If you were asked to establish your willingness to pay (WTP) or willingness to accept (WTA) for a specific good or service it would most likely vary depending on what is being valued. This idea of WTP and WTA is based on the economic concept of establishing monetary values for all goods and services, even if the good or service brings non-instrumental value to you. This concept was developed due to the homo sapiens suicidal tendencies to exploit all resources biotic and abiotic until they are virtually exhausted (and yes it is possible to exhaust biotic resources). But to continue we must first define some of the key terms that will assist us in establishing the relevance of WTP and WTA, and what exactly it means for the future of our planet.
Contingent Valuation: Hypothetical estimates of prices of non-market goods and services based on survey questions asking how much one would be willing to pay for an extra unit of the good or how much one would accept for the loss of a unit of the good.
Willingness to Pay: The price or dollar amount that someone is willing to give up or pay to acquire a good or service. Willingness to pay is the source of the demand price of a good. However, unlike demand price, in which buyers are on the spot of actually giving up the payment, willingness to pay does not require an actual payment.
Willingness to Accept: The price or dollar amount that someone is willing to receive or accept to give up a good or service. Willingness to accept is the source of the supply price of a good. However, unlike supply price, in which sellers are on the spot of actually giving up a good to receive payment, willingness to accept does not require an actual exchange.
Now that we have defined the key terms related to establishing values for goods and services we may begin to discuss further the concepts of willingness to pay (WTP) and willingness to accept (WTA) and their differences. Willingness to pay is different from willingness to accept, because with WTP you are considering your personal willingness to pay to receive a good or service. This could range from buying household appliances to entering a national park to experience the scenery -- it all depends on your WTP and the good or service you are attempting at acquiring. With WTA it is your personal willingness to accept a certain value to give up a good or service, and this could also range from giving up drinking coffee in response to the economic savings it generates to giving up driving a car in exchange for knowing the amount of carbon dioxide you are personally diverting from the atmosphere.
With contingent valuation (CV) studies survey design is critical because it formulates the questions that the recipient is answering in regard to their personal valuation practices. This means that if a questionnaire for a CV is formulated wrong the resulting answers from a recipient will be skewed and the precise valuation for a good or service -- such as a forest being considered for resource exploitation -- will be lost to unpredictable data failure.
In regard to ecological resources contingent valuation measures tend to have an upward bias, because of social factors associated with WTP and WTA. When an individual is surveyed to determine their WTP or WTA regarding an ecological resource, and its instrumental and non-instrumental values, an individual will be compelled due to social factors to value their WTP or WTA for the ecological resource as worth more. This results in an upward bias regarding the valuation of ecological resources causing most economists to speculate on the true value that is placed on ecological resources when bias is replaced with Keynesian economic supply and demand theory.
In all the valuation of goods and services, specifically those of environmental resources, through contingent valuation studies with questions relating to willingness to pay and willingness to accept have established some value on ecological resources to protect them from the current growth and profit hungry economic system that has exploited our resources for too long. Now it is time for the next step in our systematic evolution, the establishment of a monetary-free economy perhaps, the study of environmental economics being accepted as mainstream, or something even more “radical” in the philosophical context. We can only hope our ignorance is lifted before we meet our untimely demise.
Thank you for your interest, please comment and subscribe.
Onward,
Hayden van Andel
In this complicated world we currently live in, filled with global markets, political corruption, corporate greed, and rampant severe poverty, it is hard to distinguish what systems will work and what systems will not work in the future. A leading factor to some of the economic and societal woes the world has been experiencing of late is the concept of paradigms. A paradigm is a worldview underlying the theories and methodology of a particular scientific subject. So how can societies find a paradigm that benefits the majority and harms no one (ideally)? This is the question philosophers have posed for a millennium to no avail. Until today previous leaders have not considered the shifts in paradigms as probable logical solutions to the flawed systems scattered throughout different societies. To discuss this concept further we must first define some key terms that will help us establish some different paradigms that have already been implemented throughout different societies around the world.
Regression Analysis: the use of regression to make quantitative predictions of one variable from the values of another.
Boundary Vegetation: consists of the area of vegetation that creates a boundary between ecosystems.
Intangible Costs: an unquantifiable cost relating to an identifiable source. Intangible costs represent a variety of expenses such as losses in productivity, customer goodwill or drops in employee morale.
Intangible Benefits: are advantages or favors that can be offered by one person to another. An example would be a research organization asking someone to volunteer time and expertise for a project in exchange for prestige by affiliation.
Induced-Adoption Paradigm: the idea of the induced-adoption of a certain paradigm to mitigate change within a system.
Familial Influence: the influence of family on the decision making process towards investors.
Now that we have defined the key terms relating to shifting paradigms in societies we can begin to discuss the different areas in which societies can establish shifts in paradigms. From the dissertation by Bradley Tyndall the differences between a diffusion of innovation paradigm and an induced-adoption paradigm in the context of the use of Grevillea in Kenya is a great example of shifting paradigms in an emerging market for societies. The difference is, diffusion of innovation paradigms include the action of innovative systems being dissolved among a society through a certain paradigm over time, and induced-adoption paradigms are almost forced through the actions of either economic collapse of environmental collapse, which provides limited innovation. So the use of the Grevillea tree in Kenya is based on a diffused innovation paradigm, because over time the adoption of the Grevillea tree became diffused throughout Kenya as farmers found them to be indispensable.
With the diffused innovation paradigm came the realization of the intangible costs and benefits of the Grevillea tree. These intangible costs and benefits played a major role in the process of diffusing the innovation of planting the trees on farms to then practice agroforestry. The intangible benefits of planting the Grevillea tree were extremely valuable, like marking property boundaries, harvesting the branches, and the expedient growing rate all contributed to the diffused innovation of planting the Grevillea tree with the shift in paradigms.
Thank you for your interest, please comment and subscribe.
Onward,
Hayden van Andel
