E PA-230-12-85-028
September 1985
METHODS DEVELOPMENT FOR ENVIRONMENTAL
CONTROL BENEFITS ASSESSMENT
Volume X
EXECUTIVE SUMMARY
by
David S. Brookshire and Thomas D. Crocker (Project Director)
Ralph C. d'Arge, and William D. Schulze
University of Wyoming
Laramie, Wyoming 82071
Shaul Ben-David and Ronald G. Cummings
University of New Mexico
Albuquerque, New Mexico 87131
Allen V. Kneese
Resources for the Future, Inc.
Washington, D.C. 20036
Edna Loehman
SRI International, Inc.
Menlo Park, California 94025
USEPA Grant # R805059-01-0
Project Officer
Dr. Alan Carlin
Office of Policy Analysis
Office of Policy, Planning and Evaluation
U.S. Environmental Protection Agency
Washington, D.C. 20460
OFFICE OF POLICY ANALYSIS
OFFICE OF POLICY, PLANNING AND EVALUATION
U.S. ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 2 04 60

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OTHER VOLUMES IN THIS SERIES
Volume 1, Measuring the Benefits of Clean Air and Water, EPA-230-12-85-019.
This volume is a nontechnical report summarizing recent research for EPA on
methods development for better estimates of economic benefits from environmental
improvement. The report presents the basic economic concepts and research
methods underlying benefits estimation as well as a number of case studies,
including several from other volumes of this series. Finally, it offers insights
regarding the quantitative benefits of environmental improvement.
Volume 2, Six Studies of Health Benefits from Air Pollution Control, EPA-230-12-
85-020.
This volume contains six statistical epidemiology studies. They show that
large associations between health and current levels of air pollution are not
robust with respect to the statistical model specification either for moratality
or morbidity. They also find that significant relationships, mostly small,
occasionally appear.
Volume 3, Five Studies on Non-Market Valuation Techniques, EPA-230-12-85-021.
This volume presents analytical and empirical comparisons of alternative
techniques for the valuation of non-market goods. The methodological base of the
survey approach - directly asking individuals to reveal their preference in a
structured hypothetical market - is examined for bias, replication, and
validation characteristics.
Volume 4, Measuring the Benefits of Air Quality Changes in the San Francisco Bay
Area: Property Value and Contingent Valuation Studies, EPA-230-12-85-022.
This volume replicates a property value study conducted in the Los Angeles
Basin for the San Francisco Bay area. A taxonomy series of air quality types and
socioeconomic typoligies are defined for cities in the area to examine how
property values vary with pollution levels. The contingent valuation method
surveys individuals, directly asking their willingness to pay for changes in air
quality. The survey method yields benefit values that are about half the
property value benefits in both the Bay area and Los Angeles.
Volume 5, Measuring Household Soiling Damages from Suspended Particulates: A
Methodological Inquiry, EPA-230-12-85-023.
This volume estimates the benefits of reducing particulate matter levels by
examining the reduced costs of household cleaning. The analysis considers the
reduced frequency of cleaning for households that clean themselves or hire a
cleaning service. These estimates were compared with willingness to pay
estimates for total elimination of air pollutants in several U.S. cities. The
report concludes that the willingness-to-pay approach to estimate particulate-
related household soiling damages is not feasible.

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Volume 6, The Value of Air Pollution Damages to Agricultural Activities in
Southern California, EPA-230-12-85-024.
This volume contains three papers that address the economic implications of
air pollution-induced output, input pricing, cropping, and location pattern
adjustments for Southern California agriculture. The first paper estimates the
economic losses to fourteen highly valued vegetable and field crops due to
pollution. The second estimates earnings losses to field workers exposed to
oxidants. The last uses an econometric model to measure the reduction of
economic surpluses in Southern California due to oxidants.
Volume 7, Methods Development for Assessing Acid Deposition Control Benefits,
EPA-230-12-85-025.
This volume suggests types of natural science research that would be most
useful to the economist faced with the task of assessing the economic benefits of
controlling acid precipitation. Part of the report is devoted to development of
a resource allocation process framework for explaining the behavior of ecosystems
that can be integrated into a benefit/cost analysis, addressing diversity and
stability.
Volume 8, The Benefits of Preserving Visibility in the National Parklands of the
Southwest, EPA-230-12-85-026.
This volume examines the willingness-to-pay responses of individuals surveyed in
several U.S. cities for visibility improvements or preservation in several
National Parks. The respondents were asked to state their willlingness to pay in
the form of higher utility bills to prevent visibility deterioration. The
sampled responses were extrapolated to the entire U.S. to estimte the national
benefits of visibility preservation.
Volume 9, Evaluation of Decision Models for Enviromental Management, EPA-230-12-
85-027.
This volume discusses how EPA can use decision models to achieve the proper role
of the government in a market economy. The report recommends three models useful
for environmental management with a focus on those that allow for a consideration
of all tradeoffs.

