138 MEASUREMENT OF ENVIRONMENTAL AND RESOURCE VALUES, opp, Raymond. and Alan Kapok 17. “Arete Pty andthe a Ozone Cont” Amer oral of Agar Eom een 0.5 pp 986502 Taymor Fe Wiliam J. Vaghan, Michel Has and Richard Hoe SS imptcaione of Environmental Poy for US, Ac aoe a Case of kmient Ors Standards” oral of Exsiernets Monet 2 opp 32-3 ave Laser Band Eugene PSeskin 197 Air Palatino Human Heth ie Na Jane Hops Univers Pres for Resouces fo there 4 1D Pavia Cony, nd Freer}. Prcha 198 "eon crash Areas fer Marne Production Proce” J of Ta mms and Magen a 8,2 pp 5-16 seg Kevan 985"Welare Economic andthe Environment” Sea Keene ad James Sere) es, Hae of Nl Rese en cm a. Asteran, The Netherland: Baer te Paster 2 cK 386, The Dama aces Ailes fo eel Xe bird Hater” Report prepared by Intl PCBs Ne" CeipeN, forthe Gran Assesment Dion $b Oca Aten Amir, cna Robes Cameron, and aha T Caron, 1987 Using Sars Mc Pus Ga The Cone! Valtion Mat. Washing, D.C “sm Kenya Wiliam. Desvourges 1986, Maring ter ua engi Neel, Mase: Kiwer ot Ls" rvtonmental Prtecon, Agency. 1860 The Addenda to he aS Se Paper" Rear ange Pr, N.C: Envonmental Us. Emewonmentl Protection Agency. 1986, The Send Adem Ai Ga noe Porat ater and Sur Oe Research ange See Ci EronmentalProetion Age 3 Defining and Measuring Welfare Changes: Basic Theory he theory ofthe measurement of welfare change has been dis: ‘sted by others Both atthe moat rigorous levels of abstraction snd in pragma, praca ters appaton Mont fh da. son on the welfare fects of changes inthe prices people pay forthe goods they consume. My major purpose in adding t this Iterature to provide a systematic development ofthe definition and measurement of welfare effects of changes in quantities or qualities of ‘vironmental and resource service flo. ‘Changes in environmental quality can affect individuals’ wel fares through any of the following four channel: changes in the prices they pay for goods Bought in market; changes inthe prices they receive forthe factors of production; changes the quantities ‘or qualities of rnmarketed goods (for example, public goods such 35| ‘i quality) and changes in the risks individuals face The fis three ‘ofthese channel are the focus ofthis chapter. After a brief review of the theory of indvidval preferences and demand, review the Princ lof wore measurement for price changes, These principles oe Frlevantbecatise some forms of environmental change affect people ‘only indrely through their effets on prices. Alb, a review ofthese ‘principles will provide a good foundation for the treatment of quae fiy and quality changes that follows. The extension ofthese pine: pls to the valuation of changes in sk—the fourth channel-raises Some interesting questions, which willbe lft to chapter “A thorough exposition othe theory is presente in Boadway and Brace (098 See alo Jahensson (1987), Fora weatment designed mor for prc ‘loners, sc st, Heth and Selenite (1982)40 MEASUREMENT OF ENVIRONMENTAL AND RESOURCE VALUES The principles and measures developed in tis chapter apply cqualy © decreases and increases in individuals welfare, Its 4 iti rinape of welfare economics thet al cot lately take the form of reductions the utty welfare of individuals Thi principle applies equally to the costs of public plies ((or example, inves ment in resoure development and the regulation of private activ ities) and to the cont of private tes of the environment (or ‘ramp, harvesting from a common property resource and Using the waste receptor services ofthe environment) Hence, the welfare tmearres developed here provides fundaton forthe analysis of toth the benefits and the coats of environmental change 1 return {0 this point in chapter 4. In thischaper I consider the ses of questions in some deta ‘The first set concerns how to define an accepable monetary measure of change in economic wellae for an individual. The answer otis Suestion hinges in parton what the measure would be sed for, AS Falla (1965) suggests, «welfare measure shold anewer the ques tions posed by policymakers. But policymakers can ask diferent Linds of questons or exampie suppose tat pocymaers wish fo vaste proposed pliy changes ft terms of an aggregate socal welfare function that placed diferent weights on individuals’ Changes in tity depending on thei postions inthe income dist fiom (Bergson, 1966) In that case, the welfare measure that answers the polisymakers” queston must bes money mete of uliy changes. Allermatvely if plicakers wish to select polices onthe basis ofthe potential Paro improvement criterion, they wil want measures of required compensation and wilingness to make Com Pensating payments, In the concluding section ofthis chapter, Ie fam to the question of choosing fiom among te atemativ measures deserved inthe chapter, “The second set of questions concerns how changes in welfare sou be messed both in theory and in pace. Theory suggests ‘temative ways of calculating ether exact or apprownate welfare meatues, using data on observed behavior of individuals forexample, ther demand fnctions for market goods, These altema tives wil be described and evaluated, especialy fom the practical perpectve of implementation "The third set of questions concems how any measure of welfare changes for individuals might be aed to make Judgments about so Sil pois affecting many individuals, For example lot posse to Speak ofa measure of aggregate welfare forthe soily a8 the? I 56, what signfcance can beached fo changes in sch a measure? Measures of wellare change for an individual can be defined and alyzed without reference othe notions of elfen and equity. this tense the concept i objective that, one can dene stl es sure a monetary eqtalent of an inviduts welfare change went ting commited t any parc se of rae fonts Scene augezation across indivi othe oe of such elare messes ‘oth cho" in answering the ti seta guestona that eos jucgments abou the relative desrvingnesof indicus the meme tng ot eliiency, and he objectives of puc py come ints pay Some ofthese sues ae duced inthe selon headed! Aggrepsn dnd Socal Wel Jn the llowing section I eview some of he basi teinoa and theory involving indvideal preferences and demand T thee {Ske up the standard case where ity depend ony onthe sumption of market goods. examine the theory of measuring the welfare value of change in the rss ofthese ods and tre tonships among the Marsala and Hicslan srps ears of well change. There are two reson for chews ths onder of Presentation Fst paras the historia volo ofthe thoy ‘fwellae change: And secon, make for an eae exposition ok theta principles. The section concdes wih ayevew of metods for obtaining act measure of and approvimaions to the dented Hickson surplases. Inthe thd so | tly deseo how he theory of wellae value fr changes m pres of prods can be spied to changesin factor pres. then take up inthe ourth cca te cate ofthe welfare eects of change in he quanies a sora ‘oods where individuals ae ot fee to adjust these quasi Tesponse fo peice changes, n the final two sections, Tee sone Othe asues involved n aggregating measures of inva wong Change fr publ policy decison making aod in secting the apie prt wee mesure, INDIVIDUAL PREFERENCES AND DEMAND Before introducing the various possible welfare measures twill be ‘useful to review briely the Basic theory of individual