EPA-230-12-85-028

September 1985

METHODS DEVELOPMENT FOR ENVIRONMENTAL

CONTROL BENEFITS ASSESSMENT

Volume X

EXECUTIVE SUMMARY

by

David S. Brookshire and Thomas D. Crocker (Project Director)

Ralph C. d\'Arge, and William D. Schulze

University of Wyoming

Laramie, Wyoming 82071

Shaul Ben-David and Ronald G. Cummings

University of New Mexico

Albuquerque, New Mexico 87131

Allen V. Kneese

Resources for the Future, Inc.

Washington, D.C. 20036

Edna Loehman

SRI International, Inc.

Menlo Park, California 94025

USEPA Grant \# R805059-01-0

Project Officer

Dr. Alan Carlin

Office of Policy Analysis

Office of Policy, Planning and Evaluation

U.S. Environmental Protection Agency

Washington, D.C. 20460

OFFICE OF POLICY ANALYSIS

OFFICE OF POLICY, PLANNING AND EVALUATION

U.S. ENVIRONMENTAL PROTECTION AGENCY

WASHINGTON, D.C. 20460

OTHER VOLUMES IN THIS SERIES

Volume 1, [Measuring the Benefits of Clean Air and Water]{.underline},
EPA-230-12-85-019.

This volume is a nontechnical report summarizing recent research for EPA
on methods development for better estimates of economic benefits from
environmental improvement. The report presents the basic economic
concepts and research methods underlying benefits estimation as well as
a number of case studies, including several from other volumes of this
series. Finally, it offers insights regarding the quantitative benefits
of environmental improvement.

Volume 2, [Six Studies of Health Benefits from Air Pollution
Control]{.underline}, EPA-230-12-85-020.

This volume contains six statistical epidemiology studies. They show
that large associations between health and current levels of air
pollution are not robust with respect to the statistical model
specification either for moratality or morbidity. They also find that
significant relationships, mostly small, occasionally appear.

Volume 3, [Five Studies on Non-Market Valuation Techniques]{.underline},
EPA-230-12-85-021.

This volume presents analytical and empirical comparisons of alternative
techniques for the valuation of non-market goods. The methodological
base of the survey approach - directly asking individuals to reveal
their preference in a structured hypothetical market - is examined for
bias, replication, and validation characteristics.

Volume 4, [Measuring the Benefits of Air Quality Changes in the San
Francisco Bay Area: Property Value and Contingent Valuation
Studies]{.underline}, EPA-230-12-85-022.

This volume replicates a property value study conducted in the Los
Angeles Basin for the San Francisco Bay area. A taxonomy series of air
quality types and socioeconomic typoligies are defined for cities in the
area to examine how property values vary with pollution levels. The
contingent valuation method surveys individuals, directly asking their
willingness to pay for changes in air quality. The survey method yields
benefit values that are about half the property value benefits in both
the Bay area and Los Angeles.

Volume 5, [Measuring Household Soiling Damages from Suspended
Particulates: A Methodological Inquiry]{.underline}, EPA-230-12-85-023.

This volume estimates the benefits of reducing particulate matter levels
by examining the reduced costs of household cleaning. The analysis
considers the reduced frequency of cleaning for households that clean
themselves or hire a cleaning service. These estimates were compared
with willingness to pay estimates for total elimination of air
pollutants in several U.S. cities. The report concludes that the
willingness-to-pay approach to estimate particulate-related household
soiling damages is not feasible.

Volume 6, [The Value of Air Pollution Damages to Agricultural Activities
in Southern California]{.underline}, EPA-230-12-85-024.

This volume contains three papers that address the economic implications
of air pollution-induced output, input pricing, cropping, and location
pattern adjustments for Southern California agriculture. The first paper
estimates the economic losses to fourteen highly valued vegetable and
field crops due to pollution. The second estimates earnings losses to
field workers exposed to oxidants. The last uses an econometric model to
measure the reduction of economic surpluses in Southern California due
to oxidants.

Volume 7, [Methods Development for Assessing Acid Deposition Control
Benefits]{.underline}, EPA-230-12-85-025.

This volume suggests types of natural science research that would be
most useful to the economist faced with the task of assessing the
economic benefits of controlling acid precipitation. Part of the report
is devoted to development of a resource allocation process framework for
explaining the behavior of ecosystems that can be integrated into a
benefit/cost analysis, addressing diversity and stability.

Volume 8, [The Benefits of Preserving Visibility in the National
Parklands of the Southwest]{.underline}, EPA-230-12-85-026.

This volume examines the willingness-to-pay responses of individuals
surveyed in several U.S. cities for visibility improvements or
preservation in several National Parks. The respondents were asked to
state their willlingness to pay in the form of higher utility bills to
prevent visibility deterioration. The sampled responses were
extrapolated to the entire U.S. to estimte the national benefits of
visibility preservation.

Volume 9, [Evaluation of Decision Models for Enviromental
Management]{.underline}, EPA-230-12-85-027.

