Valuing Environmental Damage

Per-Olov Johansson

Oxford Review of Economic Policy, 1990, vol. 6, issue 1, 34-50

Abstract: The purpose of this paper is to review the most important parts of the economic theory and measurement of environmental damage. The paper is structured as follows. Section 2 introduces the willingness to pay concept and money measures such as the compensating variation and the equivalent variation. This section also offers an interpretation of money measures in terms of the outcome of a referendum. Section 3 defines the total value of an environmental asset, in order to give the reader an idea of the complexity of the money measures used in recent empirical studies. Section 4 and 5 introduce risk or uncertainty and discuss the choice of money measure in a risky world. In section 6, three frequently employed methods for the estimation of money measures are introduced. The paper ends with some remarks regarding the limitations of these approaches to decision making. Copyright 1990 by Oxford University Press.

Date: 1990
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