Monetary estimates of the value that society places on improvements in the quality of fresh water are necessary for the proper evaluation of government projects, laws, and regulations intended to improve the quality of a nation’s rivers and lakes. This research develops a novel methodology, related to but different from the contingent valuation approach, to address this issue and other valuation problems for which people are asked to make difficult trade-offs about complex public goods. We then apply this approach to the valuation of water quality improvements in North Carolina and Colorado (USA).

One of the most difficult problems associated with valuing environmental benefits is that the improvements in environmental quality come in the form of complex, multi-dimensional public goods. To make the problem even more difficult, people are not accustomed to thinking systematically about their trade-offs among the various attributes of the goods, and are even less practiced and comfortable with assigning monetary values to these attributes. Improvements in the quality of fresh water is a representative example of this class of problem for the water bodies are located at varying distances from each resident’s home, people use fresh water for a variety of activities, the water takes multiple forms such as rivers, streams, lakes, and ponds, all of varying dimensions, and there are several dimensions of water quality that matter to people.

The approach developed to valuation in this paper is built on a decomposition of the complicated valuation task into subtasks that are much easier for people to carry out. We measure trade-off rates between money and improvements in the average quality of water in a person’s region, trade-off rates between improvements in the quality of lakes versus improvements in river quality, and trade-off rates among three central characteristics of good water (whether the fish are safe to eat, whether swimming is safe, and whether the aquatic environment is healthy). Based on these three sets of trade-offs, we are able to construct the monetary values that people place on projects that lead to various forms of water quality improvement. In addition, we test how sensitive these valuations are to the sources of the water pollution (e.g., animal wastes versus industrial chemicals) and to characteristics of water unrelated to pollution (e.g., smell and cloudiness). Importantly, use and non-use values are estimated separately in order to distinguish between them.

The data is being collected through a set of choice-based questions in the form of computer-administered surveys. The results of this project will be used to design a representative national survey for valuing improvements in fresh water in the United States.