Economic valuation of policies for managing acidity in remote mountain lakes: Examining validity through scope sensitivity testing

The paper introduces the reader to the contingent valuation method for monetary valuation of individuals' preferences regarding changes to environmental goods. Approaches to the validity testing of results from such studies are discussed. These focus upon whether findings conform with economic-theoretic expectations, in particular regarding whether valuations are sensitive to the size (or 'scope') of environmental change being considered, and whether they are invariant to alterations in study design which are irrelevant from the perspective of economic theory. We apply such tests to a large sample study of schemes to alter the acidity levels of remote mountain lakes. Results suggest that, when presented with environmental changes which respondents are concerned about, their values exhibit scope sensitivity and conform to theoretical expectations, and therefore could be used for formulating policy. However, when presented with changes which respondents feel are trivial, their values fail tests of theoretical consistency and are not scope sensitive, and therefore cannot be used within economic appraisals. Interestingly we find that qualitative focus group analyses are good indicators of whether a given change is likely to be considered trivial or not and therefore whether scope sensitivity tests are likely to be satisfied.