Misuses of Contingent Valuation

Although contingent valuation can be an important component in calculating the benefit-cost ratio of environmental policies, it is not universally applicable. For example, extrapolating the public’s willingness to pay for preservation of specific ecosystems and biomes led Robert Costanza et al. to conclude in an article that appeared in Nature (1997) that the economic value of the world’s ecosystems exceeds the total global gross national product. Contingent valuation loses validity when used to transfer benefits calculated from specific situations or locations to a much larger or different paradigm.


Contingent valuation is not a valid tool when the real cost involved in preventing or mitigating damage far exceeds the economic capacity of society to address the problem or when the problem cannot be corrected. The problem of removing all of the plastic debris from the oceans is an example. Although we can institute policies that will reduce the amount of plastics going into the oceans and remove a portion of the existing debris, it is impossible to make the oceans “plastic free” at any cost. Another example is using contingent valuation to determine the willingness to pay to preserve an endangered species that is beyond recovery. Applying contingent valuation to these types of problems does not produce useful results.

The usefulness of contingent valuation largely depends on the questions asked and the scope of the problem. Individual countries cannot solve global problems by themselves, thus attempting to quantify the amount Americans are willing to pay to solve their portion does not solve the problem. In fact, the efforts of environmentally conscientious countries can result in other countries acting as free-riders. Attempting to extrapolate the results of limited studies to other locations or larger areas can result in erroneous conclusions. Applying contingent evaluation to unsolvable problems or economically infeasible solutions is inappropriate.