This volume discusses how EPA can use decision models to achieve the
proper role of the government in a market economy. The report recommends
three models useful for environmental management with a focus on those
that allow for a consideration of all tradeoffs.

DISCLAIMER

This report has been reviewed by the Office of Policy Analysis, U.S.
Envirormental Protection Agency, and approved for publication. Mention
in the text of trade names or commercial products does not constitute
endorsement or recommendation for use.

ABSTRACT

The studies summarized by this volume represent original efforts to
construct both a conceptually coherent and empirically verifiable set of
methods for assessing environmental quality improvement benefits. We
have found that a conceptually and empirically simpler method than
traditional\--the survey method\--holds great promise for expanding the
range of environmental phenomena that benefit-cost analysis can reliably
capture. We also demonstrate that some environmental phenomena,
particularly those involving the human health and ecosystem effects of
pollution, will require the use of more complex models and estimation
procedures if consistently reliable measures intended for policy
guidance are to be obtained.

A single empirical finding pervades the nine volumes reviewed here: the
benefits of air pollution control appear to be sufficiently great to
warrant the exercise of great caution in implementing proposals to relax
current ambient air quality standards. Contrary however, to the thrust
of much existing clean air legislation, air pollution-induced health
effects, with the possible exception of chronic morbidity, cannot at
this time be identified as the major benefit of air pollution control.
The weight of our evidence leads us to conclude that the greater
proportion of the benefits of control now resides in aesthetic
improvements, maintenance of the life-support and direct
pleasure-material provision capacities of ecosystems, and the reduction
of damages to artifacts and materials.

[Introduction]{.underline}

As we move into the 1980\'s, the heart of the environmental concerns of
the 1960\'s and 1970\'s continues to beat, but other major difficulties
now burden us. The economy seems weak, inflation is high, and the
identification and application of corrective policies has been confused.
In this adverse economic atmosphere, there is heightened interest in the
question of whether the costly environmental regulations previously put
in place are, in fact, worthwhile. To try to shed some light on this
question, appeal is often made to an economic evaluation method called
benefit-cost analysis.

Benefit-cost analysis was developed initially to provide a useful
picture of the costs and gains associated with investments in water
development projects. In recent years, the most striking development in
benefit-cost analysis has been its applications to the economic and
environmental consequences of new technologies and scientific and
regulatory programs. These new applications of the analysis bristle with
quantification, analytical, and ethical issues of which proponents of
continuing expansions in its use do not always seem aware. For the last
several years, so as to broaden the domain of benefit- cost applications
from which policymakers may obtain consistently dependable policy
guidance, researchers located principally at Resources for the Future
and the Universities of New Mexico and Wyoming have been grappling with
these issues. The series of volumes summarized here reports the
advancements in analytical and empirical techniques made by some of
them. As in an earlier series of volumes \[Crocker-Schulze, et al.
(1979); Brookshire, et al. (1979); Adams, et al. (1979); Cropper, et al.
(1979)\] by many of the same authors, air pollution is the environmental
problem of research focus. Although they have made real and substantial
progress, the research program they and other economists have undertaken
is far from completed. The discriminating policymaker must continue to
be knowledgeable about and highly sensitive to the analytical,
empirical, and the ethical limits of the state-of-the-art.

A single empirical finding pervades these ten volumes: despite the
location and/or time-specific nature of the estimates, the benefits of
air pollution control appear to be sufficiently great to warrant the
exercise of great caution in implementing proposals to relax current
ambient air standards. Contrary to the thrust of much existing clean air
legislation, air pollution- induced health effects, with the possible
exception of chronic morbidity, cannot at this time be identified as the
major economic benefit of air pollution control. The weight of our
evidence leads us to conclude that the greater proportion of the
benefits of control now resides in aesthetic improvements (e.g.,
atmospheric visibility), maintenarce of the life-support and direct
pleasure-material-provision capacities of ecosystems, and the reduction
of damages to human artifacts (e.g., household soiling). Our several
bases for the conclusion can be gleaned from the following brief

summaries for each of the separate volumes.

[Measuring the Benefits of Clean Air and Water]{.underline}

The first volume in the series presents a detailed overview in lay terms
of the entire body of work. This overview is buttressed by an elementary
discussion of the foundations of the research in the economic theory of
the consumer and the producer, as well as the place this and similar
recent research holds in the historical evolution of benefit-cost
analysis. The volume is not a collective enterprise; rather it is one
eminent economist\'s perspective of the usefulness and the implications
of the research reported in the other volumes.

[Six Studies of Health Benefits From Air Pollution Control]{.underline}

The six studies contained in this volume all aim to increase our
understanding of the health benefits of air pollution control. The
calculation of health benefits requires both an understanding of how
people themselves value health affects in dollar terms (correctly
measured by the willingness-to-pay concept) and an understanding of air
pollution-induced health effects. Much progress has been made with
respect to the former problem. However, the link between air pollution
and human health remains problematic. Two approaches are available for
determining the health affects of air pollution. First, animal
experiments or, rarely, human experimentation can provide direct
evidence in a controlled situation. However, extrapolation from animal
to human populations is difficult and possibly unconvincing given that
many human exposures to air pollution occur over periods of decades as
opposed to the exposure periods of months possible in the laboratory.
The second approach is to analyze data on human health affects taken
from the real world, uncontrolled environment, hoping that careful
statistical analysis will allow one to account for all of the important
factors determining human health.

