Valuing the Health Impacts of Pollution: Notes and Suggested Readings

The purpose of cost-benefit analysis (CBA) is to guide investment decisions. If the costs of an investment exceed the benefits it produces, the investment should not be undertaken. Environmental economics extends conventional CBA to include environmental costs & benefits. In order to do so, these costs and benefits need to be translated into units of measurement that can be compared and added to conventional costs and benefits. Conventional goods and services are traded in markets for observable prices. With the appropriate adjustments to correct for defects in those markets, market prices provide economic values. But environmental goods and services are generally not traded in markets, so other methods are needed to estimate their dollar values. This has given rise to a large literature on environmental valuation.

 

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Economy and Environment Program for Southeast Asia