The Benefits Transfer Method: Reusing Economic Studies

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.