preferences ah "Of course ina more fundamental sense focstng anion on changes {n income and consumption othe exclusion eer naps of wel ee ‘ch social relationship and sna of sort nvelves ahd alee Judgment Ba iden sip the dono mb Seton42 MEASUREMENT OF ENVIRONMENTAL AND RESOURCE VALUES the demand for goods a trlates to wellare theory? This theory ‘starts with the premises that individuals are thelr own best judge of thelr wellares and tha inferences about welfare can be drawn for ‘each individ by obwerving that individual's choices among alterna tive bundles of gods and sevces. Ian individual prefers bundle A ‘over bundle B, then bundle A must conveys higher level of welfare. What things are to be included in the bundles uch aA and) among which individuals ae aatamed to have 2 There ie Iite controversy ver the incasion of al the goods and services that ‘can be bought or sold in markets consumer goods, the services of Iouschold sees such as house ora ca, and consumer durables ‘Since time cn be wed in ei activities or sold at some wage ate in the labor marke, individuals must aso have preferences ang alter native uses of time suchasreading, outdoor recreation, and working at ome wage rate. And since government and the envionment both provide a varity of services that enhance the wellares of individual, These services should also be included in the bundles among which people have preferences, Environmental sevice ince those pro- ‘idedby cleaner air cleaner water and scenic amenities. Fe assume that individuals can rank the alternative bundles sccrding to thee preferences what properties wil the revuling of ‘ering of bundles display? For our purpose, two are important. The fie ip nonsatiaon, or the “moresstoter” property. This means that bundle wih lager quantity ofan element willbe prefered to bundle with smaller quantity ofthat element, other things being ‘ual! The second property is substitutability among, the compo" ‘ents of bundles. This means tha ifthe quantity of one element ofa bundle, say, decreased, itis possible to increase the quantity of nother element, says, suficently to make the individual init ferent between the wo bundles, More formally, suppose that con Sete of recor Ses Hy and X” consi OE APs vat, with x <3. Subettutablty means that there is another nde X* consisting 0.27 fy 35 witha? > 3 ch hat ‘the individual is indiferent as to X° and X*. In other words, X” and [x lieon the same indifference surface.” “Forster tates of thi and elated topics, the reader may sh to cons ter tet sucha Just th, and Sch (98), Bond ‘way and Brace (980, Vartan (1984), and foharsson (987). ermal cant bo Rand conse af oe? vand' > then thsi wil preter X10 ple ce Serene eserlenesrreeetien aruda DERIVING AND MEASURING WELIARE CHANGES 43, ‘The property of substittabilty a the core ofthe economists ‘concept of value, This is because substtutaity establishes tradeoff fatios between alts of goods that matter to people The money price of » market good is just a special care of trade-off ratio, ‘because the money given up to purchase one unit of One element of the bundle i a proxy forthe quantities of one or more of the eer elements in the Bundle hat had ob reduced none ma he purchase the preference ordering has the properties described here, it «can be represented by an ordinal preference function or afi func fon that assigns a number to each bundle as function ofthe quan tes of each clement ofthe bundle. Speicaly 40.0.7) whore Xia vector ofthe quanities of mate gods, Qs a vector of Public goods and ervronatental and resourses whose gum {ies oF quasar fed forthe ndvual and Pisa vector othe times spent in vanous activites that yield ty to te India ‘This function assumed so be acresing allots argent {nd unique up toa monotonic tarformaton This preferesc Fane fiom isnot the same thing athe cardinal wy function ofthe clan Calta, Since there no io easement forts oi sti it snot posible oad or othenvie compare the ui different individuals. ee eof To simpy the exposition and notation, et us now consider an {nv whose wit uncon ony of private ods that ean ought andsoldin market. Assume that ses and preferences (Oat 5 the uty faction) are given and donot change. The nai faces set of given prices for these goods and is tsued to choose the quantities of the goods s0 att maninise his lly, pve the {her ar tre bundles 3,27, apd X, and he ndvual pers ¥ ove tnd. over 3 the ani sin the nv prefers Toner 1, For more on the somatic descpton of thse proper of preterence Se Bada and Brace (1980 or Vain (8) ce nem te et aoe tea = 29 (sj ~ 27) of [ay ain the mi for innesinaly snl change, th ‘ets i, wih th det te marl ef bat metween an othe slope othe fo dameroalndferece cue betveen beso ements ven “For purposes of mathematical madeling and analyse, itis convenint ‘tio to. Resume that this function is contmaous, conven. and twice also to assul“44 MEASUREMENT OF ENVIRONMENTAL AND RESOURCE VA “constrains of prices and fixed money income M. The maximization problem canbe expressed as maximize w = 0X) subjectto 3 p,-m) = Mt sy) The where X ie the vector of quantities (X= #4, ry {olution to this problem leads toast of ordinary demand functions (P.M) where Piste vet of pee (P = ys Pr Po ad M ito Subutitting the expressions oa fancons of Pand the die ily funcion gies he inde wt fonction, tat os {ity sea function of pes an income assuming optimal bok goods: wa ne.m, ing to Roy's Lent the demand fncons cn lo be x ‘rsdn tenns drat the ndaet iyfocton, stay = irom the prob ‘The expenditure function representa uefl pepective on the ps lem of nda choles derived by formating the dala the stlty maximization problem. The indivi assumed o minimize total xpenditoe, eoBaes — oa generation of the expendi fancton, se Don and McFadden (970, See ko Mowe (79) fr comet of one of he de: “Mer Git Serge hsm eno rd ‘tet spoaty To le wel chs of cng in emma ‘relates: IT DDERING AND MEASURING WELFARE CHANGES 45 subject toa constraint onthe level of lity attained, x) =a where 4 isthe maximum wtltyatsined with the solution tothe primal problem. Justa the solution to the uty maximization pros, lem yields set of ordinary demand cures condonal on prices an ‘money income, the solution ofthe expeaiture minimization poblen ‘elds ast of functions giving optimal quantis for given price aed uty. These ae Hicks-compensated demand functions that show the quantities consumed at various prices assuming that cove adjusted (Compensated), so that ulity i held constant a Subst tuting these demand functions into the expression for total expen ture yields the expenditure function, This expression es the minimum dotar expenditure necessary to achieve a specie iy level. given markt prices. In functional notation ener) where ¢is dllar expenditure and ui the specified utiity level. The ‘compensated demand functions can also be found by diferematng the expenditure function with respec! o each ofthe pea ron, = he, wy 0 [Now consider the set of ordinary demand functions derived fom the utility maximization problem. In order to determine the func tional form and parameters of these demand functions necessary to know the underlying uly faneton, and this may nt be dnc ‘observable Suppose instead tha we observe an individual's Beha ior and estimate the demand function that describe the individeal's responses to changes in prices and income. These functions show {ontain all ofthe same information ae the underlying preferences ‘This is assured provided that she demand functions tatty the so. «called integrability conditions. These conditions require thal the St. sky matric of substation terms, (PM), Osh, M) ®, am ‘besymmetri and negative semidefnite.