Why Economic Valuation Does Not Value the Environment: Climate Policy as Collective Endeavour

Abstract

Economics takes an individualistic approach to human behaviour. This is reflected in the use of ‘contingent valuation’ surveys to conduct cost benefit analysis for economic policy evaluation. An individual’s valuation of a policy is assumed to be unaffected by the burdens it places on others. We report a survey experiment to test this supposition in the context of climate change policy. Willingness to pay for climate change mitigation was higher when richer individuals were to bear higher costs than when, as is usual, no explicit information was provided about cost distribution. This result is inconsistent with the usual interpretation of contingent valuation data. It also suggests that the data may be biased indicators of policy acceptance. Additional survey questions suggest that a collective mode of reasoning is common.