A. Myrick Freeman

On estimating air pollution control benefits from land value studies

Abstract This paper deals with some unresolved issues in interpreting empirical property value/air pollution studies. A model is developed in which it is shown that in general regressions of property values on pollution variables do not identify the demand curve for clean air. However since the first derivative of the observed rent function is a locus of household equilibrium marginal willingnesses to pay, aggregate benefits can be calculated directly. The possibilities for obtaining approximate measures of aggregate benefits for nonmarginal changes in air quality are also discussed.

Option Demand and Consumer Surplus: Further Comment

Introduction, 528. — The framework of the model, 530. — Demand uncertainty and option value, 533. — Some extensions of the model, 536. — Conclusions and policy implications, 537.

The economics of environmental policy

Knowledge and analyses are drawn from a broad range of experts to depict the problem of environmental quality as an economic problem whose resolution requires major changes in economic, political, and legal institutions. The model emphasizes the principle of materials balance in developing public policy which uses these interconnections as a framework. Viewed as an economic problem, environmental degradation is the result of the failure of the market system to efficiently allocate environmental resources among their alternative uses. The governments primary concern is to preserve competition and assure that the distribution of income meets the societys ethical standards, but the market system fails to work for common property resources. The problem of designing institutions for collective action that can efficiently manage common property environmental resources is analyzed. The need to bring environmental resources back into the economic system so that their use can be subject to the same sorts of constraints influencing the use of other resources (land, labor, and capital) is emphasized.

The Benefits of Water Quality Improvements for Marine Recreation: A Review of the Empirical Evidence

This paper reviews the empirical literature on the economic value of marine recreation fishing, beach visits, and boating. Questions addressed include: What values do people place on changes in the attributes of recreation sites and activities? What do we know about how water pollution control policy affects these attributes? And, is it feasible to use the value information obtained for specific sites and/or activities to estimate the benefits of improving marine water quality? The literature establishes that some measures of pollution reduce the values of trips to beaches and that improved fishing success is valued by recreational anglers. However, there is substantial variation in value measures across studies. Welfare estimates can be sensitive to model specification and estimation. In the case of marine recreational fishing, the links between pollution control policy and the attributes of the activity that people value (catch rate) have not been established.

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 ...

Methods for assessing the benefits of environmental programs

Publisher Summary Environmental regulations that lead to the reduction in the emissions of air and water pollutants presumably have been undertaken in this chapter because of the welfare gains they generate for people. Several models and techniques have been developed to interpret individuals responses to allow the calculation of the money benefits of the hypothetical changes. The chapter discusses a simple model of the process through which an environmental regulation results in economic benefits. The chapter shows that economic measures of benefits require an understanding of the underlying physical, chemical, and biological processes that make up the environment. It considers some fundamental questions in the definition and measurement of welfare changes. The chapter examines models based upon the revealed behavior of producers and consumers responding to price signals and changes in environment quality and models based upon how people respond to specific hypothetical changes.

Economic Valuation: What and Why

Consider the choices faced by those responsible for managing releases of water at the Glen Canyon Dam on the Colorado River. The size and timing of the releases determine the value of the hydroelectric power generated. But the pattern of the releases influences the nature and value of the recreational activities on Lake Powell above the dam and on the rivers in Glen Canyon and Grand Canyon below the dam. The release patterns also affect, in complex ways, the availability of suitable habitat for and the probabilities of the survival of several endangered species. Thus, managers face choices that involve tradeoffs.1 More hydroelectric power means reduced quality and quantity of recreation opportunities and, perhaps, reductions in the survival of some endangered species. It is necessary to reconcile the sometimes conflicting desires and interests of those affected by management decisions and to make wise choices concerning these trade-offs. To do so, resource managers require information on the value of hydroelectric power and the values that people place on various attributes and types of recreation on and along the Colorado River and on changes in the survival probabilities for endangered species.2

The Hedonic Price Approach to Measuring Demand for Neighborhood Characteristics

Publisher Summary This chapter reviews the hedonic price approach as a technique for measuring the implicit prices of goods that are not themselves explicitly traded in markets but are characteristics of traded goods. The hedonic technique is a method for estimating the implicit prices of characteristics that differentiate closely related products in a product class. The estimation of the demand for a characteristic of housing involves a two-step procedure in which first the implicit price of the characteristic is estimated by the application of the hedonic price technique. There are several assumptions that must be satisfied to apply the hedonic technique to estimating the demand for neighborhood characteristics. For the use of the hedonic price approach at all, it is necessary to assume that the observed housing prices approximate equilibrium prices, that is, the prices that just make everyone willing to hold the existing stock of houses. In other words, the assumption of rapid price adjustment is basic to the technique. One of the virtues of the hedonic price technique is that the problem can be handled through the choice of variables included in the hedonic price function.

Environmental Policy Since Earth Day I: What Have We Gained?

I review the data on costs and benefits of the major environmental laws passed during the 1970s. The winners in terms of benefit-cost analysis include: getting lead out of gasoline; controlling particulate air pollution; reducing the concentration of lead in drinking water; and the cleanup of hazardous waste sites with the lowest cost per cancer case avoided under Superfund The losers include: mobile source air pollution control; water pollution control; and many of the regulations and cleanup decisions taken under the Federal Insecticide, Fungicide, and Rodenticide Act, the Toxic Substances Control Act, the Safe Drinking Water Act, and Superfund.

Equity, efficiency, and discounting : The reasons for discounting intergenerational effects

Abstract Confusion between the ethical norm of intergenerational equity and the practical technique of discounting only obscures the basic issues of efficiency and equity. The author distinguishes between the discounting approach and the equity argument, and explains their essentially complementary roles in long-term investment decisions. He argues that the discounting method is an important tool in the achievement of intergenerational equity since it can determine the amount of compensation to be paid to future generations, a sum which by definition will compensate them for the damage our action has caused.