News and Social Cost: The Case of Oil Spills and Distant Viewers

Robert Farrow and Douglas M. Larson

Journal of Benefit-Cost Analysis, 2012, vol. 3, issue 4, 1-22

Abstract: Although contingent valuation methods are now frequently used to assess the total value of even distant events, benefit-cost analysis could also be informed by observed behavior that links distant events and consumers. It is typically the news media which connect passive consumers to distant events about which they may or may not take action. The information and adaptation costs incurred by the news consumer are privately beneficial, but additionally are shown to be a lower bound to social welfare losses from a socially defined “bad” event under plausible circumstances. The recent Deepwater Horizon well blow-out in the U.S. Gulf of Mexico is a current example which we seek to inform by study of the oil spill from the Valdez, Alaska spill in 1989. We identify an incremental willingness to pay for news about the Exxon Valdez spill above a standard news broadcast and an increased probability of viewing a broadcast related to the spill. We develop and explain how this private value associated with media consumption can be interpreted as a partial measure of social costs for passive viewers who take no further action beyond news viewing and likely represent the majority of affected citizens (though not necessarily the majority of social costs). Though the per-person values of passive users may be modest in magnitude in the present application, some passive use values appear to be measurable, and that it may well be worth pursuing further the search for the faint but observable links between behavior and distant events through the news media.

Date: 2012
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