This latter approach, statistical epidemiology, is the principal focus
of this volume.

The first three studies attempt to determine the association between air
pollution and mortality. One study examines evidence from data on
aggregate mortality rates in sixty U.S. cities and points out the
extraordinary difficulty in obtaining a stable, robust statistical
association between current air pollution levels and current mortality
rates. The conventional wisdom holds that a large positive relationship
exists between particulates in air and mortality. The study demonstrates
that this relationship is highly unstable depending on specification of
the statistical model used in the analysis. A second mortality study
uses a small sample of data on individual ages at death, taken from the
Survey on Income Dynamics (1972), to see if, by using disaggregate
information on individuals, a more stable and convincing relationship
can be obtained. In this small sample of individuals, no significant
statistical relationship is obtained between current air pollution
levels and longevity. A final mortality study is a very preliminary
description of an ongoing research effort using an excellent and highly
detailed data set on twins collected by the National Academy of Sciences

\[Hrubec and Neel (1978)\]. Of the three studies relating to mortality,
this one has perhaps the best data and should be capable of detecting
even small effects. In fact, a strong but small statistical correlation
is shown between air pollution and prior symptoms of cardiovascular
disease such as chest pain. An association with coronary heart attack is
small and not as strong.

Two of the studies examine morbidity. One focuses on chronic illness
while another considers acute illness. Both studies use Survey on Income
Dynamics data and data on current air pollution levels. The relationship
between chronic illness and air pollution is shown to be potentially
large but is again very sensitive to model specification. Since little
[a]{.underline} [priori]{.underline} knowledge is available on
appropriate model specification, it is impossible to choose between a
specification which yields a large impact and one which yields no
significant impact. The study of acute health impacts shows, using a
particular specification, a small positive association of marginal
statistical significance between sulfur oxide and lost work days.

In summary, the five statistical studies presented in this volume show:
(1) large associations between health and current levels of air
pollution are not robust with respect to statistical model specification
either for mortality or morbidity; and (2) statistically significant
relationships, mostly small, do occasionally appear.

The final study considers the type of data which might resolve
controversies over the magnitude of air pollution health affects. The
principal conclusion is that, before a very expensive primary data
collection effort is undertaken, it would be better to continue
statistical modeling of human health affects working with existing data
sets, some of which are of fairly high quality. However, all work of
this sort should henceforth be built upon explicit physiological and
economic models that specify the parameter space. The results of these
secondary data studies can then be used to guide the specification of
future primary data collection efforts.

As a final remark which should not be overlooked in light of the rather
ambiguous evidence presented in this health effects volume, all studies
to date have only looked for health affects associated with current air
pollution exposures, [not]{.underline} at any possible association
between current health affects ard long term cumulative air pollution
exposures. Thus, it is premature to draw any final conclusions from
existing epidemiological evidence concerning human health and air
pollution exposures.

[Five Studies on Non-Market Valuation Techniques]{.underline}

Two approaches are generally considered for estimating the value of
nonmarketed goods. The most widely accepted approach has been the use of
hedonic prices, where it is assumed, for example, that either wages or
housing valued reflect spatial differences in the quality of air
resources. Alternatively, using survey techniques, one may directly ask
households or individuals to state their willingness-to-pay for
alternative levels of air quality. The necessity for an alternative
approach to the hedonic lies in the spatial nature of air resources. In
a well developed housing market, the hedonic

approach is appropriate. However, consider the case of a remote and
unique scenic vista, valuable to recreators, which is threatened by air
pollution from a proposed coal fired power plant\--a typical situation
in the western United States. Although it is possible, in principle, to
impute the value of clean air and visibility from the relative decline
in local visitation which might follow construction, information prior
to construction on the value of visibility at the site is needed for
socially optimal decisionmaking. The hedonic approach is unavailable
both because the scarcity of local population makes use of wage or
property value data impossible and because scenic vistas may themselves
be unique.

Because of its hypothetical nature, the empirical implementation of the
survey approach raises questions of bias, replicability, validation by
other techniques, and appropriateness for benefit-cost analysis. Before
incorporation of survey approach results into benefit-cost analyses,
these questions require answers. The research reported in this volume
tries to provide them.

The first paper of the volume evaluates the results of six recent
experiments which have utilized the survey approach for estimating the
value of a nonmarketed environmental attribute. Where possible, the
issue of replication of results is addressed. The range of environmental
attributes valued in the six experiments was quite large, including
noise, wildlife, strip mining, and visibility. Four out of six attempted
some internal methodological cross check. Biases, within the survey
approach, do not appear to have been an overriding problem. However, the
studies indicate the need to establish a precise market\--hypothetical
in nature\--for the results of a survey approach to be interpretable. to
be interpretable.