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DISCLAIMER
This report has been reviewed by the Office of Policy Analysis, U.S.
Environmental Protection Agency, and approved for publication. Mention in the
text of trade names or commercial products does not constitute endorsement or
recommendation for use.
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ABSTRACT
The studies summarized by this volume represent original efforts to
construct both a conceptually coherent and empirically verifiable set of methods
for assessing environmental quality improvement benefits. We have found that a
conceptually and empirically simpler method than traditional—the survey method—
holds great promise for expanding the range of environmental phenomena that
benefit-cost analysis can reliably capture. We also demonstrate that some
environmental phenomena, particularly those involving the human health and
ecosystem effects of pollution, will require the use of more complex models and
estimation procedures if consistently reliable measures intended for policy
guidance are to be obtained.
A single empirical finding pervades the nine volumes reviewed here: the
benefits of air pollution control appear to be sufficiently great to warrant the
exercise of great caution in implementing proposals to relax current ambient air
quality standards. Contrary however, to the thrust of much existing clean air
legislation, air pollution-induced health effects, with the possible exception of
chronic morbidity, cannot at this time be identified as the major benefit of air
pollution control. The weight of our evidence leads us to conclude that the
greater proportion of the benefits of control now resides in aesthetic
improvements, maintenance of the life-support and direct pleasure-material
provision capacities of ecosystems, and the reduction of damages to artifacts and
materials.

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Introduction
As we move into the 1980's, the heart of the environmental concerns of the
1960's and 1970's continues to beat, but other major difficulties now burden us.
The economy seems weak, inflation is high, and the identification and application
of corrective policies has been confused. In this adverse economic atmosphere,
there is heightened interest in the question of whether the costly environmental
regulations previously put in place are, in fact, worthwhile. To try to shed
some light on this question, appeal is often made to an economic evaluation
method called benefit-cost analysis.
Benefit-cost analysis was developed initially to provide a useful picture
of the costs and gains associated with investments in water development projects.
In recent years, the most striking development in benefit-cost analysis has been
its applications to the economic and environmental consequences of new
technologies and scientific and regulatory programs. These new applications of
the analysis bristle with quantification, analytical, and ethical issues of which
proponents of continuing expansions in its use do not always seem aware. For the
last several years, so as to broaden the domain of benefit- cost applications
from which policymakers may obtain consistently dependable policy guidance,
researchers located principally at Resources for the Future and the Universities
of New Mexico and Wyoming have been grappling with these issues. The series of
volumes summarized here reports the advancements in analytical and empirical
techniques made by some of them. As in an earlier series of volumes [Crocker-
Schulze, et al. (1979); Brookshire, et al. (1979); Adams, et al. (1979); Cropper,
et al. (1979)] by many of the same authors, air pollution is the environmental
problem of research focus. Although they have made real and substantial
progress, the research program they and other economists have undertaken is far
from completed. The discriminating policymaker must continue to be knowledgeable
about and highly sensitive to the analytical, empirical, and the ethical limits
of the state-of-the-art.
A single empirical finding pervades these ten volumes: despite the
location and/or time-specific nature of the estimates, the benefits of air
pollution control appear to be sufficiently great to warrant the exercise of
great caution in implementing proposals to relax current ambient air
standards. Contrary to the thrust of much existing clean air legislation, air
pollution- induced health effects, with the possible exception of chronic
morbidity, cannot at this time be identified as the major economic benefit of
air pollution control. The weight of our evidence leads us to conclude that
the greater proportion of the benefits of control now resides in aesthetic
improvements (e.g., atmospheric visibility), maintenarce of the life-support
and direct pleasure-material-provision capacities of ecosystems, and the
reduction of damages to human artifacts (e.g., household soiling). Our
several bases for the conclusion can be gleaned from the following brief
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summaries for each of the separate volumes.
Measuring the Benefits of Clean Air and Water
The first volume in the series presents a detailed overview in lay terms of
the entire body of work. This overview is buttressed by an elementary discussion
of the foundations of the research in the economic theory of the consumer and the
producer, as well as the place this and similar recent research holds in the
historical evolution of benefit-cost analysis. The volume is not a collective
enterprise; rather it is one eminent economist's perspective of the usefulness
and the implications of the research reported in the other volumes.
Six Studies of Health Benefits From Air Pollution Control
The six studies contained in this volume all aim to increase our
understanding of the health benefits of air pollution control. The calculation
of health benefits requires both an understanding of how people themselves value
health affects in dollar terms (correctly measured by the willingness-to-pay
concept) and an understanding of air pollution-induced health effects. Much
progress has been made with respect to the former problem. However, the link
between air pollution and human health remains problematic. Two approaches are
available for determining the health affects of air pollution. First, animal
experiments or, rarely, human experimentation can provide direct evidence in a
controlled situation. However, extrapolation from animal to human populations is
difficult and possibly unconvincing given that many human exposures to air
pollution occur over periods of decades as opposed to the exposure periods of
months possible in the laboratory. The second approach is to analyze data on
human health affects taken from the real world, uncontrolled environment, hoping
that careful statistical analysis will allow one to account for all of the
important factors determining human health.