*If these conditions ae satis “See for example, Varian (1984). The original reference is Hurwicz and ue|46 MEASUREMENT OF ENVIRONMENTAL AND RESOURCE VALUES fied, the system of demand functions canbe integrate to yield the expenditure fancton, which in turn ean be used to derive the indirect and direc tility functions. I the integrability conditions are not sat- isfie, the implication i thatthe observed demand functions are not Consistent withthe maximization ofa wall behaved uly Tuncton, ‘As explain blow, ifthe integrability conditons ae satised tay be posible to utize empirically derived descriptions of demand be- havi to obtain a complete description ofthe underying preferences, ts wll a exact measures of wellae change for 8 wide range of postulated changes in economic circumstances (WELFARE MEASURES FOR CHANGES IN PRICES [An Overview In order to introduce the atemative welfare measures, consider fit the simplest case of only two goods and the wellare gan asacated va onmarginal decrease inthe pic of one ofthese goods. Five ternative measures ofthis welfare change have been ented in the teratare: The frst the change in ordinary consumers sup, ‘concept whose origin can be traced back through Alfred Marshall Dupait» As Marshall explained [The individual] derives from a purchase a surplus of sats faction, The exces ofthe pice which he would be willing to pay father than go without the thing. over that which he Sctualy does pay's the econamc measure ofthis surplus of Satisfaction. may be called consumer's surplus. (1920, p2) (Ordinary consumers surplus is measured by the ares under Mar. shallan ordinary demand curve bat above the horizontal pric ine. ‘As we will se, the consumer surpkas measure cannot be defined in terms ofthe undesying tity function. And, in general i wll be ‘ferent rom the other four meatures defined below. “The other four measures of welfare change ate theoretical refine ‘ments ofthe ordinary consumers surplus (Hick, 183). Each can be defined in terms ofthe underying individual preference mapping "igure 3-1 shows fwo indifference curves for an individual. Assume “osha (19 and Cure, Murphy, and Schmit (1971) provide uel scssons of the htory and evelton ofthe concept 8 consumer's discuss ee. DEFINING AND MEASURING WELFARE CHANGES 47 Figure33.Fourmemures of the welfare gain from price decease that an environmental improvement reduces the cost of producing) Sothatts price drop rom po. In tesponse to the prie redaction, {he individual shit from the consumption bundle marked Aa wy level w to consumption bundle Bat ult eve a. What is the we fare benefit ofthe price reduction to th individual? Four alternative Wwellare measures can be defined in tems of goods, which taken {tobe the mumerare. The units of are chosen so thatthe pic of ‘equal fo one Thus, can be taken to represent income "inthe many gpd cas, xe compost ga that an be ete a2 Index the consumption level of al eter goods xcept The aggregation ‘al other goo to a compost god kr apa epeortaten vd So lng =the peso lo he gods a sted te move in the same Proportion, hat ha there ae no change inthe elatve pce of om. ‘ents ofthe composts good bunds. The sscumption car be mae,48 MEASUREMENT OF ENVIRONMENTAL AND RESOURCE VALUES “The our remaining measures of welfare changes at: 1 Compensating Variation (CV}—This measure asks what com pencitng payment tat an fein change n income) Is neces ay make the india niferent between the original station {iin figure 1) and the new price set. Given the ew pie set with (aaertption punt B the naval sncome could be reduced by the SMrount af c¥.and tht person would stil be a well ff at point Cas at point A with the orginal price stand money income. The measure CY Eee nterpretedes the maximum amount shat the individual would {eowling te ay forthe opportunity to consume a the new pric se. However fora price increaee, CV measures what mist be pad tothe [Halnidual to mae thot person indifferent t the price change, For price decreases the CV ant be greater than the individuals income Butora pice incest, the CV could exced income. S eaivalent Varation (EV) This mearure asks what change in income given the original pies) would lead to the same utity Change a the change i the rice of. As shovenin igure 3-1, given ‘Recent paces te individual could reac tity Tevel wat point D wit en income incense equal to EV. EV is the income change yivalnt to the welfare gain det the pice change. The EV mes ‘re has also been described ae the minimum fump sum payment the individual would have to receive to induce that person to voluntary forgo the opportunity to purchase at the new price set, For @ price Increase, EP the maxim amount the individual would be wing to pay tavold the changein prices Tote that both the EV and CV measures allow the individual to jut the quantities consumed of both goods in response to both “hangs in feltve prices and income levels, The remaining two mes ‘tte are defined so ast place restrictions on the individual's ajust- ‘ment ofthe consumption bundles, 3 Compensating Surplus (C5)~This measure asks what com pensatng payment wll maketh individual iniferent st the rg Ffarattuaton andthe opportunity to purchase the new quantity xf the good whose pce has changed. The CS measure i the vertical Uiseance between the inference curves atthe rew quay 35, Ts {Sth distance om Bo Fin igure 1. This measure ws closely related tore CV measure the only difference being the restriction on adjust: tng the purchases of in responce tothe compensating change in "F Equivalent Surplus (ES)—This measure asks what change in sncome requted. ven the old prices and consumption level of {onder to make the individual aswell of as that person would be hth the new price set and consumption point B. figure 1 the ES DEFINING AND MEASURING WELFARE CHANGES 49 seas the verdant he wo ndferenc cues, holding the consumption of good x, atthe original level, that is, the vertical distance rom Ato E. The ES measure closely related tthe EV measure, the only ference Being inthe restriction onthe ast ‘ment ofthe consumption a in the former case The ES measure i irger tan the EV meaire fr pie dares bce mas clude an income equivalent to the individs's welfare lows stemming from the inablty to adjust the consumption of so sto equate the argc aion wih pce ao * ach ofthese conc pls messes something diferent and has 8 different meaning. The next subsection is devoted t Sn evaluation of the compenaiting and quhaent veal sed {hei lationship tothe ordna compensa ° ry conauner spi. The compensa ing and equivalent surplus measures for price changes donot anewer ‘ery usefl question since they both srry rest the india to consuming a specie quantty of the good whose price h anged. * *PSGBS tantly of the gond whore Price as ‘A Closer Look atthe Welfare Measures In this seton first preset the basic welfare measure for 3 ma change in one prices Then I give more rigorous desvating othe costing sui competing van and