketed benefits of nature have been intensively discussed in the literature. One of the questions, considered also in earlier editorials of this Journal, is what are we actually measuring.
Reallocating land from timber production to nature conservation has been a prominent trend in northern Europe and North America during recent decades. On many occasions, this has caused public debates, the spotted owl controversy in western United States being a well known example. In Finland, the implementation of the European Union's nature conservation programme, Natura 2000 Network, at the end of 1990's resulted in a heated public controversy.
Public debate and the arguments presented went out of all proportion as compared to the actual proposal. In the Natura 2000 Network proposal, only 5 % of the conserved area were newly protected sites, and newly protected forestland area was 0.15 % of the productive forest land area in Finland. Still, it was claimed that the programme would severely restrict forestry, endanger the profitability of forest industries and violate private forest owners' property rights. The Ministry of Environment received over 14.000 written complaints from private landowners concerning the conservation areas proposed.
After the conflict, social scientists have tried to find out what actually went wrong. The most important reason seems to have been the fact that the environmental administration neglected land owners by leaving them completely out of the process of policy planning and designing the areas to be conserved. A contingent valuation survey on Finnish households' willingness to pay for increased conservation in the form of the Natura 2000 Network (Pouta et al. 2002), indicated that the planning process itself had a significant negative effect on Finnish households' welfare. Those respondents who were offered a nature conservation programme similar to Natura 2000 Network, but without the Natura label were willing to pay five times more for the increase than those who received the conservation project within the Natura 2000 Network. According to a choice experiment survey (Li et al. 2001), the proposal would have actually lost a majority vote in Finland.
Preliminary results of a survey conducted in year 2002 on increasing biodiversity conservation in forests in Southern Finland indicate much more positive attitudes towards nature conservation (Lehtonen et al. 2002) than the survey on Natura 2000 Network just a few years earlier. One reason for this may be that preferences have changed. Partly, the results may reflect the fact that the later survey is very explicit on the effects of the programme on biodiversity, which seem to matter more than the hectares conserved. However, one reason may also be that this time the planning has not got the bad publicity of Natura 2000 Network, at least not yet.
Since Fischhoff and Furby (1988), researchers have been aware of the fact that the context is an important determinant of willingness to pay for public goods. However, at least in Finland, this does not seem to have been common knowledge to environmental groups or policy planners. On the other hand, maybe it is exactly these kinds of features of non-market valuation techniques that cause environmental groups and even many academic natural scientists and ecologists to view the methods and mindset of economists with grave suspicion. Non-market valuation methods seem somehow to dilute the value of nature, which should be preserved whatever the costs.
However, disregarding the effects of policy planning, or the perceived property rights of the landowners, is not going to make conservation policies more effective. In fact, if conservation controversies decrease citizens' utility given the proposed level of conservation, they decrease willingness to pay, and make it more difficult to justify conservation measures. Other things being equal, as customers we are more likely to enter a shop with good, reliable service, and a friendly smile can save the day, even if we decide not to make the purchase that time. This is how the human mind works: why should it be any different in the market for environmental goods and services?
Ciriacy-Wantrup SV (1947) Capital returns from soil-conservation practices. Journal of Farm Economics 29: 1181-1196.
Davis RK (1963) The value of outdoor recreation: an economic study of the Maine woods Ph. D. thesis, Harvard University. Fischhoff B, and Furby L (1988) Measuring values: a conceptual framework for interpreting transactions with special reference to contingent valuation of visibility. Journal of Risk and Uncertainty 1: 147-184.
Lehtonen E, Kuuluvainen J, Pouta E, Rekola M, and Li C-Z (2002) Stated preferences of the forest conservation in southern Finland. Scandinavian Forest Economics (forthcoming)
Pouta E, Rekola M, Kuuluvainen J, Li C-Z, and Tahvonen O (2001) Willingness to pay in different policy-planning methods: Insights into respondents' decision-making processes. Ecological Economics 40: 295-311.
Li C-Z, Kuuluvainen J, Pouta E, Rekola M, Tahvonen O (2001) Using choice experiments to value Natura 2000 nature conservation program in Finland. Helsingin yliopisto - University of Helsinki Metsäekonomian laitos - Department of Forest Economics Tutkimusraportteja - Reports 18.