The concept of existence value was first raised in one of the most influential papers in environmental economics by John Krutilla (1967), where he advocated a move away from the Pigouvian approach to conservation of natural resources in terms of the optimal inter-temporal utilization of natural resource stocks to an appreciation of several unique features of such resources. These included non-renewability, the possibility of option value, and existence, or non-use, value. Krutilla was advocating nothing less than pushing back the boundaries of the discipline: economists should consider more than just the valuation of common tangibles. The controversy that this assertion caused remains today, and divides most economists into two camps. Those such as Rosenthal and Nelson suggest that existence values are not to be treated merely as another type of good, as they represent something quite different, while those such as Kopp believe that what existence value is is not as important as the fact that we can envision it as consistent with neoclassical theory, and therefore are warranted in measuring it in a total valuation framework.
To assess the validity of these competing claims, the appropriate domain of discussion requires more than just the tools of economic analysis. As Portney (1994) writes: "…the critical scrutiny directed at the contingent valuation method has led some economists to think more deeply about cognitive processes, rationality, and the nature of preferences for all goods, public or private".
[...] For example, an agent's existence value for the Grand Canyon, while apparently coming from altruistic motives for the benefit of those who may visit it and enjoy its natural beauty, can be redescribed in terms of wanting to enjoy the satisfaction of knowing that the Grand Canyon is there to be enjoyed. Hence, all motivation can be redescribed in terms of psychologically egoistic motivation, so that the entire discussion is a red herring: wherever existence value comes from, if it is a value that comes from agents for goods, it is compatible with the neoclassical view. [...]
[...] In section three, the meta-ethical side issues of the importance of motive on the assessment of existence value, the validity of psychological egoism implicit in neoclassical economics are discussed and the case against considering existence value as a conventional pure public good is made. This paper is directed towards the informed economist, rather than the philosopher, and the mode of analysis shall be skewed accordingly. For brevity, a working knowledge of cost-benefit analysis, and in particular the Contingent Valuation Method (CVM) is assumed, as is a good knowledge of welfare economics, in particular Hicksian and Marshallian demands and Arrow's Impossibility Theorem. [...]
[...] Thus the aggregate benefits remain less than costs with the inclusion of existence value: SA + SB < C Therefore, when individualistic altruism prevails and the user pays all the costs, adding in existence value does not change the cost benefit outcome. We can add a caveat that if there are N users, and A cares more about a restricted group in particular, then there may be a different outcome. For example, in an income distribution problem, if there are three agents and one agent has individualistic altruism for one of the other agents, then the optimum distribution involves giving the cared-for agent more income than the others to maximize aggregate utility. [...]
[...] However, this may not be as surprising as it sounds: a change in context can be considered a change in the good that an individual is being asked to value: this is the motivation for advertising and sales tactics, such as those used by car salesmen. On this view, if context didn't matter, this would constitute a violation of neoclassical theory. The embedding phenomenon refers to the fact that people's valuations of resources do not seem to be responsive to the quantity of the environmental good: for example people's valuations for the preservation of and 20,000 birds of an endangered species may hardly differ at all. [...]
[...] Establishing a protocol is not the central aim of this paper, but inasmuch as existence value is considered the residual between use value and total value, it seems that there is a prima facie case for including it as the first in the sequence; this view is buttressed by the notion that existence value involves knowledge of a state of the world, and that use (in many cases) requires that the agent has pre- existing knowledge of the good they are using, hence existence value is at least prior to use, and may be considered a precondition to use value. [...]
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