for all direct and associated costs of 

 participation. In recreational activi- 

 ties this would include the associated 

 cost of travel, lodging, special equip- 

 ment, and similar items. It is the cost 

 of getting there or the total cost of 

 participating which is perceived as the 

 real value of a natural resource used in 

 this manner. 



The fourth method of measurement is 

 the social value to the participant. 

 This is essentially a measure of how 

 much each participant or each consumer 

 values the activity or the goods or ser- 

 vices he is purchasing, such as a fish- 

 ing experience or a hunting experience. 

 Perhaps more accurately, the way the 

 economist measures this social value is 

 the willingness to forgo the experience. 

 In other words, instead of asking how 

 much is one willing to pay, one would 

 ask how much is one willing to give up 

 to participate in this activity? Would 

 one give up a whole day's wage or would 

 one give up two days' wages for half a 

 day of fishing? That would be the social 

 value as we measure it. According to 

 most of the research we have done, this 

 method gives the highest value. The di- 

 rect market value generally gives the 

 lowest value. 



Another evaluation technique I wish 

 to mention is what we call the reserva- 

 tion value to potential participants. 

 One will also see this referred to as 

 "option demand." The reservation value 

 is a measure of the willingness to re- 

 serve or maintain an opportunity to par- 

 ticipate or enjoy a good in the future. 

 In other words, I am buying an option 

 for future participation. I do this by 

 paying dues to the Sierra Club to pre- 

 serve an area or by making a contribu- 

 tion to a museum for an art piece. The 

 option demand is simply a normative 

 judgment that I would like to have the 

 opportunity for future participation in 

 an activity. It is irrelevant whether 

 or not I ever participate. This is the 

 driving force behind the valuation of 

 much of our natural resources, particu- 

 larly all the parks, game refuges, and 



things we would like to preserve for the 

 future. 



This reservation value is a rela- 

 tively new approach that economists have 

 taken. There is not much in the litera- 

 ture on it yet, and we are just getting 

 around to formalizing this concept of an 

 option demand. If there is any approach 

 that might be worthwhile researching in 

 terms of natural resources, fisheries, 

 wetlands and wildlife valuation, it is 

 the concept of an option demand. At 

 least, it is a positive approach which 

 recognizes that these resources have 

 values for the future. What we need is a 

 way of formalizing the concept just as 

 we have formalized market pricing and 

 the various discriminatory pricing sys- 

 tems mentioned earlier. 



In summary, I hope we have devel- 

 oped a better understanding of the role 

 of prices and the pricing system in al- 

 locating and managing our natural re- 

 sources or natural environments. At 

 least we have looked at some of the ap- 

 plications of pricing theory in both the 

 private market sectors and the public 

 goods sectors of the economy. We have 

 also looked at the limitations of a 

 pricing system as a basis for the eval- 

 uation of either current values or in- 

 vestment decisions that involve the man- 

 agement and development of natural re- 

 sources, such as estuaries, fisheries, 

 and wildlife. Many people are proposing 

 the existence of enormous prices (what 

 they really mean is value) for natural 

 environments in the hope of attracting 

 attention to their management, develop- 

 ment, or preservation. However, these 

 proposals will not be taken seriously by 

 society unless they can be adequately 

 documented and verified either empiri- 

 cally or intuitively. We face the pros- 

 pect of living with a range of prices 

 and values for our natural resources 

 within which reasonable political deci- 

 sions can be made for this segment of 

 the public goods market. 



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•U.S. GOVERNMENT PRINTING OFFICE: 1980—772-253/196 



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