The first comprehensive set of guidelines for estimating economic values when markets do not exist has been released.
These guidelines, titled “Contemporary Guidance for Stated Preference Studies,” are published in the Journal of the Association of Environmental and Resource Economics and provide a set of best-practices for students, researchers, and professionals who estimate these values and use them to support decision making.
“More and more people are realizing that this type of economic valuation can support and enhance decision making,” said Kevin Boyle, a professor in Virginia Tech’s Department of Agricultural and Applied Economics and a lead author on the paper. “We wanted to provide a resource that not only eases entry into this type of value assessment, but also increases the overall caliber of stated-preference studies.”
The paper is written for students looking to learn how to apply the methodology, as well as for seasoned researchers and analysts who want to use best practices in their research. It is written at a professional level for those who want to understand what constitutes a credible value estimate to support decision making. It addresses five stages of practice – survey development and implementation, value elicitation, data analysis, validity assessment, and study reporting.
“The paper provides the most comprehensive and authoritative guidance available for this important valuation technique,” said Robert J. Johnston, a professor of economics at Clark University and the paper’s lead author. “Our goal was to support valid economic value estimates for improvements in environmental, human heath, and other such areas. Feedback from researchers since the paper was published suggests that we have done just that.”
Boyle and Johnston were among a dozen researchers from five different countries collaborating on the paper. Authors included experts in natural resource and health economics, environmental valuation and management, and survey development.
Collaborating on this academic resource, the authors stressed the value stated-preference studies have on setting policy, seeking to support litigation damages, and other management issues that require value information in the absence of market prices or observed choices by people.
“Before this paper, knowledge of stated preference was scattered throughout 1000s of individual journal articles,” said Daniel Phaneuf, editor of the journal where the paper was published. “No effort had been made to translate the many findings into a summary of accumulated wisdom until now.”
The guide represents not only a compilation of respected literature on the topic, but also a well-thought out synthesis of the most relevant recommendations and examples from recent research. The authors researched findings chronicled in journals with an eye toward contemporary conditions and scenarios, adding components to account for changes in research techniques and methods that have occurred since the 1993 NOAA Blue Ribbon Panel report that focused on a narrower set of methods and applications guidance.
“It took us over two years to construct this paper,” said University of Alberta Professor Wiktor (Vic) Adamowicz, one of the paper’s 12 authors. “We consulted a wide array of individuals in the field to construct a document that we hope will enhance the validity and credibility of a range of applications of stated-preference analysis including those in environmental and health economics.”
Hearing from numerous valuation experts via written submissions, conference calls, and workshops, the authors succeeded in producing the first paper of its kind to integrate key points from the literature, as well as advice from academics and professionals experienced in various aspects of stated preference studies.
"While such guidance is common in other fields, this is one of the first synthesized guidance resources on procedures used by economists and is therefore critical for credible studies to support decision making," said Boyle.