alent varaton tmeasures of welfare change forthe case of changes in price For ‘nal change say the wee mena sth change sep pce eld wy com. Uag ion) 8) ge, ay v 7 ® where i, isthe marginal welfare measure. This result also follows From their tty function and Roy's deny Jus Heh and Sh RE Ape Van (8 ean ret Cie, Append Varn (800) se Johaneen5) MEASUREMENT OF ENVIRONMENTAL AND RESOURCE VALUES Inthe et hand side ofthe ist expresion, the marginal utility ofthe ‘ce change s converted fo monetary nts by dividing by the margi [at ustty of income, The second expression says that the change n> come regulted to hol wily constant equal tothe change mprice multiple by the quantity ofthe good being purchased, f In figure 32, panel A shows one individual's preference mapping in the simple two-good case, Suppose thatthe pice of good alls fom rlopr The individual respond by moving rom the orignal euiib- Fama pint Ato point Bon the new budget ine. In panel Bf figure ‘3 these cqulibetam postions are ploted inthe price and quantity plane Points A and Bare onthe ordinary demand! curve holding the Face of good fy and money income constant. Since the Marshalian Ffeps Soocaied withthe consumption of a good ata gven price is {heaves under the demand curve, the change n surplus fora change {the poo pre is the geometic area prABPy in panel B of igre 32 inmathematial form. =f rane ® where Ss the change in surplus “The conditions under which S can be lerprete at an indicator fut change canbe seen by employing Roy's ent 200P. Myap ocr, Mant nM) = and substituting this int equation (3) to abtain aia so- ("ay Ver Ifthe marginal tlt of income s constant over the range of the price ‘change his can be writen a ee Varan 1984, pp. 208-208) [oe pa M) ote Pa, MDL I a 20M “This expression shows that the Marshallian surplus can be inter- st52 MEASUREMENT OF ENVIRONMENTAL AND RESOURCE VALUES ing factor the marginal tty of income. If the marginal tity f ‘Rome cont then 8 a be sid to be proprtind othe ‘ange ntl for any price change. But the constancy ofthe mar {pal uly of income ax any one pie changes ia restrictive conde fon The’ marginal fy of income cannot simultaneously be invariant wih repectfo income and to changes inal ofthe prices. "hternatively a Siberber explain (176, p. 350-361) the ine spalofequation (can be viewed asthe sum of erie of small steps Bom an nial pice and income vector of, Pi M1098, M0) following a path on which py and M are held constant. Bu there ze ‘ther paths over which @) ca be integrated involving changes aay from the tal Values for andor M as ong as the terial points (Grn Phs AT) And the other paths wll ot in general lead tote sane Gide Wate for the integral In other words the integral will ot in ‘eneral be patindependent. “hour problem arses when the Marshalan surplus measure is generalzed to simultaneous changes in ll prices n this cae, $s Sn tine neg Ti ital wl be independent ofthe of integration (het the order in which pres andor incomes [fc assumed to change) only he income claticies of demand for “lgoods ave equal, The income elatctes ofall goods canbe equal ‘Secret oly if they are ll equal o one nother words prefer. ‘Ses ave homo Fall the prs of only subset of all tds change a unajue ents the marginal tity of income SoeMant wi cespct tw ony those prices hat are changed. (Se us, ‘ueth and Sct [1982] for more details) Suppose now that asthe price of god is deceased, income is ‘eR eay rom te nividonl so at herman tthe nal uty iSet ond indferene carve so Given the pce change and the com eating income change the india! weld be eli st Cpanel Ac figure 92, Pint Cm ao plotted pane B of gure 32. Points A and C are on the Hickrcompenssted demand {ive demand carve that fet ony the absttton effect om the ‘angen reative pce. Te income eet of the price change has ‘en etiminated by the device of compensating, wihdravals of sroney income, Since isa normal good by asumption, that i fan an income elt greater than eo, the Hicks-compensaed Acmand cure i less precast than the ordinary demand curve “Sfoa fl restment of thse, se Salon (194), DDERIING AND MEASURING WELTARE CHANGES 53 The ference brent Hike compenated and he ody de HEV, Vand consumer surpis messes af welarechaney Panel A of igure 32 shows the compensating vara measure ofthe welfare change asocated wih the price decrease hat, the reduction in income needed to hold the fndvidal on the ange inference curve ners of he indirect tty fancton, CV the or My = PuM~ Cv) =u The CV can also be defined in terms of the expenditure function. Its the diference between the expenitures rea ie fifleence between the expencitres reed sta ity CV = eth H)~ el pee) > 0 M~ e557.) ® Since CVis defined asthe diferencebetwcen two le ture, i can also be veritten as the inte sof expen ; al of the marginal eelare sure (esuation 2} over the evant ange: Species, ov = ("2809 dn am wens Semin M rice set yields a higher level of pao) and by substittion CV = C0 Pae a) eR pa) ° Ice word oh the CY idl in ee of alo fears the ou of money eee sy a at the new set of prices “ . : Te Eo he ar he et of he Hes compere demand care tewcen tnt es ais he esr fait derivative fhe expense fencion wth ange weet Eetchngenenpenr ime) ey ace a ee cn or sna changes nye sen te, dene She rikocompend demand cone, eee eetaie ‘3k MEASUREMENT OF ENVIRONMENTAL AND RESOURCE VALUES DDERNING AND MEASURING WELIARE CHANGES 55. “quantity for holding tity constant Fr frit changes, the int a Panel A se A ivuwe the rato the et fhe Hick compensated Thanacare thats bec ict words, | wv {far in Unlike the Marshalian measure of surplus given by equation (9), this Incase doesnot rely on any assumption about the constancy ofthe ‘marginal wy of income, This Because this measure integrates “ong 2 constant uty indfeence curve at. In the many-good ‘le! when ever prices change, the CV ofthe price changes taken {Spier i the Integral ofthese f compensated demand functions ‘Saluated by taking each price change succesively. The order in ‘hich the pace changes ae evaluated i ieevant.* “The equivalent variation can also be derived through the expenditure function, Panel A of figure 23 shows the same preference mapping tnd price change for an individual With a price decreas, the EVis | ‘ef the additional expenditure (income) necessary 10 reach ‘ty level given the nil set of pecs. In terms ofthe indirect ‘lity fnetion, EVs the solution to (M+ EV) = (PM) at In figure 33, the EVisthe atonal expenditure necessary to sustain point © over point A atthe iil prices, oF EV = epic pae = C95, Pee 4) > 0 = ee = M 6 ‘Since the money expenditure level are the same at pont A and pont Bi that, eps Pas a) = Paw) can aso be weiter a | EV = iP) Epi pent) o TATRisKolows from the symmetry of the cross price substitution terms,156 MEASUREMENT OF ENVIRONMENTAL AND RESOURCE Ince wo, ugh he EV tine tems of te monty ln change rom uf canal be messed yt ‘Range i expendtre ese with pce changes given wit vee EV can alo be wen athe neal fhe marginal vue measure (equation [2) this ime holding derivative ofthe expenitre function (hi Tuiy constant aw) genre anaher Hickecompencated de ‘mand care tough pnt Bin pal Bo ge 3. The ae {Reet fh compete dead carve ete he isthe equivalent voto wellore mess pees ee sor tc nee ge omer Lee aera Ggeatetetecatm ca are ir asetiniacaneena eer mandi eee