INTRODUCTION

As i n d i c a t e d i n t he I n t r o d u c t i o n , an i m p o r t a n t f a c t o r in t h e success o f governments' a t t e m p t s t o p r o v i d e a p p r o p r i a t e l e v e l s o f pr es er ved n a t u r a l ecosystems usi ng t he i n f o r m a t i o n generated by b e n e f i t - c o s t ana lys es o f p u b l i c a c q u i s i t i o n s o f such a r e as , i s the a ccur ac y o f t h e b e n e f i t measurements i n c o r p o r a t e d i n these a n a l y s e s . P a r t I ' s a n a l y s i s o f t he t h e o r e t i c a l and p r a c t i c a l problems o f measuring t he communi ty' s v a l u a t i o n s o f p r e s e r v a t i o n b e n e f i t s , f o r use i n b e n e f i t - c o s t a n a l y s e s , begins i n t h i s c h ap t er w i t h a c o n s i d e r a t i o n o f t he gener al concept o f b e n e f i t s as i t a p p l i e s t o each i n d i v i d u a l w i t h i n t h e community - g i v e n t h a t b e n e f i t - c o s t a n a l y s i s r e q u i r e s t h e use o f t h e sum o f a l l t h e b e n e f i t v a l u a t i o n s o f t he i n d i v i d u a l s c om p r i s i n g t h e community,as t h e community v a l u a t i o n . Such a gener al e x a m i n at i o n i s i m p o r t a n t t o t he c o m p i l a t i o n o f a

l i s t o f t e c h n i q u e s s u i t a b l e t o t he t a s k o f measuring each type o f b e n e f i t , as i t p r o v i d e s a base f o r t he assessment o f t h e v a r i o u s t e c h n i q u e s i n terms o f t h e i r a b i l i t y t o r e l a t e c o n s i s t e n t l y w i t h t h e t h e o r e t i c a l concept o f a b e n e f i t so e s t a b l i s h e d .

S e c t i o n 1.2 begins w i t h a b a s i c i n t r o d u c t i o n t o t h e b e n e f i t c on c e p t , us i ng t h e M a r s h a l l i a n consumer's s u r p l u s measure o f

w e l f a r e change f o r t he example o f a movement i n t h e p r i c e o f a good. The H i c k s i a n compensating v a r i a t i o n measure i s then shown t o be t h e o r e t i c a l l y more a p p r o p r i a t e i n t h e same c i r c u m s t a n c e . Se ct ion 1. 3 examines t h e M a r s h a l l i a n and H i c k s i a n measures f o r t he s i t u a t i o n

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of a change in the quantity of the good being considered: clearly, where governments elect to provide the benefits of natural

ecosystem preservation at zero cost, i t is a change in quantity provided rather than a change in price which must be considered. It is noted in Section 1.4 that where property rights are adequately defined, the distinction between individuals who benefit and those who lose from a change in resource allocation is clear, and the benefit-cost analyst is able to proceed to implement the Kaldor- Hicks criterion with an unambiguous definition of benefits and costs. However, the section points out the d iffi c u lt ie s involved in

situations where property rights are not defined or are in conflict, and introduces the Hicksian equivalent variation and surplus

measures as possible alternatives to the compensating measures. Sections 1.2 to 1.4 are essentially concerned with the

theoretical aspects of the Marshallian and Hicksian benefit measures - Section 1.5 seeks to place these considerations in perspective by analysing some of the implications of practical use. The chapter concludes, in Section 1.6, that while the Marshallian consumer's surplus is generally the most practical measurement concept, i t may not be applied easily when the ordinary demand curve is not observable directly from a market - the situation applying to many of the benefits of natural ecosystem preservation. The measurement al ternatives, in the case of non-marketed goods, are concluded to be the Marshallian consumer's surplus based on the inference of the demands for related goods, and the Hicksian concepts based on

are the bases f o r the pr a c ti c a l measurement techniques reviewed in Chapter 2.