qualities. When regression analysis is used to aid in calculating the aggregate 

 bid, the size of the bid is regressed (is the independent variable) on such 

 socio-economic characteristics as race, income, education level, total outdoor 

 recreation days, and travel costs. The mean bid of the populace is then 

 calculated using the estimated regression coefficients. The mean bid times the 

 population size may be used as the estimate of net benefits conferred. However, 

 some researchers use the median bid of the populace (times the population) as 

 the estimate of net benefits conferred. Nonrespondents may be considered as 

 entering a bid of zero dollars, or they may be excluded from the sample. 



The principal criticism of the contingent value method is simply that it 

 is not based on actual market behavior. Many economists believe that the 

 benefits estimated with the contingent valuation survey instruments are flawed 

 by several types of bias. These include (Thayer 1981) starting point bias (the 

 size of the initial amount that the recreationist is asked to exchange for his 

 use of the resource may influence the size of his maximum bid); hypothetical bias 

 (the inability or unwillingness of the respondents to predict what they actually 

 would pay if required to do so); and strategic bias (the maximum bids may differ 

 from the true willingness-to-pay of the respondents because the participant may 

 attempt to use the questionnaire to direct the expenditure of public funds). 

 Also, if various qualitative site characteristics such as the abundance and 

 diversity of wildlife confer off-site benefits, the TCM will underestimate the 

 social value of the site (Loomis 1987a), but the CVM captures both on-site and 

 off-site benefits. 



The use of this approach to impute off-site values to an outdoor recreation 

 site, however, is controversial. For example, the survey instrument may ask 

 respondents to estimate the existence value of the site. This is the dollar 

 value that is attached by respondents to the fact that the site exists. 

 Nevertheless, the potential of willingness-to-pay approaches to estimate changes 

 in benefits conferred from on-site quality changes strongly suggests that this 

 method will be widely used to value changes in quality variables such as instream 

 flow levels. 



THE DISTINCTION BETWEEN FACTORS OF PRODUCTION 

 AND FINAL GOODS AND SERVICES 



One of the useful distinctions in conventional economic analysis is that 

 between final goods and services and factors of production (factor inputs) used 

 to produce the final goods (Friedman 1962). The distinction is often vague in 

 conventional and natural resource economics. The services of a waitress in a 

 restaurant is a factor of production from one point of view; but from another 

 vantage point, it is also one of the important services provided by the 

 restaurant. Habitat is a factor input in the production of various target 

 species, such as migratory waterfowl (Hammack and Brown 1974; Lynn et al . 1981; 

 Johnson and Adams 1988). This should mean that habitat has no direct value to 

 the angler or hunter. However, streamflow habitat has been directly valued in 

 a series of recent papers (Walsh 1980; Daubert and Young 1981). I know of no 

 wetlands valuation efforts that use this approach, but Loomis (1987b) has shown 



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