Working Paper No.85Applying the Contingent Valuation Method in Resource Accounting
Applying the Contingent Valuation Method in Resource Accounting: A Bold Proposal
Resource accounting involves complementing conventional national accounts with changes in environmental and natural resource capital valued in monetary terms. By adopting the Ramsey device of "Bliss", we derive a theoretically consistent environmentally adjusted NDP (Net Domestic Product) measure. The measure indicates sustainable future consumption that an economy can support along the optimal path approaching "Bliss", or "sustainability" determined by national environmental goals. The goals accepted by the Swedish parliament are used to show the applicability of the contingent valuation method to elicit non-market benefits of an economy approaching the sustainability targets. We investigate the compatibility of marginal willingness to pay measures derived on hypothetical markets with market prices used in national accounts. Finally, we raise certain issues of survey design, e.g. to take advantage of the CVM as a democratic device for value estimation over time.