Reconsidering the use of Hicks neutrality to recover total value

Abstract

In this paper, I reconsider the use of Hicks neutrality for recovering total value for a change in an environmental good. I clarify the need to adjust expenditures and explain how numerical techniques can be used in approximating these adjustments. I show that the circumstance believed to support Hicks neutrality, weak neutrality at the choke price vector, is a case of weak complementarity. I mathematically demonstrate that the necessary degree of Hicks neutrality is unlikely to be satisfied. I derive the ensuing relative bias and show its usefulness in selecting goods which may approach Hicks neutrality.