land development and preservation over time and under uncertainty a review and a research agenda abstract the combination of a rising interest in sustainable natural resource use and the increasingly fractious nature of the interactions between developers and preservationists has led to renewed interest in the question of appropriate natural resource management in this paper i consider the question of land development and preservation over time and under uncertainty i first review the extant literature and then i discuss its shortcomings next i propose a research agenda which will enable us to shed light on some important management questions faced by land developers

ex ante consumer welfare evaluation in cost benefit analysis abstract public projects and policies are normally evaluated ex ante i e while consumers may still be uncertain about future prices income levels interest rates and preferences this paper extends the theory of ex ante consumer welfare evaluation by developing a 2 period model with multiple sources of uncertainty it provides insights into the influence of temporal uncertainty on the empirical measurement of ex ante willingness to pay

valuing environmental commodities some recent experiments a general model of consumer behavior is proposed to assess six recent experiments that have attempted to reveal preferences for environmental goals each experiment used a mix of both the techniques and the theory of demand for non market commodities and each was designed to estimate a non market attitude associated with the environment and to analyze potential biases in the techniques the six cases show some consistency in results the linkage within the contingent market between the environmental attribute institutional setting and the bidding instrument must be realistic and accepted by the respondent to avoid biased results possibly the most important result is the replication of results using a traditional property value study and a contingent bidding approach all evidence obtained to date suggests that hedonic studies of property values or wages travel costs and survey techniques all yield values well one order of magnitude in accuracy 41 references 2 tables

the sign and size of option value we adapt the theoretical state preference model to value nonmarket public goods under individual uncertainty about use illustrating with an assessment of willingness to pay to prevent acid rain lake damage in the northeast united states individual

ecological economics and scientific controversies lessons from some recent policy making in the eec abstract contrasting the very limited scientific evidence on the forest dieback issue with the sudden adoption of policies on air pollution decided in the frg 1983 1984 and extended to the european community 1985 we propose an interpretative framework for the real internalization process at work in what was tantamount to a social crisis for public opinion the media and political actors we conclude that open scientific controversies on some environmental issues effects causes solutions pave the way for some actors to use the issue for their own techno industrial strategies quite alien to ecological constraints in cases of very high uncertainties on impacts it becomes impossible to apply conventional social cost benefit analysis scba as an optimizing tool we propose to develop economic analysis as a negotiation language and to give pride of place to the value of learning time and to the crucial role of technological pluralism as a condition for flexibility in the future

valuing amenity resources under uncertainty does the existence of fair contingent claims markets matter abstract alternative welfare measures are evaluated as measures of the value of change in access conditions for environmental resources and it is shown that traditional hicksian surplus estimates systematically underestimate benefits it is further argued that the existence of fair contingent claims markets is a peripheral consideration in benefit estimation that state dependent payments present no significant collection obstacles not already encountered in state independent payment schemes and that risk neutral social decision making requires state dependent benefit measures for situations involving individual risk these findings imply that future research should focus on developing theoretical bounds between the expected value of state dependent benefit measures and conventional measures and that contingent valuations techniques need to be extended to measure contingent payment possibilities for changes in uncertain access conditions to environmental resources

environmental issues and economic decisions in developing countries abstract this paper explains the key role of environmental economics in incorporating environmental concerns into decision making and in facilitating the more efficient management of natural resources as a step toward sustainable development it reviews concepts and techniques for valuation of environmental impacts for use in conventional cost benefits analysis as well as key related aspects including environmental impacts of economywide policies multicriteria analysis risk and uncertainty and discount rate issues several developing country case studies are summarized which cover a range of practical valuation methods the evidence presented suggests that the valuation techniques for determining use values may be applied successfully in appropriate cases but examples involving nonuse values are rare the use of multiobjective desicion methods also needs to be explored where economic valuation is not feasible

continuous locational marginal pricing clmp this paper proposes a solution to eliminate the step change in the curve of location marginal price lmp with respect to load variation the new solution is named continuous locational marginal pricing continuous lmp or clmp because it is a continuous function with respect to load the present lmp methodology leads to a step change when a new constraint either transmission or generation becomes binding as load increases similarly there is also a step change of lmp if an existing constraint is no longer binding when load decreases the proposed clmp methodology smooths the step changes in the price curve and introduces a fourth component future limit risk flr price in addition to the present three lmp components energy price congestion price and loss price also flr is an indication of how close the present system state moves to the next constraint an algorithm is proposed in this paper to give a technically efficient method to calculate clmp and flr price two case studies are presented to demonstrate the proposed clmp methodology

an assessment of the empirical magnitude of option values for environment goods this paper provides an empirical assessment of the magnitude of option values relative to expected surplus using a model presented by larson and flacco 1992 option values and option prices are computed for both simulated data sets and actual estimates of recreation demands results indicate that option values engendered by price and income uncertainty are generally quite a small percent of expected surplus

