Values, economic valuation, and the assessment of environmental and economic change

This chapter begins by highlighting differences between deontological and anthropocentric economic approaches to valuation and shows that in special circumstances they can have similar conservation consequences. Difficulties in distilling social preferences from individual valuations are identified and major (often neglected) limitations of revealed preference and stated preference methods for evaluating environmental changes are specified. This is followed by an assessment of economic welfare criteria for determining collective choice, for example, the Kaldor–Hicks criterion (also called the potential Paretian improvement criterion) and the Bergson welfare function. The worth of several macroeconomic indicators of changes in human well-being (such as changes in GNI per capita, HDI) is assessed in relation to environmental change. The shortcomings for valuation purposes of local and regional economic impact analysis are revealed. The conflict between this impact method of economic valuation and that of ‘traditional’ welfare economics is highlighted. It seems likely that the choices of most measures and methods of economic valuation are significantly influenced by social embedding.