Environmental variables affect economic well-being in three major ways: direct effects on consumption or income of households, industry, and government; accumulation in the environment of stocks of residuals that then affect economic activities or economic assets; and effects on the service flows of economic assets, including capital stock, natural resources, and human resources. The main value of natural-resource accounting is in providing a complete picture of the role these resources play in the economy. Sometimes this information can be used to judge the overall sustainability of the use of resources, while at other times it can be used to manage natural and environmental resources and to inform public policy choices.
4.2 For valuation, the panel recommends that BEA rely primarily on market values or proxies of market values that are based on actual behavior. Contingent valuation, while sometimes useful for other purposes, is currently of limited value for environmental accounting in the context of the economic accounts.
Valuing environmental goods and services requires distinguishing between private and public goods. Market prices provide the marginal valuations for private goods, but determining the value of public goods requires the summation of individual values. Moreover, there may be no behavioral traces for individual valuation of public goods.
Price data are relatively reliable for private market goods produced from forest and agricultural assets, such as timber stumpage, livestock, and land use and quality. Values for near-market goods—those that have direct counterparts in the market—can be constructed by comparing the near-market goods with their market counterparts, adjusting for quality as necessary. Techniques for valuation of public goods are still under development. Some techniques—such as hedonic or travel-cost studies—rely on behavioral or market-based estimates; while these estimates are subject to significant measurement errors, they are conceptually appropriate in economic accounts. Other techniques, such as contingent valuation, are not based on actual behavior, are highly controversial, and are subject to potential response errors.
4.3 Quantitative data on many natural-resource assets are currently relatively adequate. However, the data on many environmental variables are at present poorly designed for the construction of environmental accounts. The panel recommends that greater emphasis be