A method of estimating social benefits from pollution control

Abstract

In an article in Water Resources Research, 1966 Joe B. Stevens tried to estimate direct recreational benefits from water pollution control by using market demand curves for a sport fishery. The quality of the fishery was represented by the angling success per unit of effort. Water pollution would cause a deterioration in the quality, i.e. would decrease angling success. By estimating a demand function for the sport fishery, both as a function of the price of using the fishery and as a function of the quality variable, Stevens thought he could calculate the recreational benefits or the willingness to pay for maintaining constant quality, from various areas under the demand curves. Stevens' idea, although a very sound one, was not developed in a rigorous way and his conclusions were therefore vague. The aim of this article is to develop a theory which can lend support to calculations such as those presented by Stevens. The ideas in this article are first presented intuitively in a non rigorous way. Then Section III includes a brief review of elements from demand analysis and a statement of the marginal conditions for Pareto optimality in an economy with public goods. A theoretical framework is developed in Section IV which enables derivation of the willingness to pay for public goods in certain cases on the basis of information on demand functions for private goods.