The Definition and Choice of Environmental Commodities for Nonmarket Valuation

Abstract:     
Economic analyses of nature must somehow define the “environmental commodities” to which values are attached. This paper articulates a set of principles to guide the choice and interpretation of nonmarket commodities. We describe how complex natural systems can be decomposed consistent with what can be called “ecological production theory.” Ecological production theory - like conventional production theory - distinguishes between biophysical inputs, process, and outputs. We argue that a systems approach to the decomposition and presentation of natural commodities can inform and possibly improve the validity of nonmarket environmental valuation studies. We raise concerns about the interpretation, usefulness, and accuracy of benefit estimates derived without reference to ecological production theory.

Keywords: nonmarket valuation, stated preference, revealed preference, commodities, endpoints

JEL Classifications: Q30, Q51, Q57

Working Paper Series