Great CBA requires measuring benefits and costs in comparable units - usually dollars. But how do you price things like cleaner air, saved time, or reduced illness risk? We need methods to convert non-market benefits into dollar terms.
Engagement Message
What's one benefit of environmental policy that would be hard to price?
Market prices work when they exist. If a policy reduces steel production by 1,000 tons, we use market prices to estimate cost. But many policy impacts lack market prices: life saved? Hour of commute time? Day of clean air?
Engagement Message
Why can't we just survey people and ask what these things are worth?
Revealed preference methods observe what people actually do, not what they say. If workers demand $5,000 extra pay for higher accident risk, this reveals how they value safety. Similarly, driving 10 minutes to save $5 reveals time value of $30 per hour
Engagement Message
What does buying a $300 bike helmet reveal about safety preferences?
Value of statistical life (VSL) uses revealed preference to price safety policies. If people accept higher death risk for $500 extra pay, and that risk means 1 in 10,000 chance of death, then VSL = $5 million.
Engagement Message
Why is VSL useful for evaluating safety regulations?
Contingent valuation directly asks people what they'd pay for improvements, using careful survey methods to get honest answers. "How much would you pay for 20% reduction in local air pollution?" The key is making scenarios realistic and specific.
Engagement Message
What's one way survey respondents might give unrealistic answers about environmental values?
Travel cost method values recreational sites by examining what people spend to visit them. If visitors to a national park spend an average of $200 on travel costs, this suggests the park provides at least $200 in value per visitor.