Sompanted dena carve hat pas ough be ilps. aihamerecamieraneraiens fiom at cat par a postion. as some inte 29- ugh the Marsan consumer urls : featan wearer dur menue 7 fe oe Eeeonot wel rg ever htt nde cy change cp unr pcan rae Ort that con bene nape compere et Te aman spi es eben CV nde pee esto of wheter ante a stl approximation ether {hector menus question that http in he subse e other measures, a question that I take uf DEFINING AND MEASURING WELFARE CHANGES 57 mn contrast, the CV and the EV do represent welfare relevant measures, Te EV 6 the monetary equivalent of «price change rca be interpreted as an inex of uty inthe sense that lt imputes the same monetary value tall changes fom an inl positon that sea inthe same nal uity level. This because it eveluaterall changer from an intl postion atthe same set of prices The CV camnarte interpreted as an index of uty. Rather, measures the ollueting income change necessary to prevent iy change. As eke Prt it, “the [EV] imputes dollar evaluation fo change la ete levels fora particular path of price changes, white the RV[ dene, dolar values necessary to hod uty constant when prices change’ (0972p. 948) ‘Thetwomessures EV and CV willbe the same the income east sity of demand for good ise. In thiscase the ordinary ad ake compensated demand curves are identical. Wiha posive income clastiaty, the EV exceeds the CV for price decreases, bul the CV onset the EV when price increases are considered. The difference between Points Cand Bin figure3-2andbetween poinisAand infigares Sa ‘ne of income level: the income elasticity of demand fort eere sore, the income diferences would haven efectonthe purthateof', The EV and the EV would be exactly equal and they ould oth be nee sured by the area under the ordinary demand curve The higher the Income elasticity of demand for, the larger isthe diferenee erccg the EVand the CY, and the agers the ference between other wen sure and the ordinary consumer surplus Theres asymmetry between the CV and the EV measures. This ca be seen by comparing figures 32 and $3 and by compare “equation (5) with equation (6) snd equation 4) with equation CW Re splcy let represent the inital pice set with p) an let sep, sent the second price et (with p'). The CV for moving from It with as the reference utility level i exactly equal to the EV of ‘moving from lo I with u! asthe relerence utilty level. The CV s+ ‘welfare measure forthe move rom At B va point the EV starts ot Point B and measures the reduction in income necessary to get fe Point Cand therefore w. Similar the EV forthe move fom 4 I1is ust equal fo the CV staring at and and enoving to [Ti sa odin wily index, For example suppose a change fom ina ponion A to posion & hasan EV oti whe change ee oe[58 MEASUREMENT OF ENVIRONMENTAL AND RESOURCE VALUES “Tis symmetry relates to the interpretation of CV and EV a mes sure of wilingnes to pay (VTP) and willingness to accept compen Eaton (WAC). The CU is sometimes. descrbed as the maximum ‘eilingneso to pay forthe right purchase the good atthe new price evel that is thot hump sum payment thatthe individual would be ‘willing to make which woud fost exhaust the potential for welfare Jin om the new ple. This description is accurate oly fora price Fccrease Fora pre increase, the CV defines the minima payment to the individual sulficent to prevent a utility decrease—in other (words, itdefines 2 WAC measure. Sinualy, the EV defines 2 WAC Teare for a pice decrease that he sum of money the individual ‘Toul! reqlre to voluntary forgo a proposed price decrease, But for "proposed price increase, the EV 5 a WTP measure, that i the Trimm sum of money that could be taken away from the individ al yielding ose of wlty equivalent to that caused by the price ‘Change: Whotever the direction ofthe pice change, te CV takes the Inia wiity athe reference pot, “These two measure ct alan be iterpretd in terms ofthe in plied rights and obligations sesocated wih alternative price sets, The Ev eartes with imple the presumption thatthe individual has turight to make purcases a anew set flower prices, but does have ight tothe orginal pace stim the case of price increases. In con {tant the EV contains he presumption thatthe individual has aright {oan obligation to accept the neve lower (higher price set and mst ‘De compensated (make payment) the new price set is not 4 be tained, Based on this interpretation of the two measures, some ‘Sonomists heve argued thatthe choice between them is basally aa ‘ine one, that is-one that depends ona value judgment a to which “indevyingdistibuton of property rights = more equitable. Al of this ean be summarized a follows Welfare mesure Princesse Prcedcrnse EV-implicd propery rightin WIPtoavold WAC toforgo thechange ‘cv-limplied property right in WACtoaccept WIP toobain| the stata quo For two alternative price changes, the welfare measures should te the same if both changes place the individual om the sae higher | Fndiference curve But l the two price changes place the indivi ‘ndifforent inference curves, the wellare measure shoul correctly DEFINING AND MEASURING WELFARE CHANGES. 59 ewe The compensating varition incre aks wo altel inate he prfrence ranking of thet aerate. The EV es ac ap rr consent ong sot he CV Tigre strates why thi tec. shows anni in ui t pat A gen per and ey ice Sepp tone oly props! woul netsh peo sand epee the pea sy anstansaly. Te nil would Shine sno ‘culviom a pot Bc The CV sesue of te wee ange ‘own t Chie The second poy seat woul decree he rrcot whe tng pe Ts wou one snes equlirism at pont C eit C has een dre oe sien crveas pon 8. Therre the eo ele hang shouldbe these the wo poy shen Bat can ban by iapectons the CF oe ie areata. Bt nxnMEASUREMENT OF ENVIRONMENTAL AND RESOURCE VALUES. le the individual isin fat intferent between the wo policies.” ‘The EV gives the same welfare measure forthe fo polky alters ties. THs beenuse the EV measure Bests comparoon ana point tn the indifference curve passing through the new equllbrium, Dut futh the ol prices. If two polices are om the same new indiference five the EVimeasure pcs the same point for measuring the welfare ‘feta for both pice. if the question being asked by policymakers, Does the pro- posed change pase the Kador potent compensatin tet then CVs {Retest owe The Kaldor peta operation Wt one fore of potential Pareto improvement test that sake whether iis rset winner ofa mp lof ees Fm he roposed policy change and sil leave someone beter of For each Firm, He CV gives the compensaing come change fequed fo rutin that person at hs or er il ty level he sum of ‘that could be collected from all gainers exceed the sun of there {ured compensation for loses, the propor] pates thi form ofthe Fett Pareto improvement test. The fact that he CV cannot rank Eonsstently two oF more policy changes fs no obstacle to is use in this mannet Ths Because the potential Pareto criterion Hel pro- {ob for aking too ore propose poly ge I Two proposed changes Both pase the Kaldor potental compensation {the potential Pareto improvement citerian provides no basi fot ‘hooting between them. ‘On the other hand, the question being asked by policymakers is Does the policy pass the Hicks version ofthe ptenl compensa: tion test! then EVs the appropriate measure, The Hicksin et ask trhether itis posible for