Individual preference-based values and environmental decision making: Should valuation have its day in court?

Published date15 August 2002
Date15 August 2002
AuthorAndreas Kontoleon,Richard Macrory,Timothy Swanson
Andreas Kontoleon, Richard Macrory
and Timothy Swanson
The paper focuses on the question of the extent to which individual
preference-based values are suitable in guiding environmental policy and
damage assessment decisions. Three criteria for "suitableness" are
reviewed: conceptual, moral and legal Their discussion suggests that." (i)
the concept of economic value as applied to environmental resources is a
meaningful concept based on the notion of trade-off," (ii) the limitations of
the moral foundations of cost-benefit analysis do not invalidate its use as
a procedure for guiding environmental decision making; (iii) the input of
individual preferences into damage assessment is compatible with the basic
foundations of tort law; (iv) using individual preference-based methods
provides incentives for efficient levels of due care; (v) determining standing
is still very contentious for various categories of users as well as for
An Introduction to the Law and Economies of Environmental Policy: Issues in Institutional
Design, Volume 20, pages 177-214.
Copyright © 2002 by Elsevier Science Ltd.
All rights of reproduction in any form reserved.
ISBN: 0-7623-0888-5
aggregating non-use values. Overall, the discussion suggests that the use
of preference-based approaches in both the policy and legal arenas is
warranted provided that they are accurately applied, their limitations are
openly acknowledged and they assume an information-providing rather
than a determinative role.
The role of individual preferences and cost-benefit analysis (CBA) in environ-
mental decision making has been extensively debated by economists (e.g. Kopp,
1991, 1992; Freeman, 1993), lawyers (e.g. Daum, 1993; Shavell, 1993;
Boudreaux et al., 1999; Posner, 1980, 1983; Kennedy, 1981) and philosophers
(e.g. Hubin, 1994; Sagoff, 1994; Dworkin, 1980; Kelman, 1981). Yet, despite
the voluminous literature, the discussion remains disordered and confused.
Further, though CBA has been widely used in practise (primarily in the U.S.
but now increasingly in the EU as well) its actual influence on policy has been
relatively limited. 1 Despite this limited acceptance and checkered history, the
European Union is now considering a new Directive on Civil Liability that
might imply bringing valuation into European courtrooms. Does this make
sense? Should valuation have its day in court?
One of the reasons for the ongoing controversy over valuation and CBA
within academic circles, and for the hesitancy in using CBA in the policy and
legal arenas, can be traced to an entanglement of distinct issues. 2 For example,
commentators typically confuse issues of measurement (e.g. 'Are estimates of
individual values valid?') with conceptual issues - (e.g. 'Is the economic concept
of value coherent?') or with moral issues (e.g. 'Are decision makers and the
courts morally obligated to consider individual preferences?' or legal issues
(e.g. 'Do economic values adhere to the current legal framework of damages?').
It is far beyond the limits and scope of this paper to comprehensively present
and review all the various aspects of the debate, and all the forms of
confusion that exit. Instead the aim of this paper is to provide an eclectic survey
of the issues concerning this debate. More specifically we focus on the
question of the extent to which individual preference-based values are suitable
in guiding policy and damage assessment decisions related to environmental
resources. Three criteria for "suitableness" are reviewed here: (1) the
conceptual; (2) the moral; and (3) the legal. 3
The conceptual issues that are most relevant to this discussion have to do
with the notion of 'value' as understood in economics. Within an economic
context individual preferences over environmental goods and services are
manifested through individual choices which in turn are used by the economist
Individual Preference-Based Values and Environmental Decision Making
to infer individual
economic values.
Further, most economists agree that
individuals make choices from which we can infer both so-called 'use' and
'non-use values' for environmental resources. 4 Here we will focus on the
conceptual debate relating to non-use values (see for example Quiggin, 1998,
1993). That is, is the economic concept of non-use value sufficiently coherent
to be used in environmental policy and damage assessment or is it fundamen-
tally flawed and unsuitable?
Beyond conceptual considerations the role of individual preferences in
environmental decision making will be discussed on moral and legal grounds.
The main question under discussion concerns whether the concept of economic
value is compatible with the moral basis of environmental decision making or
with the legal framework for damage assessment decisions. That is, if the concept
is coherent and consistent, is it also socially acceptable and/or legally viable?
One last note on the organisation of the issues. We have intentionally left
out of the discussion the issues on measurement. These refer to the general
question on whether individual economic values (as expressions of the
intensity of individual preference) can be validly and adequately measured. No
doubt these issues are very important. 5 Yet, they are not the most fundamental
ones. For the sake of argument the discussion that follows accepts that economic
values are readily and validly measurable. Instead, we proceed with the more
fundamental issues of the debate which concern the conceptual, moral and legal
validity of using preferences in environmental decision making.
The organisation of the paper is as follows: The following section briefly
classifies and reviews types of decision making processes in accordance with
the manner and degree to which they rely on individual preferences or expert
opinion. Section 3 deals with various objections that have been raised with
respect to the adequacy of the concept of economic value as applied to
environmental policy decisions. Section 4 turns to the fundamental moral
question of whether policy makers and courts are morally obligated to utilise
information from individual preference-based values. Finally Section 5 reviews
some key legal issues surrounding the debate on the use of individual prefer-
ence-based techniques for environmental policy and liability decisions.
One way of classifying different approaches to environmental decision making
is in accordance with their degree of reliance upon individual preference-based
values. All forms of decision making rely on individual preference to some
extent. The major difference lies in the manner in which society (or the policy

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