A second paper takes up the central issue of validating the survey
approach. Although the studies reviewed in the previous paper suggested
that the survey approach is internally coherent and consistent with the
theory of the consumer, and that its results are replicable, no external
validation had been undertaken whereby a comparative analysis using
another approach independent of the survey had been conducted. Thus,
this second paper reports an experiment designed to validate the survey
approach by direct comparison to a hedonic property value study.

The Los Angeles metropolitan area was chosen for the experiment. Twelve
census tracts were chosen for sampling wherein 290 household interviews
were conducted during March 1978. Respondents were asked to provide
their willingness-to-pay for an improvement in air quality at their
current location. Air quality was defined as poor, fair, or good based
both on maps of the region (the pollution gradient across the Los
Angeles Metropolitan Area is both well defined and well understood by
local residents) and on photographs of a distant vista representative of
the differing air quality levels. Households in poor air quality areas
were asked to value an improvement in fair air quality while those in
fair areas were asked to value an improvement in good air quality.
Households in good air quality areas were asked their willingness-to-pay
for a region-wide improvement in air quality.

For comparison to the survey responses, data was obtained on 634 single
family homes sales which occurred between January 1977, and March 1978,
exclusively in the twelve communities used for the survey analysis.
Households, in theory, will choose to locate along a pollution-rent
gradient, paying more for homes in clean air areas. However,
[ceteris]{.underline} [paribus]{.underline}, we show that the annualized
cost difference between homes in two different air quality areas (the
rent differential for pollution) will in theory exceed the annual
willingness-to-pay for an equivalent improvement in air quality for a
household in the lower air quality area. Thus, the rent differential of
an air quality improvement inferred from hedonic analysis of property
value data must exceed estimates of household willingness-to-pay
obtained from survey responses, if the survey responses are a valid
measure of the value of air quality improvements. The theoretical model
described predicts that survey responses will he bounded below by zero
and above by rent differentials derived from the estimated hedonic rent
gradient. The empirical results do not allow the rejection of this
hypothesis, thereby providing evidence that survey methods are a valid
means of determining the value of nonmarket goods.

In a third paper, the reasons why the survey approach is often a
superior means of generating data for valuing non-market goods are
advanced. Specifically the advantages of the hypothetical nature of the
survey technique are addressed. We argue that the survey technique will
often be more consistent with the precepts of economic theory than is
the use of observed behavior, that hypothetical responses are properly
viewed as conditional rather than as fictional, and that the survey
technique is quite often the only technique which can address future
events without going through the costly exercise of
\"learning-by-doing\" or \"trial-and-error.\"

The fourth paper presents the main empirical results of the volume: it
is an examination of the benefits and costs of the national ambient air
quality standards as applied to all residential areas of Los Angeles,
Orange, Riverside, and San Bernardino Counties in southern California.
The results set forth are based on the qualified arguments presented in
the previous three papers which suggest that both the survey approach
and the property value approach are valid techniques of benefit-cost
analysis. Based upon modeling contained in the region\'s [Air Quality
Management Plan]{.underline}, achievement of the ambient standards in
1979 would have required emission reductions of the 974 tons/day, 5963
tons/day and 503 tons/day respectively of reactive hydrocarbons, carbon
monoxide, and nitrogen oxides. Only the share of these emission
reductions attributable to onroad mobile source control was evaluated.

Benefits were calculated through an examination of the housing value
differentials attributed in the second paper to air quality differences.
Achieving the ambient air quality standards was consistent with
improving the \"fair\" and \"poor\" air quality regions to the \"good\"
category. In effect, this constituted an approximate 30 percent
improvement in the fair areas and a 45 percent improvement in the poor
air quality areas. Corresponding benefits were estimated to fall between
1.6 ard 3.0 billion dollars per year, indenendent of any benefits
accruing to protection of agriculture and ecosystems. The share of these
benefits associated with onroad mobile source control was

estimated to be 1.36-2.55 billion dollars.

Cost estimates were developed from existing data sources, primarily from
manufacturer statements and government publications. Given the variation
in control cost options and the uncertain nature of the cost figures, it
was found that onroad mobile source controls consistent with a policy
sufficient to achieve the 1979 ambient standards would involve a cost of
between .61 and 1.32 billion dollars, with a best estimate of 1.02
billion dollars.

The benefits from onroad mobile emissions reductions consistent with
satisfying the ambient standards are of the same order of magnitude as
the cost estimates. This implies that the ambient air quality standards
have some economic justification, though the confidence intervals for
the benefit and cost calculations prevent one from accepting the
controls outright. In any case, onroad mobile controls consistent with
the air quality standards cannot be rejected as economically
inefficient. Therefore, although the midrange benefit estimate exceeds
the midrange cost estimate, the situation is best characterized as
uncertain. Further, the static analysis performed does not answer
significant questions concerning the behavior of the benefit and cost
functions over time. Stronger statements could only be made in the
context of a much more detailed analysis of the cost side of control
efforts.