This latter approach, statistical epidemiology, is the principal focus of
this volume.
The first three studies attempt to determine the association between air
pollution and mortality. One study examines evidence from data on aggregate
mortality rates in sixty U.S. cities and points out the extraordinary difficulty
in obtaining a stable, robust statistical association between current air
pollution levels and current mortality rates. The conventional wisdom holds that
a large positive relationship exists between particulates in air and mortality.
The study demonstrates that this relationship is highly unstable depending on
specification of the statistical model used in the analysis. A second mortality
study uses a small sample of data on individual ages at death, taken from the
Survey on Income Dynamics (1972), to see if, by using disaggregate information on
individuals, a more stable and convincing relationship can be obtained. In this
small sample of individuals, no significant statistical relationship is obtained
between current air pollution levels and longevity. A final mortality study is a
very preliminary description of an ongoing research effort using an excellent and
highly detailed data set on twins collected by the National Academy of Sciences
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[Hrubec and Neel (1978)]. Of the three studies relating to mortality, this one
has perhaps the best data and should be capable of detecting even small effects.
In fact, a strong but small statistical correlation is shown between air
pollution and prior symptoms of cardiovascular disease such as chest pain. An
association with coronary heart attack is small and not as strong.
Two of the studies examine morbidity. One focuses on chronic illness while
another considers acute illness. Both studies use Survey on Income Dynamics data
and data on current air pollution levels. The relationship between chronic
illness and air pollution is shown to be potentially large but is again very
sensitive to model specification. Since little a priori knowledge is available
on appropriate model specification, it is impossible to choose between a
specification which yields a large impact and one which yields no significant
impact. The study of acute health impacts shows, using a particular
specification, a small positive association of marginal statistical significance
between sulfur oxide and lost work days.
In summary, the five statistical studies presented in this volume show: (1)
large associations between health and current levels of air pollution are not
robust with respect to statistical model specification either for mortality or
morbidity; and (2) statistically significant relationships, mostly small, do
occasionally appear.
The final study considers the type of data which might resolve
controversies over the magnitude of air pollution health affects. The principal
conclusion is that, before a very expensive primary data collection effort is
undertaken, it would be better to continue statistical modeling of human health
affects working with existing data sets, some of which are of fairly high
quality. However, all work of this sort should henceforth be built upon explicit
physiological and economic models that specify the parameter space. The results
of these secondary data studies can then be used to guide the specification of
future primary data collection efforts.
As a final remark which should not be overlooked in light of the rather
ambiguous evidence presented in this health effects volume, all studies to date
have only looked for health affects associated with current air pollution
exposures, not at any possible association between current health affects ard
long term cumulative air pollution exposures. Thus, it is premature to draw any
final conclusions from existing epidemiological evidence concerning human health
and air pollution exposures.
Five Studies on Non-Market Valuation Techniques
Two approaches are generally considered for estimating the value of
nonmarketed goods. The most widely accepted approach has been the use of hedonic
prices, where it is assumed, for example, that either wages or housing valued
reflect spatial differences in the quality of air resources. Alternatively,
using survey techniques, one may directly ask households or individuals to state
their willingness-to-pay for alternative levels of air quality. The necessity
for an alternative approach to the hedonic lies in the spatial nature of air
resources. In a well developed housing market, the hedonic
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approach is appropriate. However, consider the case of a remote and unique
scenic vista, valuable to recreators, which is threatened by air pollution from a
proposed coal fired power plant—a typical situation in the western United
States. Although it is possible, in principle, to impute the value of clean air
and visibility from the relative decline in local visitation which might follow
construction, information prior to construction on the value of visibility at the
site is needed for socially optimal decisionmaking. The hedonic approach is
unavailable both because the scarcity of local population makes use of wage or
property value data impossible and because scenic vistas may themselves be
unique.
Because of its hypothetical nature, the empirical implementation of the
survey approach raises questions of bias, replicability, validation by other
techniques, and appropriateness for benefit-cost analysis. Before incorporation
of survey approach results into benefit-cost analyses, these questions require
answers. The research reported in this volume tries to provide them.
The first paper of the volume evaluates the results of six recent
experiments which have utilized the survey approach for estimating the value of a
nonmarketed environmental attribute. Where possible, the issue of replication of
results is addressed. The range of environmental attributes valued in the six
experiments was quite large, including noise, wildlife, strip mining, and
visibility. Four out of six attempted some internal methodological cross check.
