Bird, Peter

English

University of New Mexico

Volume 20 
Issue 3 Summer 1980 
Summer 1980 
The Benefits of Environmental Improvement: Theory and Practice, 
A. Myrick Freeman III 
Peter Bird 
Recommended Citation 
Peter Bird, The Benefits of Environmental Improvement: Theory and Practice, A. Myrick Freeman III, 20 
Nat. Resources J. 697 (1980). 
Available at: https://digitalrepository.unm.edu/nrj/vol20/iss3/20 
This Book Review is brought to you for free and open access by the Law Journals at UNM Digital Repository. It has 
been accepted for inclusion in Natural Resources Journal by an authorized editor of UNM Digital Repository. For 
more information, please contact amywinter@unm.edu, lsloane@salud.unm.edu, sarahrk@unm.edu. 
THE BENEFITS OF ENVIRONMENTAL IMPROVEMENT:
THEORY AND PRACTICE
By A. MYRICK FREEMAN III
Baltimore: Johns Hopkins University Press. 1979.
Pp. 272. $6.95.
Environmental improvement usually costs the taxpayer money.
Spending taxpayers' money has acquired, in recent years, a new
unpopularity in Western economies, and supporters of public sector
environmental improvement programs now face a more difficult task.
In two powerful ways they can strengthen their arguments. First,
they can point to the relatively small true opportunity cost of many
environmental programs, and second, attempt to describe fully and
measure all of the social benefits of environmental improvement. It is
in this area that Myrick Freeman has made his contribution; his book
describes and assesses the techniques for placing a monetary value on
environmental benefits, and surveys the empirical findings.
The author's approach is firmly within the dominant neoclassical
economics paradigm. In this framework, the worth of environmental
improvement, as of changes in the quantity or price of any good, is
determined by individuals' valuations alone. It is measured by how
much people are prepared to pay, given existing incomes and prices,
for the privilege of enjoying the improvement. For most goods, the
total of individuals' valuations can be approximated reasonably by
the area under the market demand curve. Freeman discusses the
assumptions necessary for this to be valid, and argues that the likely
errors where the assumptions do not hold are small enough for the
approximation to be useful for public policy. A problem arises, how-
ever, with environmental benefits. They have the nature of what
economic theory classifies as a "public good;" therefore, neither mar-
ket prices nor market demand curves exist. Consequently, a modified
technique is necessary to measure the value of environmental bene-
fits.
The modification is to construct the demand curve for environ-
mental goods by indirect methods. Freeman concentrates on two
such techniques. For one, the direct survey method, he is pessimistic.
The route between the Scylla of strategic, biased, responses and the
Charybdis of disinterested, inaccurate responses, has yet to be
charted. The other, more promising, technique is to identify the
implicit demand for environmental goods from those cases where
public good consumption is embedded in private good consumption.
For instance, the demand for clean air is embedded in the demand
THEORY& PRACTICE
for houses in clean areas. The "hedonic price technique" then can be
used to measure the implicit price for clean air and, under certain not
over-restrictive assumptions, the demand curve can be identified.
In the second half of his book, Freeman reviews specific applica-
tions of the techniques in four distinct areas. First, and most compre-
hensively, he examines the use of property values to measure the
benefits, mainly, of air pollution reduction. In this area the hedonic
price technique has proved particularly powerful. Next, he reviews
attempts to value the diminished mortality and morbidity rates im-
plied by pollution reduction. Again, he favors a hedonic price
method to infer a measure of individuals' valuations of reductions in
the probability of death, noting, however, that the results so ob-
tained differ by orders of magnitude from those derived from survey
experiments. Unfortunately, he does not refer to the recent work of
Broome' who argues most convincingly that the value of a reduced
number of ex post deaths cannot be proxied by the value of smaller
ex ante probabilities of death. Third, he considers the measurement
of recreational benefits and espouses the familiar Clawson-Knetsch 2
method, but emphasizes its sensitivity to different approaches to
valuing time. Fourth, he briefly describes problems in measuring the
productivity benefits of environmental improvement, and concludes
with a strong plea for more empirical attempts at benefit measure-
ment; current environmental programs constitute a socio-economic
experiment which deserves thorough monitoring.
Academic convention compels the reviewer to state his or her
position on the subject. Mine is to question the usefulness of the
neoclassical paradigm in the area. Its critical assumptions are that
individuals alone can judge their welfare, and that the initial income
distribution is acceptable. Since so much environmental damage goes
unperceived, and since distributional effects are so pervasive, it seems
that the dominant arguments must be more than narrowly economic.
In his text Freeman, himself, freely acknowledges the limitations of
the paradigm.. Within its bounds, however, he has provided a clear
and valuable guide to valuating environmental improvement; for this,
even the doubters should be grateful.
PETER BIRD
Department of Economics
University of Stirling
1. Broome, Trying to Value a Life, 9 J. of PUB. ECON. 91 (1978).
2. See M. CLAWSON & J. KNETSCH, ECONOMICS OF OUTDOOR RECREATION
(1966).
July 1980]


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