Limitations of Non-market Valuation

Non-market valuation relies on individual preference. As humans, we develop preferences knowing we have a finite existence. This limits our ability to value non-market goods because these values are derived from personal benefit during a finite time. Future benefits are discounted for this reason. The benefits from non-market goods endure for much longer than our lifespans. Is there any way to value non-market goods, such as free-flowing rivers, without bias? Are we fit to judge the value of clean and sustainable environments? I would argue that we are not given the current global environmental trajectory.  Given the drastic effect of discounting on benefit-cost analysis, there are very serious policy implications. We are talking about life and death decisions here. I think we need to reconsider how we value non-market goods. The undervaluing of these goods will have a very high long term cost to the environment.

One Reply to “Limitations of Non-market Valuation”

  1. Very interesting Rob. Thanks. This is hopefully where the social planner comes in, taking into account all concerned, including future generations, and so would have a lower discount rate. The problem, though, is getting people with limited time horizons to vote for policies with long time horizons.

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