Biases, within the survey approach, do not appear to have been an overriding
problem. However, the studies indicate the need to establish a precise market—
hypothetical in nature—for the results of a survey approach to be interpretable.
to be interpretable.
A second paper takes up the central issue of validating the survey
approach. Although the studies reviewed in the previous paper suggested that the
survey approach is internally coherent and consistent with the theory of the
consumer, and that its results are replicable, no external validation had been
undertaken whereby a comparative analysis using another approach independent of
the survey had been conducted. Thus, this second paper reports an experiment
designed to validate the survey approach by direct comparison to a hedonic
property value study.
The Los Angeles metropolitan area was chosen for the experiment. Twelve
census tracts were chosen for sampling wherein 290 household interviews were
conducted during March 1978. Respondents were asked to provide their
willingness-to-pay for an improvement in air quality at their current location.
Air quality was defined as poor, fair, or good based both on maps of the region
(the pollution gradient across the Los Angeles Metropolitan Area is both well
defined and well understood by local residents) and on photographs of a distant
vista representative of the differing air quality levels. Households in poor air
quality areas were asked to value an improvement in fair air quality while those
in fair areas were asked to value an improvement in good air quality. Households
in good air quality areas were asked their willingness-to-pay for a region-wide
improvement in air quality.
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For comparison to the survey responses, data was obtained on 634 single
family homes sales which occurred between January 1977, and March 1978,
exclusively in the twelve communities used for the survey analysis. Households,
in theory, will choose to locate along a pollution-rent gradient, paying more for
homes in clean air areas. However, ceteris paribus, we show that the annualized
cost difference between homes in two different air quality areas (the rent
differential for pollution) will in theory exceed the annual willingness-to-pay
for an equivalent improvement in air quality for a household in the lower air
quality area. Thus, the rent differential of an air quality improvement inferred
from hedonic analysis of property value data must exceed estimates of household
willingness-to-pay obtained from survey responses, if the survey responses are a
valid measure of the value of air quality improvements. The theoretical model
described predicts that survey responses will he bounded below by zero and above
by rent differentials derived from the estimated hedonic rent gradient. The
empirical results do not allow the rejection of this hypothesis, thereby
providing evidence that survey methods are a valid means of determining the value
of nonmarket goods.
In a third paper, the reasons why the survey approach is often a superior
means of generating data for valuing non-market goods are advanced. Specifically
the advantages of the hypothetical nature of the survey technique are addressed.
We argue that the survey technique will often be more consistent with the
precepts of economic theory than is the use of observed behavior, that
hypothetical responses are properly viewed as conditional rather than as
fictional, and that the survey technique is quite often the only technique which
can address future events without going through the costly exercise of "learning-
by-doing" or "trial-and-error."
The fourth paper presents the main empirical results of the volume: it is
an examination of the benefits and costs of the national ambient air quality
standards as applied to all residential areas of Los Angeles, Orange, Riverside,
and San Bernardino Counties in southern California. The results set forth are
based on the qualified arguments presented in the previous three papers which
suggest that both the survey approach and the property value approach are valid
techniques of benefit-cost analysis. Based upon modeling contained in the
region's Air Quality Management Plan, achievement of the ambient standards in
1979 would have required emission reductions of the 974 tons/day, 5963 tons/day
and 503 tons/day respectively of reactive hydrocarbons, carbon monoxide, and
nitrogen oxides. Only the share of these emission reductions attributable to
onroad mobile source control was evaluated.
Benefits were calculated through an examination of the housing value
differentials attributed in the second paper to air quality differences.
Achieving the ambient air quality standards was consistent with improving the
"fair" and "poor" air quality regions to the "good" category. In effect, this
constituted an approximate 30 percent improvement in the fair areas and a 45
percent improvement in the poor air quality areas. Corresponding benefits were
estimated to fall between 1.6 ard 3.0 billion dollars per year, indenendent of
any benefits accruing to protection of agriculture and ecosystems. The share
of these benefits associated with onroad mobile source control was
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estimated to be 1.36-2.55 billion dollars.
Cost estimates were developed from existing data sources, primarily from
manufacturer statements and government publications. Given the variation in
control cost options and the uncertain nature of the cost figures, it was found
that onroad mobile source controls consistent with a policy sufficient to achieve
the 1979 ambient standards would involve a cost of between .61 and 1.32 billion
dollars, with a best estimate of 1.02 billion dollars.
The benefits from onroad mobile emissions reductions consistent with
satisfying the ambient standards are of the same order of magnitude as the cost
estimates. This implies that the ambient air quality standards have some
economic justification, though the confidence intervals for the benefit and cost
calculations prevent one from accepting the controls outright. In any case,
onroad mobile controls consistent with the air quality standards cannot be
rejected as economically inefficient. Therefore, although the midrange benefit
estimate exceeds the midrange cost estimate, the situation is best characterized
as uncertain. Further, the static analysis performed does not answer significant
questions concerning the behavior of the benefit and cost functions over time.