the ler fo bib the gainers fo obtain thelr nsent to forgo the proposed pay change The potential gainers Srould accepts bibe only it were large enough 0 aie thei tity Tye came amount a the proposed project would have, The offered bribe would have to be as lrg as each individual's EV measure of trefare pai. And the maxim bebe that would be offered by the potential locrs would be thelr EV measure of oe, Thus the sum of th EV ofall griners exceeded the sum ofthe EVs of all loses, the opel would pan the Hicks form ofthe potential compensation eat alo, since the Hicks form ofthe compensation tet i based on the EV measure, wil consistently rank two or more poiy changes, provided that sock is ndflerent af the distrbuton of gains and Kosses across individuals "Fe Fase (175). Chipman and Moore (19H) dacs the conditions Meseurement ‘Simply put, the problem pose for applied welfare economics i that the desired welfare measures, the CV or the EV are based om the tunobservable Hicks-compensated demand functions, while the one measure based on the Observed Matshallan demand functions i flawed asa welfare indicator The typia practice had been to se the Marshalian surplus anyway, and t offer such justifications as “in ‘ome effects are likely to be small "with only one price change path dependence is not an isue’; and’ the only measure we have and itis beter than nothing” Then Robert Willig 1976) ins widely cite arte, provided justification fr asing the Marshalon sSuopus by examining the eagmituce ofthe dferences between $ and CCV or EV under diferent conditions, He argued that "in most app ‘ations the err of approximation will be very smal. In fat the eer will often be overshadowed by the ertors involved in estimating the demand curve" (1975, p58). More recently several authors have ‘developed methods for dzet calculation ofthe CV and EV rom infor ‘ation contained inthe ordinary demand function, either through “Taylor's series approsimation (McKensie and Pearce, 1982, and ‘MeKenzie, 1983) or as exact measures, though integration to obtain the indirect utility function and the expenditure function (ace, fot ‘sample, Hausman, 1981. In this subsection I review these cent developments in applied weifae analysis and asseso the ign ‘ance fr valuing environmental services Wiig 1976) has fered rigorous derivations of expressions relating, CV, 5, and EV. These expressions provide a way of calulating the ‘magnitude ofthe differences among the three measures for given pres, quantities, and income. The dferences among the three mea ures depend on the income elastity of demand forthe good in {question and consumer surplus at «percentage of income. The dfer fences among the measures appear fo be smal and slmst tral for ost realistic cases. The dferences ae probably smaller than the or inthe estiation of the parameter of demand anton by Willg’s bounds forthe approximation erors are based on the fac thatthe differences between S and CV or EV aise from an income effect on the quantity demanded; and the sizeof that effect depends fon the change in rel income brought about bythe price change and jon the income elasticity of demand forthe good. This an be shown(62 MEASUREMENT OF ENVIRONMENTAL AND RESOURCE VALUES sn th the help of 4 nosgorous way fo theese foe pre change with he hel, igure 83." nti igure te rdnry and compensated demand ‘hives are astmed tobe linear. Let represent the sea +b, 30: cee rsp and Bvaatbre Atowgh ths exoston ppc tthe cso ony one pre change the Wii epson an be genes to aconmodate mune pe ‘angst 17), proved hx spc path of megan fchoxn [DEFINING AND MEASURING WELFARE CHANGES 63 The errors in using Sto approximate CV and EV are equal othe areas band c respectively. Fora price change fom p' tay te fetes ledluencing the sze ofthe approximation trot con be seen by sane ining the determinants ofthe rea. cv-s=-» zap -axt © whee isthe income effec on the quantity demande of associ sted with edcing income sulfiientiy to hold tity a 2. Let represent this income change. By definition, AM is CV: The defi tim of income elastic of demand is EM aM Rearanging this expression gives ‘Substituting this into uation (8) we obtain apex Ey CV o- oe In genera for small changes in p, Ap =x = — $. Ths is stil true forthe linear demand curve when © is evaluated atthe mid poet, ‘between x’ and 2". Finally, dividing both sides by CV to express the ‘ror in percentage terms gives ‘This similar othe Wiig expresion for the approximation eroe Ht say that the eror is proportional to the income elastic of de. ‘mand and consumer surplus asa percentage of income A sits ne ‘of easonng canbe used to derive dhe eatonship between EVand 5 Will's analysis is more rigorous than this in that i taker in account the possibility that for finite changes in price nd suantty "The eincpldferenc that expresses the emor a percentage of wie Will's term makes the rors prcentage ofG68 MEASUREMENT OF ENVIRONMENTAL AND tenets of dma ny ay nea ere derves rales of thumb or calcolating the maxima SRNR, Soran approumation or EV or CV. The rls of thumb are “pplicabe if hefllowing conditions are met: 5 Es 5 os o ge a0) where y= the smallest value of income elasticity of demand for the ae ov in the eon under consideration Ey, =the largest vale of income elasticity of demand forthe 1 Good in the repon under consideration, Given these conditions thereof thumb for CVs ay a nese ales ‘The st thing to note i the conditions under which t ue a Comer eqn 10 Fe change Sumer srl ab percentage fine depends on the i fhe frce change the price las of demand, and expenditure on thi Troha specenag tal ome. Te snare price ge ei the sale the propeton of Income spent on the good, the Slr io SM Ttcan teal be shown that 5 « bt S ? cl end ye it ‘This shows that, for example, fora good absorbing 50 percent of total income and fora 100 percent pice change, SIM cant exceed 05, while for a 10 percent price change for's ood absorbing 10 percent of income, S/M wil be less than 0.1. Thus condo (0) likely to be satisfied except for very lage pice inceares for goods with low price elasticities that alo absorb slrge proportion tthe total budget ‘AS forthe fis condition, the smaller that consumer surplus is 85a percentage of income, and the smaller that the income elects ‘of demand is the more likely (9) eto be satisfied. For example consumer surplus is 5 percent of income, the income casey of demand can be as high as 2.0 and stl satisty (9) SIM fat bogey satisties condition (10), the income elasticity cannot exceed itt satis). Assuming that conditions (%) and (10) hold, et us tur tothe rules of thumb. ist, according to (9), the maximum error imvohved sing $ as an approximation for ether CV or EVis5 percent Second, the stllr the change in income elatty over the fange bein cor sidered, the more precise ae (11) an (12) as statements of the ey involved in using $ rather than CV or EV If the income elsticty of demand does not change over the range being considered (En = Be), the lefthand and right-hand sides of (1) and (12) are ual tooth ‘other and the errors are zero, as discussed above. Fly, athe Income elasticity of demand forthe good decreases, the differences among ordinary consumer surplus, CV, and EV decease dseppese Ing as Ey goes to zero Will's analysis has ben interpreted as providing a justification