The final chapter of the volume reports some exploratory estimates of
the effect of changes in air pollution levels on offered wage rates.
This approach is appropriate for a national benefits study where it is
assumed that higher wages must be paid, everything else held equal, to
induce people to live in polluted communities. Estimates using this
technique were made for two cities: Denver, Colorado, and Cleveland,
Ohio.

For Denver, meeting the national secondary standards for TSP results in
a reduction in the offered real wage, from \$4.1758/hr. to \$3.9626/hr.
Multiplying this difference of \$.2136/hr. by the number of persons
affected times 2000 hours yields an estimated annual benefit for Denver
of \$92,968,935. A similar calculation for Cleveland reveals that
meeting the national secondary [air]{.underline} quality standards
causes the real wage to fall from \$3.8756/hr. to \$3.7693/hr. implying
a benefit of \$81,360,489. Note that benefits per
[household]{.underline} [head]{.underline} in the two cities are
\$426.35 for Denver and \$2l2.60 for Cleveland. This preliminary
research suggests the wage hedonic technique is viable for estimating
air pollution control benefits for standard metropolitan areas across
the nation.

A national benefit estimate for air pollution control based on consumer
perceptions as reflected in wages and property values appears possible.
Further, the use of the survey approach to assess the value of perceived
benefits, such as visibility improvements, not captured by wages and
property values appears feasible.

[Measuring the Benefits of Air Quality Improvements in the San Francisco
Bay Area]{.underline}

This volume reports the results of an attempt to repeat the survey and

property value methods developed and set forth in the second paper of
the previous volume. The study locale, however, is San Francisco rather
than Los Angeles.

While the intention was to make the two studies as comparable as
possible, there were some inevitable differences in both the situations
and in the data available that made some adaptation necessary. For
example, in southern California, as suggested, the mild, year-round
climate encourages a variety of ocean related recreational activities.
Beach front activity is highly valued and beach front property has
generally been densely developed. In the San Francisco Area, the bay is
the body of water most accessible to major population centers; however,
the bay does not offer the same recreational experiences found along the
coast of the Los Angeles area. In the Bay Area, ocean front property is
located over the ridge of the Santa Cruz Mountains and is less
accessible to the maijor employment centers. As a result, much of the
beach front property maintains a rural atmosphere.

Accordingly, it was not necessary to adopt the paired communities
approach of the Los Angeles study to control for access to the beach.
This made a more nearly random sampling approach possible which has the
advantage of providing a better basis for extrapolating the sample
results to the entire area.

Another principal difference between the areas is air quality. Smog is
considered to be the major problem in both regions. The city of San
Francisco itself has a less severe air pollution problem than Los
Angeles. However, some cities included in the region (San Jose and Los
Gatos, for example) suffer from severe pollution problems.

Thus while the San Francisco region provides suitable contrast in air
quality from place to place, still, air quality degradation is not in
general so severe and, one would expect, also possibly not so well
defined in people\'s minds. Accordingly, it was judged to be an
excellent place to see whether the Los Angeles techniques would hold up
in a different situation.

Data were gathered or constructed for 2500 households in the region.
These same households also were subsequently used for interviewing. In
addition, data were collected on about 5000 residential property sales
in areas where these families live. When these property sales were
analyzed in a fashion similar to the Los Angeles study, it was found,
despite the differences between the two locales, that similar
differences in air quality levels in the two locales resulted in similar
differences in housing sales prices and in survey bids per household.

[Measuring Household Soiling Damages From Suspended
Particulates]{.underline}

This volume employs a survey approach and an observed behavior aporoach
to estimate in Philadelphia, Pennsylvania, and Los Angeles, California,
the dollar value of reducing household soiling attributable to suspended
particulate air pollution. The received technical literature is reviewed
in the early part of the volume. On the basis of this review, it is
concluded

that: (i) the present state of the technical arts does not allow for
quantitative estimates of the relationship between particulate
concentration and the accumulation of dust/grime in households; in
qualitative terms, however, a particulate-soiling effect is
demonstratable; (ii) one cannot quantify, with any precision, the
relationship between outdoor particulate concentrations and indoor
concentrations; (iii) little can be said in terms of differentiating
between soiling effects from \"large\" (greater than 15 microns) and
\"small\" (less than 15 microns) particulates; and (iv) a dominant
relationship can be identified, however, between particulate levels and
soiling effects and between gaseous pollutants and materials damages.
Therefore, while one cannot quantitatively specify the soiling effects
that result from alternative particulate levels, it is at least
conceptually possible to look to household soiling damages via observed
responses in different pollution (particulate) environments.