Stronger statements could only be made in the context of a much more detailed
analysis of the cost side of control efforts.
The final chapter of the volume reports some exploratory estimates of the
effect of changes in air pollution levels on offered wage rates. This approach
is appropriate for a national benefits study where it is assumed that higher
wages must be paid, everything else held equal, to induce people to live in
polluted communities. Estimates using this technique were made for two cities:
Denver, Colorado, and Cleveland, Ohio.
For Denver, meeting the national secondary standards for TSP results in a
reduction in the offered real wage, from $4.1758/hr. to $3.9626/hr. Multiplying
this difference of $.2136/hr. by the number of persons affected times 2000 hours
yields an estimated annual benefit for Denver of $92,968,935. A similar
calculation for Cleveland reveals that meeting the national secondary air quality
standards causes the real wage to fall from $3.8756/hr. to $3.7693/hr. implying a
benefit of $81,360,489. Note that benefits per household head in the two cities
are $426.35 for Denver and $212.60 for Cleveland. This preliminary research
suggests the wage hedonic technique is viable for estimating air pollution
control benefits for standard metropolitan areas across the nation.
A national benefit estimate for air pollution control based on consumer
perceptions as reflected in wages and property values appears possible. Further,
the use of the survey approach to assess the value of perceived benefits, such as
visibility improvements, not captured by wages and property values appears
feasible.
Measuring the Benefits of Air Quality Improvements in the San Francisco Bay Area
This volume reports the results of an attempt to repeat the survey and
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property value methods developed and set forth in the second paper of the
previous volume. The study locale, however, is San Francisco rather than Los
Angeles.
While the intention was to make the two studies as comparable as possible,
there were some inevitable differences in both the situations and in the data
available that made some adaptation necessary. For example, in southern
California, as suggested, the mild, year-round climate encourages a variety of
ocean related recreational activities. Beach front activity is highly valued and
beach front property has generally been densely developed. In the San Francisco
Area, the bay is the body of water most accessible to major population centers;
however, the bay does not offer the same recreational experiences found along the
coast of the Los Angeles area. In the Bay Area, ocean front property is located
over the ridge of the Santa Cruz Mountains and is less accessible to the maijor
employment centers. As a result, much of the beach front property maintains a
rural atmosphere.
Accordingly, it was not necessary to adopt the paired communities approach
of the Los Angeles study to control for access to the beach. This made a more
nearly random sampling approach possible which has the advantage of providing a
better basis for extrapolating the sample results to the entire area.
Another principal difference between the areas is air quality. Smog is
considered to be the major problem in both regions. The city of San Francisco
itself has a less severe air pollution problem than Los Angeles. However, some
cities included in the region (San Jose and Los Gatos, for example) suffer from
severe pollution problems.
Thus while the San Francisco region provides suitable contrast in air
quality from place to place, still, air quality degradation is not in general so
severe and, one would expect, also possibly not so well defined in people's
minds. Accordingly, it was judged to be an excellent place to see whether the
Los Angeles techniques would hold up in a different situation.
Data were gathered or constructed for 2500 households in the region. These
same households also were subsequently used for interviewing. In addition, data
were collected on about 5000 residential property sales in areas where these
families live. When these property sales were analyzed in a fashion similar to
the Los Angeles study, it was found, despite the differences between the two
locales, that similar differences in air quality levels in the two locales
resulted in similar differences in housing sales prices and in survey bids per
household.
Measuring Household Soiling Damages From Suspended Particulates
This volume employs a survey approach and an observed behavior aporoach
to estimate in Philadelphia, Pennsylvania, and Los Angeles, California, the
dollar value of reducing household soiling attributable to suspended
particulate air pollution. The received technical literature is reviewed in
the early part of the volume. On the basis of this review, it is concluded
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that: (i) the present state of the technical arts does not allow for quantitative
estimates of the relationship between particulate concentration and the
accumulation of dust/grime in households; in qualitative terms, however, a
particulate-soiling effect is demonstratable; (ii) one cannot quantify, with any
precision, the relationship between outdoor particulate concentrations and indoor
concentrations; (iii) little can be said in terms of differentiating between
soiling effects from "large" (greater than 15 microns) and "small" (less than 15
microns) particulates; and (iv) a dominant relationship can be identified,
however, between particulate levels and soiling effects and between gaseous
pollutants and materials damages. Therefore, while one cannot quantitatively
specify the soiling effects that result from alternative particulate levels, it
is at least conceptually possible to look to household soiling damages via
observed responses in different pollution (particulate) environments.
