Economist Proposes, Judge Disposes: Contingent Valuation of Environmental Damages in the US Courtroom
Posted: 19 Sep 2019
Date Written: June 13, 2007
What is the value of a national park? One way to estimate the value of natural resources and other non-market goods is to use contingent valuation (‘CV’) — a widely-used but controversial valuation method which involves asking individuals how much they are willing to pay to ensure a hypothetical improvement (or avoid a hypothetical deterioration) in environmental quality. CV has been used to estimate the value of environmental goods ranging from finless porpoises to desert lands, and perhaps most famously in the wake of the Exxon Valdez oil spill in 1989. The first part of this article argues that some of the underlying assumptions and limitations of CV make it legally problematic. Nevertheless, in the United States, a landmark decision by the District of Columbia Circuit Court of Appeals mandated the inclusion of ‘option’ and ‘existence’ values in natural resource damages, and upheld CV as a theoretically valid method for such calculation. The second part presents a comprehensive survey of (reported) cases in US district and circuit courts where parties sought to rely on, or challenged, CV studies in the environmental context. I argue that while US courts have been reluctant to accept specific CV studies, the reasons for their reluctance are not clearly articulated. The story that emerges from the case law is of CV being accepted in theory but often rejected in practice. I argue that the rejection of specific applications of CV has been a way for courts to assuage their unease with its conceptual and methodological underpinnings, while paying lip service to Ohio. However, it means that plaintiffs and defendants continue to seek to rely on (often very expensive) CV surveys with little or no judicial guidelines on what kinds of studies, if any, would be deemed legally acceptable.
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