As measured by an observed behavior (frequency of cleaning) approach to
estimating household cleaning costs, annual household soiling damages in
the Pennsylvania-New Jersey-Delaware area range from \$762 per household
(1980 dollars) to \$1,386 per household in \"do-it-yourself\" households
as air particulate concentrations range from 40 microns per cubic meter
(u/m3) to 123 u/m3; such damages for households that hire others to
perform household cleaning tasks range from \$1,531/household to
\$2,683/household in the same range for particulate concentrations.
Marginal household soiling damages attributable to air particulates are
estimated at \$6.63/household per u/m3 per year.

A survey technique similar in conception and rationale to the Los
Angeles and San Francisco surveys reported in previous volumes was found
to be an infeasible approach to estimating particulate related household
soiling control benefits unless particulates are totally eliminated.
Average annual valuations related to the total elimination of air
particulates were some \$7.32/household in the Los Angeles area and
\$2.68/household in the Philadelphia area. in the Los Angeles area and
\$2.68/household in the Philadelphia area.

The results of the survey indicated that individuals in the Los Angeles
and Philadelphia areas were willing to pay a maximum of \$32.83/month
and \$12.59/month, respectively, for the elimination of all air
pollutants. These total \"bids\" were allocated to pollution effects as
follows: 66 - 76% health; 13 - 18% visibility; and 9 - 16% household
soiling. Although independently performed from the Los Angeles study
reported in an earlier volume, this estimate is of the same order of
magnitude as the earlier estimate.

The volume concludes that only an observed behavior (frequency of
cleaning) approach to estimating suspended particulate-induced household
soiling damages is likely to be effective in terms of providing
logically consistent and replicable estimates it is suggested that an
approach of this sort must define cleaning frequency in terms of
multi-task household cleaning operations \-- such as \"light\" cleaing
and \"deep\" cleaning \-- rather than in terms of specific cleaning
tasks. Second, refined estimates for time spent per operation must be
obtained. Third, stratified (over income) samples must be used. Finally,
data relevant for the value of household labor must be

obtained for [various]{.underline} posited changes in household cleaning
time.

[The Value of Air Pollution Damages to Agricultural Activities in
Southern]{.underline}.

[California]{.underline}

In spite of an enormous literature on the phytotoxic effects of air
pollution, few research efforts have been directed at the implications
of these effects for agricultural markets. Of those few studies that do
exist, nearly all do no more than multiply the results of field surveys
or experimental studies of yield reduction by an invariant current price
in order to estimate the value of air pollution-induced losses, e.g.,
Thompson and Taylor (1969), Benedict, et al. (1973), Millecan (1976).
The adjustments in output and input prices and cropping and location
patterns that agricultural markets and growers make in response to
altered levels of air pollution have been neglected. The three essays in
this volume weigh some of the economic implications of these air
pollution-induced adjustments for southern California agriculture.

The initial essay uses a mathematical programming technique to assess
air pollution-induced losses to fourteen of southern California\'s most
highly valued annual vegetable and field crops. This technique allows
the estimation of the losses [in]{.underline} consumer surpluses and
grower quasi-rents occurring after growers have been permitted to alter
cropping patterns and locations in response to changes in ambient
concentrations of photochemical oxidants. As we have used it, however,
the technique falls somewhat short of capturing all economically
relevant features of the impacts of air pollution upon agricultural
markets. Among other things, such as the impact of air pollution on
intertemporal agricultural investment patterns, it forces us to
disregard losses that inputs employed but not owned by the grower may
suffer. In addition, as we have used it, the technique embodies an
assumption that air pollution has no influence upon the uncertainties
that growers and the inputs they employ face.

The second essay provides estimates of the losses in earnings that
workers in citrus groves bear from the oxidant air pollution to which
they are exposed in their work environments. Although citrus is not
among the fourteen crops to which the mathematical programming technique
is applied, the greater than two percent earnings losses that air
pollution imposes upon citrus grove workers gives cause to wonder
whether labor for other agricultural crops might suffer similarly. If
so, these losses would be in addition to those weighing upon consumers
and growers.

The final essay is the only one of the three which does not present
pecuniary equivalents of some facet of the losses that the air pollution
originating from southern California urban and industrial activities
forces upon the area\'s agriculture. Instead, after a brief discussion
of why uncertainty is costly to the agricultural sector, we provide
empirical evidence of a moderately strong positive association between,
a frequently employed measure of the risks faced by agriculturists and
increases across space and time in southern California oxidant air
pollution.

The research efforts displayed in these three essays neither embrace all
oxidant air pollution-impacted crops grown in southern California nor do
they capture all plausible facets of the impacts of oxidants upon the
input and output markets for these crops. For example, losses in
consumer surpluses and producer rents from reductions in citrus yields
are not included, and economic losses generated by any yield
uncertainties that oxidants cause are absent. Despite these blanks, and
assuming that the crops and inputs we have studied have a reasonably
representative distribution of air pollution sensitivities, our informed
yet conservative judgment is that the levels of ambient oxidants
prevailing in southern California in the mid 1970\'s were responsible
for at least a four percent reduction in the total economic surpluses
generated by the area\'s agricultural activities.