As measured by an observed behavior (frequency of cleaning) approach to
estimating household cleaning costs, annual household soiling damages in the
Pennsylvania-New Jersey-Delaware area range from $762 per household (1980
dollars) to $1,386 per household in "do-it-yourself" households as air
particulate concentrations range from 40 microns per cubic meter (u/m3) to 123
u/m3; such damages for households that hire others to perform household cleaning
tasks range from $1,531/household to $2,683/household in the same range for
particulate concentrations. Marginal household soiling damages attributable to
air particulates are estimated at $6.63/household per u/m3 per year.
A survey technique similar in conception and rationale to the Los Angeles
and San Francisco surveys reported in previous volumes was found to be an
infeasible approach to estimating particulate related household soiling control
benefits unless particulates are totally eliminated. Average annual valuations
related to the total elimination of air particulates were some $7.32/household in
the Los Angeles area and $2.68/household in the Philadelphia area. in the Los
Angeles area and $2.68/household in the Philadelphia area.
The results of the survey indicated that individuals in the Los Angeles and
Philadelphia areas were willing to pay a maximum of $32.83/month and
$12.59/month, respectively, for the elimination of all air pollutants. These
total "bids" were allocated to pollution effects as follows: 66 - 7 6% health; 13
- 18% visibility; and 9 - 16% household soiling. Although independently
performed from the Los Angeles study reported in an earlier volume, this estimate
is of the same order of magnitude as the earlier estimate.
The volume concludes that only an observed behavior (frequency of
cleaning) approach to estimating suspended particulate-induced household
soiling damages is likely to be effective in terms of providing logically
consistent and replicable estimates it is suggested that an approach of this
sort must define cleaning frequency in terms of multi-task household cleaning
operations — such as "light" cleaing and "deep" cleaning — rather than in
terms of specific cleaning tasks. Second, refined estimates for time spent per
operation must be obtained. Third, stratified (over income) samples must be
used. Finally, data relevant for the value of household labor must be
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obtained for various posited changes in household cleaning time.
The Value of Air Pollution Damages to Agricultural Activities in Southern.
California
In spite of an enormous literature on the phytotoxic effects of air
pollution, few research efforts have been directed at the implications of these
effects for agricultural markets. Of those few studies that do exist, nearly all
do no more than multiply the results of field surveys or experimental studies of
yield reduction by an invariant current price in order to estimate the value of
air pollution-induced losses, e.g., Thompson and Taylor (1969), Benedict, et al.
(1973), Millecan (1976). The adjustments in output and input prices and cropping
and location patterns that agricultural markets and growers make in response to
altered levels of air pollution have been neglected. The three essays in this
volume weigh some of the economic implications of these air pollution-induced
adjustments for southern California agriculture.
The initial essay uses a mathematical programming technique to assess air
pollution-induced losses to fourteen of southern California's most highly valued
annual vegetable and field crops. This technique allows the estimation of the
losses in consumer surpluses and grower quasi-rents occurring after growers have
been permitted to alter cropping patterns and locations in response to changes in
ambient concentrations of photochemical oxidants. As we have used it, however,
the technique falls somewhat short of capturing all economically relevant
features of the impacts of air pollution upon agricultural markets. Among other
things, such as the impact of air pollution on intertemporal agricultural
investment patterns, it forces us to disregard losses that inputs employed but
not owned by the grower may suffer. In addition, as we have used it, the
technique embodies an assumption that air pollution has no influence upon the
uncertainties that growers and the inputs they employ face.
The second essay provides estimates of the losses in earnings that workers
in citrus groves bear from the oxidant air pollution to which they are exposed in
their work environments. Although citrus is not among the fourteen crops to
which the mathematical programming technique is applied, the greater than two
percent earnings losses that air pollution imposes upon citrus grove workers
gives cause to wonder whether labor for other agricultural crops might suffer
similarly. If so, these losses would be in addition to those weighing upon
consumers and growers.
The final essay is the only one of the three which does not present
pecuniary equivalents of some facet of the losses that the air pollution
originating from southern California urban and industrial activities forces upon
the area's agriculture. Instead, after a brief discussion of why uncertainty is
costly to the agricultural sector, we provide empirical evidence of a moderately
strong positive association between, a frequently employed measure of the risks
faced by agriculturists and increases across space and time in southern
California oxidant air pollution.
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The research efforts displayed in these three essays neither embrace all oxidant
air pollution-impacted crops grown in southern California nor do they capture all
plausible facets of the impacts of oxidants upon the input and output markets for
these crops. For example, losses in consumer surpluses and producer rents from
reductions in citrus yields are not included, and economic losses generated by
any yield uncertainties that oxidants cause are absent. Despite these blanks,
and assuming that the crops and inputs we have studied have a reasonably
representative distribution of air pollution sensitivities, our informed yet
conservative judgment is that the levels of ambient oxidants prevailing in
southern California in the mid 1970's were responsible for at least a four
percent reduction in the total economic surpluses generated by the area's
agricultural activities.
