Constructing Markets: Environmental Economics and the Contingent Valuation Controversy

Abstract

As economists took up the task of measuring the "demand" for environmental services not traded in markets, some chose to substituted survey-based methods known as contingent valuation (CV). Doing so, they could not help but find themselves in the uncomfortable position of self-evidently constructing their observations rather than merely observing them. Apparent anomalies between the constructs and the predictions for economic man led to a fierce debate over the merits of contingent valuation - a debate that hinged on the question of whether economic theory was being "applied" or "tested."

Keywords: Contingent Valuation, Stated Preference, History, Environmental Economics

JEL Classification: B2, Q5, D6, C9