[Methods Development for Assessing Acid Precipitation Control
Benefits]{.underline}

There has recently been increasing awareness that some environmental
pollutants, because of the broad geographical scope of their effects,
impose not only the direct affronts to human life and property of the
traditional urban pollutants, but also attack the pleasures and the life
support services that the earth\'s ecosystem scaffolding can provide.
Acid precipitation might be one of these pollutants. The basic purpose
of this volume is to suggest those types of natural science research
that would be most helpful to the economist faced with the task of
assessing the economic benefits of controlling acid precipitation.
However, while trying to formulate these suggestions, inadequacies in
the supporting material the ecologist could offer the economist and in
what the economist could do with whatever the ecologist offered him
became apparent. Therefore part of the research effort was devoted to
initial development of a resource allocation process framework for
explaining the behavior of ecosystems that can be integrated into a
broadened benefit-cost analysis which captures traditional ecological
concerns about ecosystem diversity. Our intent has been to make a start
at providing a basis for the ecological and the economic disciplines to
ask better-defined questions of each other.

Some reasonably well-defined questions have nevertheless been asked and
tentative answers have been provided for a few of them. In particular,
most of the existing techniques for assessing the benefits of pollution
control require knowledge of the [magnitude]{.underline} of the response
of the entity of interest to variations in the quantity of pollution to
which it is exposed. The entity that is the oblect of interest in these
estimates of response surfaces or functions must itself have value to
humans or it must contribute in some [known]{.underline} fashion to
another entity having value to humans. Otherwise, the economist is
unable to perform his tasks. Additional properties that response surface
research must have to be most valuable for the empirical implementation
of the techniques of benefit-cost analysis are outlined in the text.

The simplest of these available techniques is applied in a first
exercise at using known response surfaces to assess the benefits of
controlling acid precipitation in Minnesota and the states east of the
Mississippi River. Current annual benefits of control are estimated to
be no more than \$5 billion in 1978 dollars, with reductions in
materials damages constituting the largest

portion of these benefits and reductions in damages to forest ecosystems
the next largest. The reader must not treat this estimate as definitive,
although the ordering of current annual control benefits by sector is
highly plausible.

The known response surfaces used to construct the above estimate
sometimes displayed two properties that could impart \"all-or-nothing\"
and "now-or-never" features to the acid precipitation control decision
problem. These two features arise because the marginal benefits of
[reducing]{.underline} acid precipitation appear to be increasing over a
substantial interval of increasing pH values, and because the effects of
acid precipitation upon ecosystem buffering capacities are less than
fully reversible, both technically and economically.

[Visibility in the National Parks]{.underline}

This study was designed to improve the state-of-the-art measuring the
value of atmospheric visibility and to provide some actual estimates of
that value for the Grand Canyon and the surrounding region. A survey
technique similar in concept to, but different in detail from, the Los
Angeles and San Francisco studies was employed to acquire the requisite
data. During the summer of 1980, over six hundred people in Denver, Los
Angeles, Albuquerque and Chicago where shown sets of photographs
depicting both clear conditions and regional haze. The photographs were
taken in Mesa Verde, Zion and Grand Canyon National Parks and
represented \"poor,\" below average," "average," "above average,\" and
\"excellent\" visibility. Our calculations suggest that complete
decontrol of SO~2~ emissions by projected power plants in the region in
1990 would result in a decrease in typical summer visibility from that
which was represented in the photographs as \"average\" visibility to
that which was represented as \"below average\" visibility. Two-thirds
of the survey participants were asked how much they would be willing to
pay in higher electric utility bills to preserve the current average
condition\--middle picture\--rather than allow visibility to
deteriorate, on the average, to the next worse condition as represented
in the photographs of the Grand Canyon or of the region (an estimate of
total preservation value). They were also asked about their willingness
to pay in the form of higher monthly electric power bills to prevent a
plume from being seen in a pristine area. To represent plume blight, two
photographs were taken from Grand Canyon National Park, one with a
visible plume. One-third of the participants were asked how much they
would pay for better visibility on the day of a visit to the Grand
Canyon (an estimate of user value). The surveying had a very high
response rate (few refusals) in part because of the nature of the
interviews. Typically, interviews were conducted in the late afternoon
or early evening hours in residential neighborhoods. Due to the size of
the display boards used, most interviews were conducted on the front
lawn of the respondent\'s home. Often, both husband and wife
participated jointly in answering the questions. Individual bids ranged
from an average of \$3.72 per month in Denver to S9.00 per month in
Chicago for preserving visibility at the Grand Canyon. These average
bids were increased by \$2.89 to \$7.10 per month per household in the
four cities if visibility preservation was to be extended to the Grand
Canyon Region as a whole a represented by the photographs taken from
Mesa Verde and Zion. Prevention of a visible plume at the Grand Canyon
was worth on the

average between \$2.84 and \$4.32 per month for the four cities
surveyed.

