Various techniques, which attempt to means environmental effects, are
discussed below.
Preventive Expenditure Techniques
How much people are prepared to spend to prevent degradation of environment
can be used as a measure of the value of the environmental effects.
It is, however, usually thought that this technique underestimates the
value of the environmental effects for various reasons. If the full
scopes of environmental effect including the long-team consequences
are beyond the common people's comprehension, the expenditure they would
undertake to prevent degradation of environment would all very much
short of the required levels. Secondly, it may always not be possible
to fully offset all environmental effects by preventive expenditure
especially in case of massive investment projects (such as large dams)
which cause large environmental changes.
Replacement Cost Techniques
In this technique, how much people are prepared to spend to restore
the environment to its previous state after degradation has occurred
is taken as a measure of the value of the environmental effects. This
technique also suffers from shortcomings similar to those mentioned
in the context of the preventive expenditure technique. It is normally
beyond the competence of common people to judge the full scope of damages
done to the environment and it is not usually possible to restore the
environment to its previous state after it has been damaged.
Property Value Techniques
Real estate values depend on various factors, including environmental
factors. A residential accommodation at the lake or with a view to maintain
commands a premium in the market. Air pollution depresses price of property
in the area. People are willing to pay more for property similar in
other respects in areas with clean air. The difference in market price
can be used as a measure of the value to society of the cleaner environment.
The measurement of this value in practice may however be quite difficult.
In order to separate the effect of cleaner environment on properly value
from other factors (such as location, quality of neighbourhood, etc)
that affect a site's value, one would require to collect data as the
value of various sites throughout the area and analyse the data with
the help of an appropriates statistical method.
There have been several studies exploring the relationship between air
pollution and property values, most of these studies show a significant
negative relationship between properly value and air pollution. These
studies have, however, been criticized for underestimating the environmental
effects of air pollution. People often do not know or understand the
severity of pollution problems at different sites.
It requires special expertise to accurately estimate the pollution level
at a site. Even if people are told about the presence of air pollutants
in the area, they cannot make any use of such information because they
lack knowledge about the effects of pollutants on human health or property.
In such conditions it is not logical to expect that difference in properly
value would correctly estimate the value of environmental effects of
air pollution.
Human Health - Effect Technique
One method to estimate the value of environmental effects as to study
the effect of pollutant exposures on human health.
It involves putting a monetary value on illness and death caused by
exposure to pollutants. This idea of putting money value on human life
does not appeal to everyone. Many regard human life to be of infinite
value. But, is society's behaviour always consistent with such thinking?
IS society prepared to pay whatever is necessary to prevent a death?
If human life were considered of infinite value, we would never allow
those activities which pose a risk to human beings, given that virtually
no economic activity is completely risk-free, and they all would be
stopped.
For example, injurious and deaths caused by road accidents could be
reduced significantly if laws pertaining to road safely are made very
strict. Several studies have shown that appropriate changes in design
of vehicles and lowering of speed limits can reduce the number and severity
of traffic accidents significantly. But we know that society does not
take all these required steps. This ofcourse, does not mean that human
life is cheap. Most people consider it invaluable, if not of infinite
value.
One way to determine the effects of exposure to pollutants on human
health is to study the incidence of diseases among people. Of course,
air pollution is not the role cause of diseases. There are many other
explanatory variables such as age, sex, hygienic conditions, climate,
living standard and dietary habits. In order to separate the effect
of air pollution from other variables, a large body of data on the incidence
of various diseases among different sections of the population in various
places needs to be collected and analysed with the help of appropriate
statistical methods.
An alternative method of determining the effects of exposure of pollutants
is to conduct laboratory experiments on plants or animals. Plants animals
are exposed to different levels and different kinds of pollutants to
study their effects. Rats are often used as study objects for various
reasons. The results of such studies, however, cannot be generalized
too much. These studies cannot tell much about the effects of pollutants
on human health as the human physiology is much different from that
of rat or any other animal.
Once the relationship between pollutant exposures and human health effects
is determined, the next step is to estimate the value of human health
effects in monetary terms. The human health effect technique calculates
the value of the health effects by looking at lost economic production
and increased health-care costs. The opportunity costs of an individual's
premature death can be calculated by estimating the discounted present
value of his future earning if he had not died prematurely. This provides
a measure of lost economic production and thus a measure of loss to
society. In case of illness, the cost of care is added to the losses
of earnings. This technique however does not value the psychic costs
of ill health.
Many people find such procedure of calculating the worth of human life
highly unsatisfactorily because according to this criterion a large
section of people would command a very low economic value, especially
the old people, disabled and those unemployed or in poorly paid jobs.
Travel Cost Method
This method estimates the time and money that people are willing to
spend on 'eco-trips', i.e., visits to places of environmental value
such as mountains, forests, lakes and parks. This method, however, severely
underestimates the worth of the environmental assets and services because
of its highly narrow focus. It only looks at the entertainment, recreational
aspects of environmental assets. Environment constitutes the basic life
support system; its total value consists of several components as discussed
above. This approach ignores most of them.
Contingent Valuation
In this method, the value of environmental assets and services is assessed
through public opinion surveys. People are directly asked their valuation
of the environment. They are asked how much thing is willing to pay
to conserve the environments. There are problems, however, with approach.
People often lack knowledge in that area; therefore their responses
do not accurately reflect their concerns. Secondly, there is a general
inherent problem with Survey method i.e. the answer to a question very
much depends on the way it is asked. If people realize that their answer
will have effect on the decisions they may reply in strategic manner.
For example, if how much they are willing to pay is a hypothetical question
(i.e., no payments are involved), people will answer it in one way.
On the other hand, if there is a probability that they may actually
have to pay they will answer it in another way. In the later case, there
would be a systematic underestimation of the value of the environment.
If the understand that they do not have to pay, the polluter will pay,
their responses are likely to overestimate the value of the environment.
If they are asked how much compensation they should be given for the
environmental damages, they would certainly exaggerate the worth of
the environment.
For these reasons, it is quite difficult to interpret the survey responses
and come up with a figure which genuinely represents people's valuation
of the worth of the environment. Investigators should try to frame questions
in such a manner which induces individuals to respond not as interested
parties but as disinterested observers, as people concerned with the
public interest.
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