value measure that would restore people to their original level of satisfaction is WTA compensation. In contrast, in the freshwater wetland restoration example, the presumed property right is in the existing fishing conditions and the appropriate value measure is WTP to obtain the improvement in fishing conditions. Unfortunately, economists have had difficulty in measuring WTA (Boyce et al., 1992; Brown and Gregory, 1999; Coursey et al., 1987; Hanemann, 1991) and most empirical work for policy applications involve measures of WTP. This issue arises for a variety of reasons, such as survey respondents not being familiar with WTA questions and because most respondents have incomplete knowledge of relative prices. Thus, most of the following discussion focuses on the use of valuation methods to estimate WTP.

Why Valuation Is Required

Chapter 2 discusses the importance of economic valuation as input into decision-making and, in particular, for aiding the assessment of policy choices or trade-offs concerning various management options for aquatic ecosystems. As Chapter 3 has illustrated, given the complex structure and functioning of aquatic and related terrestrial ecosystems, these systems often yield a vast array of continually changing goods and services. The quality and quantity of these services are in turn affected by changes to ecosystem structure and functioning. Thus, alternative policy and management options can have profoundly different implications for the supply of aquatic ecosystem services, and it is the task of economic valuation to provide estimates to decision-makers of the aggregate value of gains or losses arising from each policy alternative.

Valuation is especially important because many services provided by aquatic ecosystems have attributes of public goods. Public goods are are nonrival and nonexcludable in consumption, which prevents markets from efficiently operating to allocate the services. An example would be wetland filtration of groundwater. As long as the quantity of groundwater is not limiting, everyone who has a well in the area can enjoy the benefits of unlimited potable groundwater. However, in the absence of any market for the provision of water through wetland filtration, there is no observed price to reveal how much each household or individual is willing to pay for the benefits of this service. Although everyone is free to use the aquifer, no one is responsible for protecting it from contamination. This is not an action that could be undertaken by a company and provided for a fee (price) because no individual has ownership of the wetland filtration process or the aquifer. However, nonmarket values can be estimated to assess whether the benefits of collective action—perhaps through a state environmental agency or the U.S. Environmental Protection Agency (EPA)—exceed the cost of the proposed actions to protect the wetland, and consequently the wetland filtration process and the quality of the water in the aquifer for drinking purposes.

It is also the case that some aquatic ecosystem services indirectly contribute



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