Valuing Nature: Unavoidable and necessary

A presentation by Ian Bateman OBE FBA FRSA FRSB

Part of our 2020 President’s Symposium.

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Marcus Richmond asked:

How is it possible to assign a monetary unit value to the creation of recreation opportunity?

Professor Bateman replied as follows:

The monetary valuation of recreation has a history of well over 50 years now – and is one of the most well developed areas of environmental economics.

In essence the idea is simple: How do we value something? By looking at what we are prepared to give up to attain or enjoy that thing.

This is exactly the logic we apply when we go into the supermarket – we look at some good X and consider its attributes, and then look at its price P. That tells us how much money we have to give up to get X. Money arguably has no intrinsic worth – rather it’s a stock of possibilities – other things we could have. We consider how much of those other things we are prepared to give up to get X and if we feel it is a good trade then we pay the price P.

That same logic applies when as consider taking a recreational trip T. We have an estimate of how much we would enjoy T based upon its attributes. We then consider what we have to give up to obtain T. Typically that is a mix of travel expenditure and travel time. Both of these are valuable resources. Spending money of travel means we can’t spend that money on other things. Likewise devoting time to travel means we can’t do other things with that time. That too can be turned into money by looking at, for example, how much we pay to shorten travel trips (I once did a study in Italy where a mix of toll roads and free roads make this easy to assess; the toll roads cut travel times but are expensive, the free roads take longer but are free so you can see peoples trade-offs between time and money).

Adding these travel expenditure and travel time costs together gives you a total travel cost. You can then relate this to the number of trips people take and how far they go. What you find is:

• • When you compare two similar visit experiences (e.g. walking in a woodland), on average people prefer to travel less rather than more. i.e. they prefer lower costs than higher costs – just like in the supermarket
  • When you compare different visit experiences (e.g. walking in a woodland versus beach experiences with fabulous swimming experiences, a great clifftop walk and a wonderful pub) then people are prepared to travel very different distances i.e. they are happy to pay higher costs (again just like in the supermarket, comparing a tin of baked beans with a fabulous salmon supper)

In each case you can work out what people are willing to pay for the recreational experience being considered.

When datasets get big enough (and we have fabulous data) you can discern incredible detail in peoples’ behaviour and hence in their valuations. So, for example, we can observe the extra costs people are prepared to pay (i.e. their higher value) for visiting rivers with high as opposed to low water quality. This is useful to decision makers as it shows how much benefit will be generated by increasing that water quality and therefore how much they should be prepared to pay to improve water quality.

https://www.exeter.ac.uk/leep/research/nevo/ is a link to Prof. Bateman’s Natural Environment Valuation Online tool at The University of Exeter’s Land, Environment, Economics and Policy Institute.