for using consumer surplus as an approximation ofthe CY othe EV But there are two reasons why one should be cautious sot adopting the Willi approach to welfare measurement. The fist hast de wi limitations on the applicability of the Wilig conditions to some Kinds of problems of wellare measurement, including some of specifi iter ¢stto environmental and resource economists: The second arses be ‘cause ofthe recent development of new methods for obtaining erect ‘measures of CV and EV from the same information that i requced fo ‘se the Willig approximation. The Willig conditions for valid approximation were developed for changes in Sas a result of changes in the price of some met 00d. Many environmental and resource policy sues raul infor, ation onthe total value of some environmental sevice a esos ‘of what would be lost if the reource were destroyed or diverted fo some other use. For example, the economic cost of damming rver that provides whitewater canoeing and trout fishing would be mex(66 MEASUREMENT OF ENVIRONMENTAL AND RESOURCE VALUES sured bythe total areas under the Hicks compensated demand curves for these activities, This i equivalent to measuring the change in Consumer surplus fr a price crease from the present price tothe ‘Vertical intercept ofthe Hicks compensated demand curve Bockstoe [ind McConnell (180) point out that forthe nest demanel fantion, the income elastic of demand goes to infinity asthe price ap- proaches the vertical intercept. Thu the approximation err cannot Decalcolted.” Tor some questions, the variable of interest to poleymakers isnot (CV but some fection of CV—for example, the dead weight los asocl Sted with tax on a commodity. Suppose an excise tases the rice ‘ta good frm pop" a shown in igure 36. The consumers loss [smeasured by CV isthe areas + + c butonlyb + cisan effiency Iban, since a evenvetranefer to dhe government. If the ordinary demand curve is used to appronimate the consumer loss, the area ci the ero If the Wiig conditions are satisfied, cis an acceptably small percentage of Sand CV; but ten be an unacceptably large percent [pe ofthe re dead weight oss = “The second reason for being cautious about using the Willig appronimaton is that beter methods of wellare measurement nov REC the demand functions being sed to caeulte Sef wy ‘maximizing behavior on the pat of individuals, they should satisty the integrability conditions. And this is the case, al explan inthe fot section iti possible to calelate CV and EV direlly without Sppronmation. On the other hand, ithe demand functions do not aay the integrability conditions, then is inappropriate to use the Willig approximations since thet devation was also based on the _ssumpon of wtty maimizing behavior Ws basic proposition inthe theory of demand that if the ordinary ‘emand functions elle wity-masanizing behavior, they contain all ‘ofthe information on preferences that necessary to reconstruct an ‘relma inden of uly: Recognition ofthis dual elaionship between, “Sina comment on Backs! and McContl (98), Hanemann (580) sowed tha I the purer of the Marsan demand funcion were ‘Shown, as unneesary to compute the Wiig approximation ex sine the CVewlbecauned deccty nthe, Hanemann oppure thesnlyt of Hassan (1959), obedscassod bow. DEFINING AND MEASURING WELFARE CHANGES 67 Pree’) “eM cr) gure34 Theil approxiation and Rew proximation and he erin estimating dead weigh lowed dm dine Tapenade yen ag YE hem arty ss a cri ond eager Seance and Pee (176, 8D, and MeKerte (976 98) The metal che es nr a oe Eicin tenement ny pcan bre (no ap pone ee ioe ome il ao oe re = rts Sa Re ay, sel uo hve pried opr cna One cently, several authors have presented operational pro-(68 MEASUREMENT OF ENVRONMENTAL AND RESOURCE VALUES roximations.® For eampl, Hasman’s (961) procedure, which it dovetped forthe es nl one poe chang, eles our Sheps The frst involves combining the ordinary demand function SndRoy's dont to obtain» partial diferent equation: oP, 3018p, ~ gote, Mant PM = thet fancon separable so these demand anton conte oly tam pe amen and the Semand funn mem 9 anh teM= vd econometriclly and where the parameters b and care estimated y here pyand Mare deflated by an appropriate index ofthe other pce. Changes in py and M that invalve moving along. an indi Terence curve must saisty 206) dod , 3) dO g Ia a? aM) a where # defines path of price changes. Rearangng this expression, Substituting int 1), ad using the pict faction theorem gives Mon a Hb tem the solution of whichis rn M(p,) = keen — b-n-8) the inal wheres the constant of integration, which depends onthe ia ty. Hut ge bay chew stat te ia ‘iy evel quaint wy fant and qustexpendture ee Hausman (181) an Beran and Randal (1984) or examples of cxact measurement Varta (28) preset an algo fo appointing DEFINING AND MEASURING WELFARE CHANGES 69 funeion follow diet weerl(ned) (ena! )] Hern) These expressions are termed “quasi” functions because they 4 not contin information about the elles ofthe price of oer 0ods on utility or expenditure * As can be seen this method de pends on the ability to solve the diferentil equation thats obained {rom Roy's Identity. Hausman (1981) has shown a method of solution for the case when only one price changes, and has discussed in gem ral terms the solution In the case of mull price changes and, hee Conclusions Seton ofa welfare mesture has long involved questions both of appropriateness and proccalty The Marhullan durple meses tas requerly chown onthe rounds of pracy, even though ‘was recognize thet the mess was napproprit in tat fa got Erswter any spc well formed wellare ution, Wiligs derlog ‘ment ofthe bounds for the eon of approuiaton in anes ae encouragement to his prac, Bat quily on fa hele hago ane few approaches fo eat welae measurement that eer te opr tunity aula the more apprprate CV and EV measures ely Se nina pray remain Hower Doe Kae ough abut the anton om ofthe uty anton since ie {act measurement methods? Asouningfunctnal oo the eaten demand fancion for prone etationsequlaen tas, thefanetional erm the undrng tty ancon Ore spp assume x psi untonal orm os the ty funcon or Set ey function and to dere te demand funn for station is he appmsch taken then pogging the esimated poms ta ete uty fantom fo cute were changes sghtfonard provided ‘a ie prt io denen con ye [Baily conditions. Sine researchers have been elon o pei te ancora orm the wy function, on akematve hasbeen spay >For frber anatase were measurement when demand nr ‘maton svar ony same te foods beng pureed ake {Hanemann i an anne Say)170 MEASUREMENT OF ENVIRONMENTAL AND RESOURCE VALLES s2-alled flee forma forthe indirect or diet uity function > Again, if {he integrability conditions ae satisfied, deving “eat” wellar mea sures from the “approximate fleblefanctional form ofthe uty Fane ‘Sons sraigfonvard > Thealleative ito seek idan fromthe data by scetng the fnctional form for the demand functions on the bas of lodnes of ftand constency with the etn impose by theory WELFARE MEASURES FOR CHANGES IN FACTOR PRICES, Wthe quantity ofthe factor thatthe individual supplies tothe markets tunaffeted by changes ints pric, the price change lfc ony n- ome. In this case, the income change isan exact mesure of he wel fare efecto the price change. But the change in factor pie affects the quantty supplied for