WILLINGNESS TO PAY TO AVOID EXTINCTION

Lynne Kiesling

How cool is this? Tim at Environmental Economics points us to an upcoming Sotheby’s auction of saplings from a tree thought to be extinct.

This is a nice example of a field experiment in something that is awfully difficult to do: determining aggregate willingness to pay to avoid extinction.

In my environmental economics class I ask students how much they are willing to pay to reduce the probability of tiger extinction (because I love tigers!). Problem is, you guessed it, a version of the knowledge problem. People can only evaluate willingness to pay when they have a context in which to evaluate opportunity cost, and typically it’s through market processes that we discover our subjective evaluation of opportunity cost. But if you just walk up to someone at the zoo and ask them how much they are willing to pay to avoid tiger extinction, they have no frame of reference for determining that price. So the numbers you would get from such a survey are highly suspect.

This auction provides an alternative that could generate valuable and more accurate data on WTP to avoid extinction. Auctions are easier to do for plants than for animals, though, and entire ecosystem areas are even harder than that. [irony] Oh, wait, I have a thought … what about clearly and transparently defining and enforcing property rights? I wonder if that might do it … [/irony]


2 thoughts on “WILLINGNESS TO PAY TO AVOID EXTINCTION

  1. “Oh, wait, I have a thought … what about clearly and transparently defining and enforcing property rights? I wonder if that might do it … [/irony]”

    I used to think the Fifth Amendment had done that. Then the Supreme Court “amended” the Fifth Amendment. Now you are suggesting that we amend the amendment to the Fifth Amendment. I think I’ll go take a nap.

  2. A similar problem exists in asking people how to value a public good. If you are thinking of building a bridge, there’s no point estimating potential demand for it on the basis of the numbers of people who currently swim across the river.

    (Probably you know this example. Your post made me consider it in terms of the different opportunity costs, given different contextual framings — currently swimming across vs. not crossing the river.)

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