Extrapolating these bids to the nation implies that preserving
visibility in the Grand Canyon Region is worth almost 10 billion.
dollars per year. These are the benefits of power plant SO~2~ controls
which are projected to be in place in the region by 1990. Projected
emissions with existing and currently planned levels of SO~2~ control
would [not]{.underline} produce a perceived decline in visibility in
1990 according to our calculations. Additionally, prevention of a
visible plume at the Grand Canyon is worth almost four billion dollars
to the nation. Surprisingly user values alone were about two orders of
magnitude smaller than total preservation values. This suggests that
existence values derived from knowledge that a unique natural wonder
remains preserved may be very large for the Grand Canyon Region. The
accuracy of these estimates, given the difficulty of quantifying
environmental values in dollar terms, is probably on the order of plus
or minus 50 percent. However, the methodology used must still be
considered experimental since this is the first study, to our knowledge,
to include an estimate of existence values.

As in the acid precipitation study, the incremental values people
attached to improved visibility displayed a property that could impart
an "all-or-nothing\" feature to the visibility protection decision
problem: the incremental benefits of improving visibility appear to be
increasing over a substantial range of visibility improvements. Although
unremarked upon by their authors at the time, at least two earlier and
independent studies of the value of visibility \[Randall, et al. (1974);
Rowe, et al. (1980)\] have estimated incremental benefits functions
displaying the same prcperty.

[Evaluation of Decision Models for Environmental Management]{.underline}

The theme of the final volume of the series diverges from the control
benefits estimation emphasis of the previous eight volumes. Its concern
is with the contributions alternative classes of decision models can
make to the environmental policy problem of: (a) finding the mix and
levels of these activities that are consistent with \"homeostatic\"
ecological functioning and society\'s preferences; (b) achieving this
mix and these levels; and (c) deciding the appropriate role of
government in a market economy. One section of the volume contains an
abstract discussion of models and a survey of candidate models for
environmental policy. A fuller treatment of those models thought to be
particularly relevant for environmental management problems is presented
in a subsequent section. The theoretical foundations and operational
linkages of these models are described in detail. A final section
considers the informational requirements of each type of model, the
extent to which each satisfies earlier - stated model criteria, and
promising areas for future research with respect to the application of
formal decision models to environmental management issues.

[Methodological Conclusions]{.underline}

Benefit-cost analysis is a means of ascertaining the quantity of some
numeraire (e.g., current dollars) that the gainers and losers from some
public action will consider equivalent in value to their respective
gains and losses.

The benefit-cost analyst tries to ascertain what individuals are
willing-to-pay and/or would have to be paid for the public action in a
world where markets are pervasive. His goal is to provide the public
decisionmaker with consistently reliable policy guidance. These ten
volumes have demonstrated that this goal is both simpler and more
complex to achieve than has perhaps previously been recognized.

The goal is simpler in that survey and differential property value
techniques are relatively easy and inexpensive to implement and can
readily be designed to provide estimates of national and regional, as
well as local, control benefits for a large number of classes of
pollution effects. Moreover, the survey technique, though the soiling
study in Volume V seems a counterexample, allows one to capture a
variety of classes of effects traditionally viewed as intangible (e.g.,
atmospheric visibility) or outside the realm of historical experience
(e.g., a prospective power plant in a national parks region). The
potential valuable applications of this analytically and empirically
simple yet powerful technique have probably not yet been stretched to
anywhere near their limit. Exactly where this limit lies should
nevertheless be carefully explored before embarking on a campaign to
apply the technique with much greater frequency to broader classes of
environmental problems.

Whatever the ultimate potential of the survey technique, it seems that
many simple \"old reliable\" techniques using data on observed rather
than contingent behavior are, in fact, substantially less than reliable.
The techniques have been idly appllied. The empirical consequences of
these casual, even pretheoretical, treatments of underlying biological
and economic processes are forcefully demonstrated in the aggregate
mortality study of Volume II and the agricultural damage study of Volume
VI. When using observed behavior as the data source for the benefits
assessment exercise, the biological and the economic adjustments to
pollution-induced stress that the organism can make must be taken into
account when designing the research problem. This accounting will
require the use of more complex models and estimation procedures than
have heretofore dominated if reliable measures for policy guidance are
to be obtained.

All policy relevant environmental benefits assessment issues are not
amenable to treatment by simpler, unchanged, or more complex versions of
[existing]{.underline} techniques. As was emphasized in the health
studies of Volume II, the acid precipitation study of Volume VII, and
the national parks visibility study of Volume VIII, there are conceptual
and measurement issues (e.g., irreversibilities, nonconvexities,
existence values, ecological diversity) that limit, sometimes severely,
the suitability and/or believability of existing methods. Until resolved
to a greater degree, the analytical and empirical compromises
practitioners now make could, with distrubing frequency, result in
seriously misleading estimates of pollution control benefits. Because
partial or, as with ecological diversity, complete neglect of
economically relevant facets of the environment is involved, these
misleading estimates will generally be biased dowrward: they will
underestimate control benefits.

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