Accounting for subsistence needs in non-market valuation: a simple proposal

Abstract

Revealed and stated preference techniques are widely used to assess willingness to pay (WTP) for non-market goods as input to public and private decision-making. However, individuals first have to satisfy subsistence needs through market good consumption, which affects their ability to pay. We provide a methodological framework and derive a simple ex post adjustment factor to account for this effect. We quantify its impacts on the WTP for non-market goods and the ranking of projects theoretically, numerically and empirically. This confirms that non-adjusted WTP tends to be plutocratic: the views of the richest -whatever they are -are more likely to impact decision-making, potentially leading to ranking reversal between projects. We also suggest that the subsistence needs-based adjustment factor we propose has a role to play in value transfer procedures.The overall goal is a better representation of the entire population's preferences with regard to non-market goods.

Do differences in brute luck influence preferences for redistribution in favour of the environment and health?

“…In addition, the wealthy have other means of avoiding the negative consequences of environmental quality, often are less exposed to negative environmental externalities (air or water pollution, toxic waste, noise, natural hazards). They are also better equipped to reduce negative environmental externalities through costly behaviours, like avoidance, changing locations or better prevention (Champonnois and Chanel, 2022). Finally, the effects of perceived brute luck are well aligned with established theories suggesting that longer-term (environmental) collective interest relates to dispositional optimism.…”