spill (see Chapter 5). In the Catskills study (see also NRC, 2000), a critical decision was made early on to not attempt to value the entire suite of services provided by the watershed but rather to focus on the service of water purification. More specifically, the issue was whether the restoration of the Catskills watershed would be more cost-effective than constructing a new drinking water filtration system as a way of addressing New York City’s drinking water quality problems. This definition of the issue was determined by policymakers, not by the analysts.
This very specific and policy-oriented focus meant that it was not necessary to identify and attempt to value all of the services provided by the watershed, but rather to ascertain whether the cost of restoring its water purification services exceeded or was less than the known cost of a replacement for them. As discussed in Chapter 5, this focus greatly simplified the valuation task because a full economic valuation of the services of the watershed would have required the following: (1) that all sources of value be identified, such as water purification, tourism, support of biodiversity, esthetic values, recreational fishing, streamflow stabilization, and so on; (2) that each of these services be quantified; and (3) that each service be valued. It was not even necessary to establish the restoration cost exactly, but only to compare it to the cost of the alternative (i.e., construction of a drinking water filtration system). Since the outcome of this comparison was that the cost of restoration was less than that of the alternative, New York City decided to spend more than one billion dollars on increased protection and restoration of the watershed (NRC, 2000). It is worth emphasizing that no aspects of the services of the Catskills ecosystems were valued to reach this conclusion; watershed restoration costs were compared to those of an alternative source of the desired service. If this answer had been different—if, for example, the cost of restoration had exceeded the cost of a new water filtration system—it might still have been appropriate to restore the watershed. However, in that case, a complete economic justification of such a decision would have required the valuation of a sufficient number of services of the Catskills watershed to show that the total economic value exceeded the costs of restoration, and offered New York City an attractive return on its investment. Such a valuation exercise would have been an order of magnitude more complex. Thus, not only was the question framed in a way that simplified the analysis, but the existing data were conducive to supporting the simplest possible outcome. The decision tree in Figure 6-1 illustrates this point—investigation of the New York City watershed followed the upper part of this decision tree, leading to a conclusion that avoided two complex steps that would otherwise have been required.
The Exxon Valdez case presents a different situation (Carson et al., 2003; Hanemann, 1994; Portney, 1994) as legal liability issues required estimates of damages to natural resources. A complete economic valuation of the costs of the massive oil spill would have required the following: (1) identification of all of the categories of impacts of the spill such as loss of fish catch, loss of tourist revenues, deaths of many species of birds, fish, mammals, and invertebrates; (2) quantification of all of these types of impacts (e.g., how much revenue from