Choice Modelling in Australia:past, present and future

Jeff Bennett

Crawford School

ANU

Some quiet contemplation

Non-market environmental valuation … and choice modelling in particular … appears to have reached a turning point in Australia

Significant interest in applications and useful levels of funding for research

Some strong ‘nodes’ of application and training Appropriate to contemplate what has happened, to

assess where we are, to speculate on future developments and to plan

In the beginning …

The Phoenix of Kakadu Resource Assessment Commission Forestry Inquiry

… the appetite for CVM applications had been lost Contingent Ranking and Rating? Louviere and Hensher Vanuatu Forests … CV and CM studies for ACIAR• Flatley, Rolfe

LWRRDC “General Call” application• Blamey, Morrison, Huybers, Whitten

Slow and steady

Sequence of applications and developments National Land and Water Audit NSW EPA Fitzroy River Basin SA - CSIRO WA - UWA Vic – Neil Sturgess … Rivers and VEAC NZ – Kerr and Sharp Health and transport developments

Not always forward

NSW Rivers … two steps forward and one step back Living Murray … one step forward and one step

back Great Barrier Reef …two steps forward and into

oblivion MBIs … no interest in assessing the level of

investment MCA … advanced as the means for avoiding the

need for the hassles of NMV The politics of economic analysis

A new impetus

Inception of the Environmental Economics Research Hub

Specific interest in advancing non-market valuation as a key element of developing government policy

Hub theme devoted to Valuation Specific projects looking at:• Integrating valuation into bio-economic models• Scope and scale effects• Time• Uncertainty• Expert vs lay values

Preparation of an application guide

Why now?

People • demand: DEWHA, State agencies • supply: capacity

Policy• Environmental issues to the fore • BUT the ‘ascendancy’ of economics and finance

Pressure • Regulatory Impact Statements

Remaining barriers

Deeply held scepticism in some quarters• The ‘anti-economics’ environmental lobby • The ‘anti-economics’ bureaucrats• The antagonistic economists

The political process … rent seeking rules Technical issues

The research frontier

Demonstrating the accuracy of results remains the ‘holy grail’ … policy makers require the assurance that they are not entering a quagmire of dispute

Incentive compatibility … belief in the results is ‘counterintuitive’ to decision makers

Hypothetical bias … also ‘counterintuitive’ Context sensitivity … what is the ‘right’ context?• Scope and scale … framing concerns• Questionnaire presentation issues … cognition,

comprehension, confusion• Information provision

Room for wide-scale experimentation (lab and field) … especially revealed vs stated preference comparisons that are not confounded by the public/private good divergence

Consistency and convergence Useful to find points of agreement within the

profession without ‘standardisation’ Avoid ‘freezing’ the evolutionary process

Contingent behaviour and choice modelling ‘Green’ accounting … at the national scale and for

individual environmental assets … values for stocks and flows of non-marketed assets

Coping with uncertainty Dealing with the ‘over-surveyed’ respondent ….

Timing is vital for policy making. Without a bank of studies and a well-recognised process of benefit transfer, the time needed to do environmental valuation (esp stated preference work) is a killer.

Benefit transfer – to be widely accepted – needs to be founded on a thorough understanding of the impacts of all the variables affecting value estimates … scope, frame, presentation etc etc