Methods Development for Assessing Acid Precipitation Control Benefits
There has recently been increasing awareness that some environmental
pollutants, because of the broad geographical scope of their effects, impose not
only the direct affronts to human life and property of the traditional urban
pollutants, but also attack the pleasures and the life support services that the
earth's ecosystem scaffolding can provide. Acid precipitation might be one of
these pollutants. The basic purpose of this volume is to suggest those types of
natural science research that would be most helpful to the economist faced with
the task of assessing the economic benefits of controlling acid precipitation.
However, while trying to formulate these suggestions, inadequacies in the
supporting material the ecologist could offer the economist and in what the
economist could do with whatever the ecologist offered him became apparent.
Therefore part of the research effort was devoted to initial development of a
resource allocation process framework for explaining the behavior of ecosystems
that can be integrated into a broadened benefit-cost analysis which captures
traditional ecological concerns about ecosystem diversity. Our intent has been
to make a start at providing a basis for the ecological and the economic
disciplines to ask better-defined questions of each other.
Some reasonably well-defined questions have nevertheless been asked and
tentative answers have been provided for a few of them. In particular, most of
the existing techniques for assessing the benefits of pollution control require
knowledge of the magnitude of the response of the entity of interest to
variations in the quantity of pollution to which it is exposed. The entity that
is the oblect of interest in these estimates of response surfaces or functions
must itself have value to humans or it must contribute in some known fashion to
another entity having value to humans. Otherwise, the economist is unable to
perform his tasks. Additional properties that response surface research must
have to be most valuable for the empirical implementation of the techniques of
benefit-cost analysis are outlined in the text.
The simplest of these available techniques is applied in a first exercise
at using known response surfaces to assess the benefits of controlling acid
precipitation in Minnesota and the states east of the Mississippi River. Current
annual benefits of control are estimated to be no more than $5 billion in 1978
dollars, with reductions in materials damages constituting the largest
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portion of these benefits and reductions in damages to forest ecosystems the next
largest. The reader must not treat this estimate as definitive, although the
ordering of current annual control benefits by sector is highly plausible.
The known response surfaces used to construct the above estimate sometimes
displayed two properties that could impart "all-or-nothing" and "now-or-never"
features to the acid precipitation control decision problem. These two features
arise because the marginal benefits of reducing acid precipitation appear to be
increasing over a substantial interval of increasing pH values, and because the
effects of acid precipitation upon ecosystem buffering capacities are less than
fully reversible, both technically and economically.
Visibility in the National Parks
This study was designed to improve the state-of-the-art measuring the value
of atmospheric visibility and to provide some actual estimates of that value for
the Grand Canyon and the surrounding region. A survey technique similar in
concept to, but different in detail from, the Los Angeles and San Francisco
studies was employed to acquire the requisite data. During the summer of 1980,
over six hundred people in Denver, Los Angeles, Albuquerque and Chicago where
shown sets of photographs depicting both clear conditions and regional haze. The
photographs were taken in Mesa Verde, Zion and Grand Canyon National Parks and
represented "poor," below average," "average," "above average," and "excellent"
visibility. Our calculations suggest that complete decontrol of S02 emissions by
projected power plants in the region in 1990 would result in a decrease in
typical summer visibility from that which was represented in the photographs as
"average" visibility to that which was represented as "below average" visibility.
Two-thirds of the survey participants were asked how much they would be willing
to pay in higher electric utility bills to preserve the current average
condition—middle picture—rather than allow visibility to deteriorate, on the
average, to the next worse condition as represented in the photographs of the
Grand Canyon or of the region (an estimate of total preservation value). They
were also asked about their willingness to pay in the form of higher monthly
electric power bills to prevent a plume from being seen in a pristine area. To
represent plume blight, two photographs were taken from Grand Canyon National
Park, one with a visible plume. One-third of the participants were asked how
much they would pay for better visibility on the day of a visit to the Grand
Canyon (an estimate of user value). The surveying had a very high response rate
(few refusals) in part because of the nature of the interviews. Typically,
interviews were conducted in the late afternoon or early evening hours in
residential neighborhoods. Due to the size of the display boards used, most
interviews were conducted on the front lawn of the respondent's home. Often,
both husband and wife participated jointly in answering the questions.
Individual bids ranged from an average of $3.72 per month in Denver to S9.00 per
month in Chicago for preserving visibility at the Grand Canyon. These average
bids were increased by $2.89 to $7.10 per month per household in the four cities
if visibility preservation was to be extended to the Grand Canyon Region as a
whole a represented by the photographs taken from Mesa Verde and Zion.
Prevention of a visible plume at the Grand Canyon was worth on the
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average between $2.84 and $4.32 per month for the four cities surveyed.
