That is the question Chris Bennett asks in a provocative piece on forest valuation prepared for a workshop held at CIFOR in December.
Bennett first lays out the compelling logic behind the recent proliferation of attempts to value forests in dollars. Since one cause of policies promoting forest resource depletion seems to be the failure to fully account for the social and economic costs associated with forest loss, it follows that if policy makers only knew the ’true’ value of forests they could make more informed decisions.
Despite this argument’s intuitive appeal, Bennet says important questions about the validity and usefulness of forest valuation remain. Persistent indications suggest that both the theory and practice of forest valuation suffer from serious drawbacks. These include: theoretical difficulties, methodological problems, resource valuation’s high cost, limited use of valuation in resource allocation decisions, and the danger valuation will divert attention from more important determinants of forest destruction.
Theoretical Difficulties and Methodological Problems
Despite practioners’ attempts to refine valuation methodologies awkward problems remain. It has proved problematic to value goods and and services that are not sold in markets, and even estimating values for marketed goods can be difficult if one is forced to project values into the future.
This problem is magnified where the concept of ’willingness to pay’ is alien or unacceptable. People’s contingent values may only be vaguely represented in monetary terms and valuation surveys frequently get responses such as, ’wildlife should not be measured in dollars’. Some respondents feel decisions about wildlife existence and similar issues involve moral considerations that are not readily amenable to pricing. Tests have found responses to contingent valuation surveys to be internally inconsistent, because of an absence of clear preferences and not only because of methodological flaws.
Respondents may answer ’what if’ questions more to express support for good causes than as consumers displaying actual preferences. Major differences have been noted between initial and follow-up question responses in willingness to pay studies and a twofold difference between hypothetical and actual willingness to pay is not unusual.
A one dimensional measure of price cannot reflect the divergent interests of individuals, groups and classes. Weighting can address some of the concerns but there is neither a correct weighting for conflicting values nor an objective definition of social welfare (for current and future generations).
Limited Impacts on Resource Allocation Decisions
Although the literature is replete with results of resource valuation studies, little evidence suggests these studies have had a major impact on actual policy. Even in industrialised economies where resource valuation is commonly applied, most resource allocation decisions are not based on these studies.
In Indonesia, in particular, resource valuation seems to have had limited impact on policy so far. The only case Bennet could identify where a valuation study was apparently influential was the decision to protect 350,000 hectares of mangrove forest in Bintuni Bay, Sorong, Irian Jaya.
Another problem is that demonstrating a resource’s economic value is one thing, capturing that value is quite another. According to most valuation exercises, sequestered carbon provides a major share of forest benefits. Some studies show the carbon value of forests associated with reduced global warming is even higher than their timber value. But it remains uncertain whether anyone will ever pay forest managers for the global service of carbon sequestration? Forest benefits related to reduced river sedimentation and soil erosion and biodiversity conservation raise similar issues.
Losing Sight of Other Policy Issues
Comprehensive resource valuation requires high investments in human and financial resources. Meanwhile, alternative approaches, which might have greater potential for informing decision making and resolving conflicts, may be overlooked. These might include providing credible tenurial assurances for forest managers, strengthening forest management institutions, or eliminating subsidies for land-clearing.
Efficiency is only one criterion in making decisions affecting tropical forests. Even if all or most forest resource values can be identified and captured, some resource allocation decisions should be made without sole reference to a forest’s monetary value. If commercial, large-scale logging in state forests is found to generate more revenue, should decision – makers automatically prefer this land use over more traditional local uses? Is there not a higher-order policy issue here, namely, rights of access based upon historical and constitutional factors? It is clearly useful for policy makers to ask how much a forest is worth. But the issue of property rights — whose is it — is no less important and is largely omitted in forest valuation exercises.
Despite all these limitations, Bennet concludes that resource valuation is probably here to stay. It can contribute to better informed resource allocation decisions, but it is not necessarily essential for making sound policy. And it is important no to let the current interest in valuation divert attention away from other fundamental policy issues.
Because of the political nature of policy, different analysts will inevitably use distinct assumptions in their resource valuation studies to support their own policy preferences. Debate about achieving full resource valuation may ultimately shift from the issue of whether ’any number is better than no number’ to which, of an array of numbers (from different interest groups) is the better number? When it comes to this it may be useful to have a number handy, but your number will never be as good as mine.
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Comments and requests can also be addressed to Neil Byron, who is collaborating with Chris Bennet in this work. His e-mail address is: mailto:firstname.lastname@example.org