Journal of Economic Perspectives
ISSN 0895-3309 (Print) | ISSN 1944-7965 (Online)
Contingent Valuation: From Dubious to Hopeless
Journal of Economic Perspectives
vol. 26,
no. 4, Fall 2012
(pp. 43–56)
(Complimentary)
Abstract
Approximately 20 years ago, Peter Diamond and I wrote an article for this journal analyzing contingent valuation methods. At that time Peter's view was that contingent valuation was hopeless, while I was dubious but somewhat more optimistic. But 20 years later, after millions of dollars of largely government-funded research, I have concluded that Peter's earlier position was correct and that contingent valuation is hopeless. In this paper, I selectively review the contingent valuation literature, focusing on empirical results. I find that three long-standing problems continue to exist: 1) hypothetical response bias that leads contingent valuation to overstatements of value; 2) large differences between willingness to pay and willingness to accept; and 3) the embedding problem which encompasses scope problems. The problems of embedding and scope are likely to be the most intractable. Indeed, I believe that respondents to contingent valuation surveys are often not responding out of stable or well-defined preferences, but are essentially inventing their answers on the fly, in a way which makes the resulting data useless for serious analysis. Finally, I offer a case study of a prominent contingent valuation study done by recognized experts in this approach, a study that should be only minimally affected by these concerns but in which the answers of respondents to the survey are implausible and inconsistent.Citation
Hausman, Jerry. 2012. "Contingent Valuation: From Dubious to Hopeless." Journal of Economic Perspectives 26 (4): 43–56. DOI: 10.1257/jep.26.4.43Additional Materials
JEL Classification
- Q26 Recreational Aspects of Natural Resources
- Q51 Valuation of Environmental Effects