Extrapolating these bids to the nation implies that preserving visibility
in the Grand Canyon Region is worth almost 10 billion, dollars per year. These
are the benefits of power plant S02 controls which are projected to be in place
in the region by 1990. Projected emissions with existing and currently planned
levels of S02 control would not produce a perceived decline in visibility in 1990
according to our calculations. Additionally, prevention of a visible plume at
the Grand Canyon is worth almost four billion dollars to the nation.
Surprisingly user values alone were about two orders of magnitude smaller than
total preservation values. This suggests that existence values derived from
knowledge that a unique natural wonder remains preserved may be very large for
the Grand Canyon Region. The accuracy of these estimates, given the difficulty
of quantifying environmental values in dollar terms, is probably on the order of
plus or minus 50 percent. However, the methodology used must still be considered
experimental since this is the first study, to our knowledge, to include an
estimate of existence values.
As in the acid precipitation study, the incremental values people attached
to improved visibility displayed a property that could impart an "all-or-nothing"
feature to the visibility protection decision problem: the incremental benefits
of improving visibility appear to be increasing over a substantial range of
visibility improvements. Although unremarked upon by their authors at the time,
at least two earlier and independent studies of the value of visibility [Randall,
et al. (1974); Rowe, et al. (1980)] have estimated incremental benefits functions
displaying the same prcperty.
Evaluation of Decision Models for Environmental Management
The theme of the final volume of the series diverges from the control
benefits estimation emphasis of the previous eight volumes. Its concern is with
the contributions alternative classes of decision models can make to the
environmental policy problem of: (a) finding the mix and levels of these
activities that are consistent with "homeostatic" ecological functioning and
society's preferences; (b) achieving this mix and these levels; and (c) deciding
the appropriate role of government in a market economy. One section of the
volume contains an abstract discussion of models and a survey of candidate models
for environmental policy. A fuller treatment of those models thought to be
particularly relevant for environmental management problems is presented in a
subsequent section. The theoretical foundations and operational linkages of
these models are described in detail. A final section considers the
informational requirements of each type of model, the extent to which each
satisfies earlier - stated model criteria, and promising areas for future
research with respect to the application of formal decision models to
environmental management issues.
Methodological Conclusions
Benefit-cost analysis is a means of ascertaining the quantity of some
numeraire (e.g., current dollars) that the gainers and losers from some public
action will consider equivalent in value to their respective gains and losses.
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The benefit-cost analyst tries to ascertain what individuals are willing-to-pay
and/or would have to be paid for the public action in a world where markets are
pervasive. His goal is to provide the public decisionmaker with consistently
reliable policy guidance. These ten volumes have demonstrated that this goal is
both simpler and more complex to achieve than has perhaps previously been
recognized.
The goal is simpler in that survey and differential property value
techniques are relatively easy and inexpensive to implement and can readily be
designed to provide estimates of national and regional, as well as local, control
benefits for a large number of classes of pollution effects. Moreover, the
survey technique, though the soiling study in Volume V seems a counterexample,
allows one to capture a variety of classes of effects traditionally viewed as
intangible (e.g., atmospheric visibility) or outside the realm of historical
experience (e.g., a prospective power plant in a national parks region). The
potential valuable applications of this analytically and empirically simple yet
powerful technique have probably not yet been stretched to anywhere near their
limit. Exactly where this limit lies should nevertheless be carefully explored
before embarking on a campaign to apply the technique with much greater frequency
to broader classes of environmental problems.
Whatever the ultimate potential of the survey technique, it seems that many
simple "old reliable" techniques using data on observed rather than contingent
behavior are, in fact, substantially less than reliable. The techniques have
been idly appllied. The empirical consequences of these casual, even
pretheoretical, treatments of underlying biological and economic processes are
forcefully demonstrated in the aggregate mortality study of Volume II and the
agricultural damage study of Volume VI. When using observed behavior as the data
source for the benefits assessment exercise, the biological and the economic
adjustments to pollution-induced stress that the organism can make must be taken
into account when designing the research problem. This accounting will require
the use of more complex models and estimation procedures than have heretofore
dominated if reliable measures for policy guidance are to be obtained.
All policy relevant environmental benefits assessment issues are not
amenable to treatment by simpler, unchanged, or more complex versions of existing
techniques. As was emphasized in the health studies of Volume II, the acid
precipitation study of Volume VII, and the national parks visibility study of
Volume VIII, there are conceptual and measurement issues (e.g.,
irreversibilities, nonconvexities, existence values, ecological diversity) that
limit, sometimes severely, the suitability and/or believability of existing
methods. Until resolved to a greater degree, the analytical and empirical
compromises practitioners now make could, with distrubing frequency, result in
seriously misleading estimates of pollution control benefits. Because partial
or, as with ecological diversity, complete neglect of economically relevant
facets of the environment is involved, these misleading estimates will generally
be biased dowrward: they will underestimate control benefits.
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