are nonconsumptive. This distinction does not influence the valuation, but helps define the effect of incremental changes in the river ecology.


Where water resources generate market-priced goods, a measure of their value is represented by their price, and the social surplus attributed to the water resource can be measured by the usual consumer’s surplus measures. Examples are ecosystem services such as water purification or commercial fish production.

Assigning values to ecosystems and the nature of their supply by river environments lead to economic valuation problems. Most of the challenges on the supply side arise from the difficulty in assigning a particular service to a given set of river characteristics. In most systems that produce economic goods a direct causal relationship, termed a production function, can be assigned between inputs and outputs. This enables a change in a valuable service to be assigned to a change in a particular input. The low flow stage of the river in summer months is an example; however, changes in low summer flows influence many ecosystem services and the effect of increasing summer flows may depend simultaneously on the level of other factors. The integrated nature of river systems means that ecosystem production functions are not only hard to estimate, but may be an inappropriate concept for river ecosystems.

Ecosystem services that are directly related to the economy can usually be assigned an economic value based on market prices and a willingness to pay. An alternative basis of value is the willingness of a consumer to accept compensation. These two forms of valuation may differ widely, because with the latter basis of value, a person’s income is not a constraint. A more familiar example to most people would be medical malpractice, where the willingness to pay and accept differ widely.


Nonmarket services have to be valued indirectly. There are three main approaches. The first includes stated preference methods such as contingent valuation (CV). The second relies on revealed preference methods that include hedonic methods using related goods, travel cost methods, and the cost of averting behavior. The third opportunity cost methods group measures a lower bound on social values by calculating the social cost of providing water related, nonmarket goods.

Despite the attention to sophisticated survey methods, CV is dogged by the problem of strategic answers from respondents who realize that, in the survey, they do not have to make trade-offs against a fixed income that are inherent in economic valuation. Despite these problems, contingent valuation provides ac-

The National Academies | 500 Fifth St. N.W. | Washington, D.C. 20001
Copyright © National Academy of Sciences. All rights reserved.
Terms of Use and Privacy Statement