Agenda, Volume 3, Number 2, 1996, pages 185-194 The Contingent Valuation Method: A Post-Kakadu Assessment Jeff Bennett rp H E environmental dimension ot public policy-making continues to grow in importance. Decisions as diverse as the relocation of die naval ammunition -A- dump from Sydney and die drainage of saline sub-surface water in die Up- per Soudi-East ol Soudi Australia involve environmental issues diat capture public interest. Economists charged widi providing information to assist policy-makers in diese cases are more and more being requested to deliver esdmates of die values of environmental benefits and costs involved. This has proved dillicult because die traditional valuation tools used by economists are based on data diat are observable in markets. Most environmental benefits and costs, such as biodiversity conserva- tion and air quality, are not bought and sold. New valuation techniques have had to be devised. For instance, where quantifiable relationships can be established be- tween lion-marketed environmental effects and marketed goods, economists have been able to infer die 11011-market values from available market data. People’s pref- erences, as revealed by dieir behaviour in markets, are dius used to estimate dieir values for 11011-marketed environmental goods. For some environmental effects, diese revealed preference techniques are inef- fective because of die absence of any related markets. This is usually die case for die so-called 11011-use values ol die environment. These arise where people experi- ence some gain or loss from die environment even diougli diey do not come in di- rect contact widi it. For example, people may gain satisfaction from die continued existence of an endangered species even diougli diey have 110 desire to see it face to lace. Similarly, people may suffer a loss when diey hear diat colonies of penguins have been harmed because of an oil spill. In such cases, values cannot be estimated dirough die analysis of peoples’ revealed preferences. Reliance must be placed 011 die analysis ol peoples’ stated preferences. One such stated-preference valuation techniques is die Contingent Valuation Mediod (CVM). 1 1lie I ravel Cost Method, for instance, establishes the value of the recreational experience by using people’s revealed preferences for travelling to a recreational site. The Hedonic Pricing Technique uses die relationships existing between market prices (for real estate) and determining environmental factors (traffic noise, air quality) to estimate die value of diose 11011-market factors. 2 The most comprehensive guide to CVM remains Mitchell and Carson (1989). Jeff Bennett is Associate Professor in the School of Economics and Management, University College, The University of New South Wales, Canberra.