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The Benefits Transfer Method: Reusing Economic Studies
Cost of a new fishing dock? NRCS often estimates the value of recreational
opportunities created or improved by agency projects and programs. Cost of
three youngsters spending the day fishing? Priceless. |
Monetary valuations of non-market goods and services such as water quality and
wildlife are estimated in terms of willingness to pay defined as the maximum
amount of money a person is willing to pay in order to obtain some level of the
good or service. This includes both the amount actually paid and the consumer
surplus. Consumer surplus measures the difference between what someone is
willing to pay for a commodity and the amount they actually are required to
pay. NRCS often estimates the value of recreational
opportunities created or improved by agency projects and programs.
For these recreational activities, NRCS has historically used three methods to
determine the willingness to pay -- the travel cost method (TCM), contingent
valuation method (CVM), and unit day value (UDV) method.
• TCM operates on the principle that per capita use of a recreation site will
decrease when costs (out-of-pocket and time) of traveling to the site increase,
other variables being constant. TCM consists of deriving a demand curve by using
the variable costs of travel and the value of time as proxies for price. This
method requires surveys of users to obtain the needed data.
• The Contingent Valuation (CV) Method estimates benefits by directly asking
individual households their willingness to pay for changes in recreation
opportunities at a given site. Individual values may be aggregated by summing
willingness to pay for all users in the study area. The surveying technique is
complicated to develop and expensive to complete. But contingent valuation
technology has been continually improved and used thousands of times since its
acid-test in developing the environmental damage estimates after the Exxon
Valdez Oil Spill in 1989.
• The UDV method provided in Principles and Guidelines for Water Resource
Projects uses a standard table to calculate a quality-based value per user day.
This table was originally created in 1962 and has been indexed by the Consumer
Price Index (CPI) since then. CPI has increased these values by 650 percent.
However US per-capita income has increase by 1400 percent, making the Unit Day
Values increasingly conservative over time.
A new Benefit Transfer method enables NRCS to investigate the possibility of using more recent
non-NRCS recreation studies for its own project areas. This is an exciting
prospect because the travel cost and contingent valuation methods are
prohibitively expensive for the foreseeable NRCS budgets. This new benefit
transfer method allows NRCS to evaluate the possibility of quickly
reusing or transferring existing travel cost and contingent valuations study
estimates from one geographic location to another.
The NRCS
Contingent Valuation/Recreational Values web site contains a collection of
information for NRCS to use for contingent valuation of recreational activities
for watershed planning and other NRCS economic purposes. It also includes a link to
Randall S. Rosenberger and John B. Loomis’ Benefit Transfer of Outdoor
Recreation A Technical Document Supporting the Forest Service Strategic Plan --
a useful introduction to benefit transfer use values that is backed by a database
of 700 recreation valuation studies.
Please contact your State economist, or your National Technology Support Center
economists David Buland,
Kevin Boyle, or
Madalene Ransom with questions
about benefits transfer or other economic technologies.
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