Contingent valuation
Also called: CVM · Topic: Environment and Sustainable Development · NCERT: Beyond NCERT
Meaning
Contingent valuation (CVM) puts a money value on environmental goods that are not sold in markets, such as clean air, a wetland or a rare species. It uses surveys that ask people directly. Either they say how much they would pay to keep the good (willingness to pay), or how much they would accept as compensation for losing it (willingness to accept). It is called a stated preference method because it relies on what people say, not on what they actually buy. It is the only method that can capture non-use values, such as the value of simply knowing a species exists.
Example
A survey asks Delhi residents how much extra they would pay each month for a scheme that halves winter smog. The average answer, multiplied by the number of households, gives a rough value of cleaner air for policy decisions.
Don't confuse with
- Hedonic pricing: this is a revealed preference method. It infers value from real market behaviour, such as house prices, instead of asking people.
Related concepts
- Natural capital
- Ecosystem services
- Total economic value
- Hedonic pricing
- Payment for ecosystem services
- Green accounting
- Adjusted net savings
- Ecological footprint
- Earth Overshoot Day
- Carbon footprint