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Will Delavan

Last modified: 2011-09-08


Over the past half century economists have developed techniques to measure how individuals value changes to goods and services that are not traded in markets (non-market goods.)  Defining economic value in terms of what an individual is willing-to-pay for a particular good or service is difficult when price and quantity data are absent.  Since no behavioral trail exist for these non-market goods, economists have developed methods to measure value.  Much of this economic research has been devoted to how individuals value changes, realized or potential, to environmental goods and services—a prime example of non-market goods.  Environmental goods and services are valued both because individuals use the environment directly for recreation, and for physical goods and services that it offers; and indirectly through ecosystems and human health that a clean environment supports.   This paper explains the taxonomy, theory, and methods underlying environmental economics with a specific emphasis on valuation.  It explains how economic theory identifies how households value the environment, how dollar values are derived for protecting or cleaning up the environment, and how these non-market values estimates of the benefits of environmental goods and services are used in decision making.  The paper provides a review of the environmental economics research specific to Pennsylvania, which has rich history of cutting edge environmental economics research.  The paper outlines the particular challenges researchers face when measuring the potential environmental impacts of Marcellus Shale drilling in Pennsylvania; and finally how effective measurement can improve economic well-being for businesses and households in Pennsylvania.


environmental economics, valuation, measurement