nonuse values in benefit cost analysis benefit cost analysis bca is a pragmatic realization of the theory of welfare economics much of the research associated with bca has sought to expand the types of benefits that can be measured in dollar terms with this research there has been a progressive movement of goods and services from the set without measures usually designated as intangibles in bca terminology to the set with for example the recreational services provided by projects associated with dams for hydroelectric power or flood control were regarded as intangible until the development of the travel cost model for estimating the demand for outdoor recreation sites one of the current frontiers in bca research is associated with modeling and measuring nonuse benefits in contrast to the past efforts with intangibles research on this topic has remained controversial with few direct effects on the practice of applied welfare economics there are two principal reasons for this outcome first there has not been an accepted set of definitions for nonuse benefits and second applied studies with empirical estimates of nonuse benefits have until recently been non existent clearly these problems are related a consistent set of definitions is a necessary prerequisite for empirical implementation i will argue that consistent definitions for nonuse benefits have been elusive because the conceptual frameworks used in the literature to describe its primary components option value and existence values are not mutually consistent in the process of demonstrating this result i will describe the elements of a consistent framework for treating both use and nonuse benefits and apply it in explaining some of the problems with the available empirical estimates of nonuse benefits

a note on option value and the expected value of consumer s surplus abstract in roughly contemporaneous papers cicchetti and freeman quart j econ 1971 and schmalensee amer econ rev 1972 reached apparently conflicting conclusions about the sign taken by option value cicchetti and freeman conclude that option value is always non negative schmalensee concludes that option value may be either positive or negative depending upon the circumstances this paper reconciles these seemingly contradictory conclusions it is demonstrated that cicchetti and freeman s unambiguous conclusions concerning the sign of option value are the result of two special strong assumptions not imposed by schmalensee

employment inequality why do the low skilled work less now abstract low skilled prime age men are less likely to be employed than high skilled prime age men and the differential has increased since the 1970s i build a search model encompassing three explanations 1 automation and trade reduced the demand for low skilled workers 2 health welfare and recreational gaming computer technology reduced the supply of low skilled workers and 3 factors affecting job search such as online job boards reduced frictions for high skilled workers i find a shift in demand away from low skilled workers was the leading cause a shift in supply had little effect and search frictions actually reduced employment inequality

valuing environmental damage the purpose of this paper is to review the most important parts of the economic theory and measurement of environmental damage the paper is structured as follows section 2 introduces the willingness to pay concept and money measures such as the compensating variation and the equivalent variation this section also offers an interpretation of money measures in terms of the outcome of a referendum section 3 defines the total value of an environmental asset in order to give the reader an idea of the complexity of the money measures used in recent empirical studies section 4 and 5 introduce risk or uncertainty and discuss the choice of money measure in a risky world in section 6 three frequently employed methods for the estimation of money measures are introduced the paper ends with some remarks regarding the limitations of these approaches to decision making copyright 1990 by oxford university press

option value a conceptual overview the importance of nonuser benefits to the process of efficiently allocating natural environments was first emphasized by krutilla 15 a decade and a half ago one of the components of these nonuser benefits is option value originally introduced by weisbrod 23 as relevant for assets that might be difficult to reproduce option value has been the subject of considerable debate perhaps the simplest approach to explaining the meaning of option value is to use an example consider an individual who is uncertain whether he or she will consume the services of a particular asset in the future furthermore assume this individual is also uncertain whether the asset will be available in the future should he

option value under income and price uncertainty abstract we present a rigorous examination of the sign of option value under income and price uncertainty we state and prove three theorems on the sign of option value when preferences are state independent if income is uncertain the sign of option value is opposite the sign of the income elasticity of the good in question the analysis of price uncertainty is in two parts one covers the case of own price uncertainty and the other the case where the price of some other good is uncertain in both cases the sign of option value is generally ambiguous

option value an exposition and extension this article examines the role of the discount rate in making decisions that will have significant implications for the environment the authors begin by providing a rationale for discounting in general and by describing the main factors that determine

requiem for option value as freeman 1984 accurately notes a lot of ink has been spilled over the concept of option value during the last two decades graham in his seminal 1981 article outlined the specific conditions under which option price is and more significantly is not an appropriate and relevant measure of value under demand uncertainty while graham s article demonstrates that option value is relevant only under restrictive assumptions regarding preferences and the nature of the uncertainty both the tone and contents of recent articles on the

valuing public goods discrete versus continuous contingent valuation responses independent applications of open ended and dichotomous choice formats are compared using tests of means estimating joint likelihood functions and nonparametric tests of distributions the null hypothesis of no difference in the open ended and dichotomous choice estimates of central tendency cannot be rejected for two out of three data sets while estimated standard deviations are significantly different for all three data sets in addition actual dichotomous choice means and standard deviations exceed those from comparable synthetic dichotomous choice data sets suggesting either open ended questions underestimate values or dichotomous choice bid structures may lead to systematic overestimates

thinking economically about climate change abstract uncertainty over both the regional impacts and timing of climatic changes the way they tend to magnify the likelihood of so called natural disasters and their irreversibility require careful analysis of policy options from an economic standpoint the best approach is to apply cost benefit thinking the essential trade off is between doing nothing now and investing in either important preventive or adaptive measures the choices involve analysis of incurring costs now against the benefits of reducing vulnerability and future damage costs for any given level of warming the aim is to minimize the sum of policy costs and costs of adaptation by individuals any resulting policy decision will have to address issues of international cooperation and compensation these considerations may in turn influence the resulting policy choices between carbon taxes marketable permits and regulatory restrictions

the choice of a welfare measure under uncertainty use of option price as a welfare measure when conducting a benefit cost analysis under uncertainty is appropriate only if the project under consideration will have no impact on the allocation of risk among individuals use of the willingness to pay locus as a benefit measure is appropriate only if the project will result in an efficient allocation of risk a more general welfare measure is proposed maximum agreeable payment that correctly measures the benefits and costs of any project