MAKING SENSE OF THE ECONOMIC VALUATION OF TRANSPORT POLICIES PERFECT EMBEDDING IN CONTINGENT VALUATION 1 1

Contingent Valuation Contingent valuation (CV) is a survey methodology used to provide estimates of the economic value of the non-market benefits of environmental changes (e.g., an increase or decrease in quality). Value is measured as individual or household willingness to pay - The indicator of value is behavioural and hypothetical (i.e., an intention). A sample of people are presented with information describing a proposed increase (decrease) in the quality or quantity of an environmental attribute (e.g. level of phosphorous in a river), and asked what amount of money they would pay to attain (avoid) the hypothetical change. The mean willingness to pay response is then extrapolated to the population and stands as an estimate of the value of the environmental change to society. This value is used in benefit-cost analysis to assess the efficiency of the proposed change. 1 1

Perfect Embedding Individuals should be willing to pay larger amounts for more of an environmental public good. That is, WTP should reflect the scope of the public good change. Perfect embedding is apparent when WTP values are not sufficiently sensitive to the scope of the public good. Perfect embedding is assessed with a “scope test” - The mean WTP value for a small amount of a good is compared with the mean for a larger amount.  Between-subjects test - the level of the public good is varied over independent groups.  Within-subjects test - the various levels of the public good are presented to the same participants. 1 1

Explanations of Embedding Moral Satisfaction: Individuals obtain a feeling of satisfaction (a ‘warm glow’) from making contributions to worthwhile causes. Different levels of the same good have similar symbolic value resulting in equal amounts of moral satisfaction and WTP. Lexicographic Preferences: The question is at odds with the way people value the environment. Individuals reject the trade-off between money and the environmental change by virtue of a moral imperative attributed to the environment. Uncrystallised Values: The question is too difficult for individuals since they have no experience of paying for environmental changes, and are not knowledgeable of the relevant issues. Methodological: Poor surveys (e.g., ambiguous WTP question, inadequate information about the environmental change) and/or implementation (e.g., intercept surveys) creates confusion. 1 1

A Fairness Explanation Willingness to pay may not vary with different levels of a public good because respondents consider the process of decision-making to be inappropriate and offer zero dollar amounts as a result. Respondents to CV surveys may not like the process of valuation because they believe that someone else is responsible for paying (e.g., polluters, users, etc.); the government should use what resources they have more efficiently; and/or some other reason to do with the act of paying. This refusal to pay is not necessarily associated with a rejection of a specific payment vehicle, but an unwillingness to accept any proposal requiring that additional revenue be raised from the general public, a specific social group, or the individual respondent. 1 1

Questions Attitude toward Paying (10% and 40%) How much do you agree with paying more money in council tax for a (10% or 40%) vehicle reduction in Bath City Centre? [strongly disagree - strongly agree]. Beliefs about Paying (10% and 40%) Why do you (agree/disagree)? [open-ended, post-coded]. Willingness to Pay (10% and 40%) What is the maximum amount of money your household would be prepared to pay extra each year in council tax to get (10% or 40% plan)? [open-ended]. 1 1

Hypothesis 1 1. What is people’s attitude toward paying additional sums of money for policy proposals aimed at vehicle reductions? 57% disagreed with paying for the 10% reduction & 51% stated a zero WTP bid 49% disagreed with paying for the 40% reduction & 41% stated a zero WTP bid 1 1

ATTITUDE10 MEDIAN = 2.00 MEAN = 2.60 SE = 0.12 SD = 1.07 ATTITUDE40 t (74) = -3.19, p < .01 z = -3.04, p < .01 1 1

t (69) = -5.09, p < .001 t (69) = -4.75, p < .001 WTP10 MEDIAN = £0.00 MEAN = £20.00 SE = £3.89 SD = £32.56 WTP40 MEDIAN = £15.00 MEAN = £33.14 SE = £5.40 SD = £45.15 t (69) = -5.09, p < .001 t (69) = -4.75, p < .001 1 1

Hypothesis 2 2. Does the distribution of respondents’ payment beliefs vary across levels of scope? People’s payment beliefs were generally stable over levels of the public good. Only the belief about the effectiveness of the 40% reduction compared with that of the 10% change varied across levels of reduction. About 40% of respondents felt that the 40% reduction was likely to be more significant than the 10% change, but nearly one- quarter of respondents felt that they already paid enough for the 10% and 40% reductions to occur. 1 1

2. Vehicle Reduction is a worthwhile goal. 12.3 4.5 Percentage of the sample stating each reason for favouring or disfavouring payment. Belief 10% 40% Reduction Reduction 1. Already pay enough. 23.1 23.9 2. Vehicle Reduction is a worthwhile goal. 12.3 4.5 3. Council should pay. 10.8 6.0 4. If we want less traffic, we may have to 10.8 3.0 pay for it. 5. Tourists should pay. 10.8 9.0 6. Options should be self-funding. 9.2 9.0 7. Vehicle users should pay. 6.2 3.0 8. Don’t believe options would work. 6.2 7.5 9. Locals shouldn’t have to pay. 4.6 0.0 10. Support reduction but don’t want to pay. 4.6 1.5 11. 40% reduction is more effective than 10%. 0.0 37.3*** *** p < .001 1 1

Hypothesis 3 3. Are beliefs about paying for vehicle reductions associated with perfect embedding? The most frequently cited payment beliefs were significantly associated with embedding and scope sensitivity, but it depended upon the proposed level of vehicle reduction. A greater number of beliefs about the higher level of reduction were significantly associated with embedding. 1 1

Variable Embedders Scopers ‘Embedders’ and ‘Scopers’ defined by responses to WTP questions for each level of vehicle reduction. Variable Embedders Scopers N 44.0% 56.0% Disagreed Paying 10% 77.0% 35.0% Disagreed Paying 40% 72.0% 29.0% £0 WTP 10% 72.0% 26.0% £0 WTP 40% 72.0% 0.0% Year Born 1958 1959 Educationa 3.2 3.0 Sex (Female) 63% 45% Incomeb 4.0 3.6 Council tax (per month) £765.76 £656.67 Frequency of visits per monthc 4.2 4.0 a ‘Technical College/College of Further Education’ = 3 b ‘£15000 - £24999’ = 4 c ‘often’ = 4 1 1

Belief Embedders Scopers Distribution of payment beliefs across ‘Embedders’ and ‘Scopers’ for each level of vehicle reduction. Belief Embedders Scopers 1. Already pay enough. (40%) 87.5 12.5** 2. Vehicle Reduction is a worthwhile 0.0 100.0* goal. (40%) 4. If we want less traffic, we may have 0.0 100.0** to pay for it. (10%) 5. Tourists should pay. (40%) 100.0 0.0* 11. 40% reduction is more effective 16.0 84.0*** than 10%. (40%) * p < .05 ** p < .01 *** p < .001 1 1

Conclusions Need to include participants in deciding the levels of service. It’s not enough that people recognise a difference between levels of scope, but that the difference is meaningful. Other payment beliefs may be susceptible to change if the public good improvement is perceived to be a significant one. Similarly, some individuals who disagree with paying may still offer some money if they believe that the level of change is significant. Some individuals may reject any level of the public good because they do not agree with paying more money for it. This attitude might be best defined by the belief that one’s household already pays enough to achieve the proposed change in the public good. 1 1

Brad Jorgensen Department of Psychology University of Bath b. s Brad Jorgensen Department of Psychology University of Bath b.s.jorgensen@bath.ac.uk http://www.bath.ac.uk/~pssbsj/ 1 1