Primary Types of Economic Analyses
Below is a brief summary of the primary types of economic analyses that can be used in making coastal and shoreline management decisions.
For a more in depth overview and practical considerations related to the methods, including when each method is most appropriate, and the strengths and limitations of each method please visit: www.ecosystemvaluation.org.1
Contingent Valuation
- A common method for estimating economic "non-use," "passive use," or "existence" values for an ecosystem or site.
- Asks people to directly state their willingness to pay for specific environmental services, based on a hypothetical scenario.
Travel Cost
- Estimates economic values associated with ecosystems or sites that are used for recreation.
- Assumes that the value of a site is reflected in how much people are willing to pay to travel to visit the site.
Hedonic Pricing
- Estimates economic values for characteristics of an ecosystem or site that have a direct effect on the market price of some good.
- Most commonly applied to variations in housing prices that reflect the value of local environmental attributes.
- Estimates the difference in total economic costs and benefits to society associated with a policy, program, or action.
- Can include immediate, future, tangible and intangible costs and benefits.
Benefits Transfer
- Estimates economic values by transferring existing benefit estimates from similar economic studies already conducted for a similar location or issue.
- Uses economic benefits of a resource in one location as an estimate of the value of a resource in another (similar) location.
Damage Cost Avoided, Replacement Cost, and Substitute Cost Methods
- Estimates economic values based on costs paid to avoided damages resulting from lost ecosystem services, costs paid to replace ecosystem services, or costs paid to providing substitute services.
- Assumes ecosystems or sites are worth at least what people are willing to pay to protect or replace them.
1 EcosystemValuation.org was developed by researchers from the University of Maryland and the University of Rhode Island, in a project funded by the National Oceanic and Atmospheric Administration (NOAA), the US Department of Agriculture, and the Natural Resources Conservation Service.