Assignment #5

Two environmental problems particularly conducive to contingent valuation are the cleanup of a local stream and a program to reduce the air pollution in a city. Both of these problems would benefit from benefit cost analysis and contingent valuation could be used to determine the value of the benefits. I believe that contingent valuation is most effective when measuring areas of concern locally. A resident of a city with poor air quality would better be able to estimate their willingness to pay for a problem in that city since it would directly affect them. A major flaw in contingent valuation is that there is not enough time to thoroughly educate respondents about the issue before they must decide their willingness to pay. Choosing to use contingent valuation method for concerns that respondents are already familiar with addresses this major flaw.

Two environmental problems not conducive to contingent valuation would be cleanup of a stream across the country and assessment of damage recovery for a business found to have caused great damage by illegally dumping waste. For the same reasons mentioned previously it is difficult to expect accurate values from respondents who are commenting based on a situation that is foreign both in subject and location. While in theory existent values make sense, in practice it is complicated and decision makers should think twice before creating policy based on values from respondents who are not familiar with the subject they are commenting on. As shown in the debate surrounding the Exxon Valdez spill, there is too much controversy surrounding damage payments based on contingent valuation. When faced with an especially politicized or expensive situation and damage recovery values must be determined, a less controversial method than contingent valuation is recommended.