How do we put a value on conservation land?
There are basically two concepts associated with valuing land. These are identified as the market price approach and non-market valuation. The market price approach is relatively straightforward and involves establishing value for goods traditionally sold in commercial markets.
However, much of the land issues that confront the Florida Fish and Wildlife Conservation Commission may be classified as environmental lands. Here, there is a fundamental distinction in economics between market and non-market goods and services. Goods and services in an established market are sold for prices that reflect a balance between the cost of production and what people are willing to pay.
The opposite is true for non-market goods (environmental lands) as these goods and services are not directly bought and sold in commercial markets (clean air and water, recreation use, etc.).
Non-market values can be generally categorized as use and non-use or passive values. Use values are based on actual use of the land and may be defined as the value derived from the actual use of a good or service, such as hunting, fishing, birdwatching or hiking.
Non-use values are values that are not associated with actual use. These values may include (option value) value for a good and service for their potential to be available in the future. In this instance, people may be willing to pay to ensure the supply of the environmental good sometime in the future.
Existence value reflects benefits from simply knowing that a certain good or service exists. For example, some people derive satisfaction from knowing that the Grand Canyon exists, even though they may never see the Grand Canyon. Bequest value refers to benefits from ensuring that certain goods will be preserved for future generations. Therefore, total economic value is the combination of use and non-use values.
Listed below are typical non-market valuation techniques used by the FWC.
Travel Cost Method - estimates economic values associated with sites that are used for recreation. Assumes that the value of the site is reflected in how much people are willing to pay to travel to the site. This method is limited to the measurement of use values.
Contingent Valuation Method - asks people to directly state their "willingness to pay" for specific environmental services based on a hypothetical scenario. This is the most widely used method for estimating non-use values.