example by altering the choice between I borandleisure"then the welfare mearure must reflect bothchangesin ‘come and changes in the wtlty derived from the quantity ofthe fae tor withheld from the market. CV and EV meavare of welfare change ‘an be defined in a manner consent with the preceding anaysi of [roduc price changes. The relationship between these measures and fhe area above the individual's factor supply cave similar tothe rel 'onships among CV, EV, and Sfor product price changes. “Consider the supply of labor where the individual allocates time between income producing work and tity yielding lesare, The in dividuals preference are descbed by Xf where fs ime spent in leisure (fun). The individual manimizs uty subject to the Budget nd time constraints Mtn we e ° o Mee Of) —P ox where M" is exogenous income, py and w ae the wage rate and hours ‘worked, and the total endowment of time. The individuals abor Supply function, w= wp P, Ms part ofthe solution tothis maxim "See, for example, Deston and Moelaue (1980 aut see, for example, Deston and Macbave O56, chapter 3) for & lacuson of Some ofthe evidence for saying Ue estan othe in ‘empincal estimation of demand syste ce Mishan (1959) for 3 dlcuason of the CV and EV measures, on “sumer surplus, and economic rent. DEFINING AND MEASURING WELFARE CHANGES 71 ization problem, Asis wellknown, the labor supply curvecan be back: vwardbending test oversome ang. prateincomeeeton the demand for lebure outweighs the negative substan tet of more expensive leisure. Se figure>?. Following the usual procedure, the indirect tty function, 21, Pat), and he poeudoexpenitue faction, PP) ah be deved dst, Huet, end Sch, 1982) The pocude ependiare fanton gives the amount of exogenous income (ot expenditure) ued tosustain any tty level ra fancon of pecs The compen Sate lator supply curve shows the quate supplied at vetous pres, sama ht xogen inne ha Bon sso mae {nin the inv at that personal ity fve say we sd ‘ved by dfereating the poeudoexpenditrefanction with pect top, Hecasethecmperated apc enn on a sition effet between work and lure, tis rays upward {nde elec than the ordinary suppiycure. PE Pies) ip PM Figure 3-7. The compensating variation fer # tector orice inceess,.72 MEASUREMENT OF ENVIRONMENTAL AND RESOURCE VALUES rp inreases from, say 10, the CV measure of welfare «gins the integral ofthe derivative ofthe peewdo-expenditure ure Eom with respect top, Geometrically thier the area othe ft ofthe ‘compensated supply curve between the two price levels, that i “ABDE in figure 37, Thief greater than the area between the prices ttounded by the ordinary supply curve, There i also another com pensted supply curve defined forthe new uty level after the price ‘Range I goes through point C. The EV measure of wellare changes the area tote ll of hi curve (nt shoven in igre 37) between the prc levels, Unless the income elastic of demand for leisure 20, vis greater than EV for wage Increases, while EV ie geste than CV for wage decease. Given an estimate ofthe ordinary labor supply fncion, exact alulation of EV and CV measures possible (Hats san, 1981) WELFARE MEASURES FOR QUANTITY CHANGES “Many environmental policy proposals involve changes in ether the ‘quantities or the qualities of nonmatket environmental goods and evices rather than changes in the price of a marketable good. From the individuals point of view, the most important characteristic of Some environmental goods i that they are avaiable only in fixed, Tualterable quantities: These quantities act ae constraints each individual's choice of a consumption bundle. The analysis of ths ‘ase of problems i often referred to a8 the theory of choice and trelfare under quantity constants Johansson, 1967) oF under posed quantities (Lankford, 1988). The importion of quanti con- aint raises some new saues inthe theory of choice and wellare Icasurement. The analyse ofthese problems has evolved ou of the theory of rationing.» Tn this section, I briefly describe the model of individual prefer- ‘ences and choice under insposed quantity constraints, I then derive “measures of wellae change for changes in the quantities of imposed {oode. These measures ae esendlly similar to the compensating Sind cquivalent surplus measures for price changes discussed earie Finally I turn tothe question of measurement, describing what is "See Haveman, Gaby, and Andon (55) fra compariton of the exact eV and rain spout of he ere oto akon labor See for example, Tobin and Houthabhe (19501) and Neary and Rober rasan, DEFINING AND MEASURING WELFARE CHANGES 73 necessary to obtain exact measures by solving for the expenditure function or indirect utty function, and the potential enor in volved in approximating these exact measures By seas unde Ut compensated inverse demand (bia) curves, “The Basic Model Consider an individual whose att function has the following forms where Xis the vector of private goods quantities (X =). fo) fad Qi 2 ‘vector of cvonment and arr svc fos do pe) thats given tothe individual Its posse that {or at east some a the elements in Q there i positive pice charged Lett = Obe the vector ofthese prices, and Pe the vector of prices or ‘X. The individual mamizes tity subject toa budget constnine POX R-Q=M where M is money income. Ths yes a st of conditional demand fanetions forthe macketed goods (PM ~ R20) In general, Qwillbe an argument in these conditional demand fanc- tons, slong with the prices of both market and nonmarket goods ‘The term “conltional” refers to the fact that these function are conditioned upon the imposed @. Inserting the conditional demand functions into the utility fune- tion gives the conditional indirect tty function 1PM ~R-Q,Q) Inventing the conditional indict iy function for the term ~ RQ yields » conditional expenditure function that gives the Iinimam expenditure om market goods required to produce wiity level, given Pand @ This i CP =M-R-Q- 88.0.0) ‘The dual fo the utility maximization problem can be stated as follows: sminimige one amization problem can be stated as74 MEASUREMENT OF ENVIRONMENTAL AND RESOURCE VALUES ‘squalor exceed some stated level, says. The solution fo this problem ges the rstcted expenditure function PR Q,19) whichis the ftal expenditure on all goods necessary to achieve a bien P, Rand Q. The conditional and restcted expenditure func- ‘ns ae related by the following expression: ere eee as) ‘Welfare measures can be defined in terms of either the condi- ‘ional or resected expenditure function. These to form of expend ture function coincide inthe special ease where R Welfare Measures : \Wetfare measures can be defined for either changes in Qor changes in| Bor both. Changes in have the ame effet a ump sum changes ia money income ual fo “AR »@, s they pose no special problem for welfare measurement. For simplicity, in what follows twill consider welfare measures only for changes in Q; and Iwill assume that Q Consists of only one element, with a price ofr 1 wil first present ‘welfare measures forthe general case where r > 0. wil also show ow these measures canbe simplified when r = 0. So that graphic presentations of some ofthe key points can be made I wll astm that Xis the numerare represented asx. Finally Iwill assume that at the given prices and income, the individual would choose more of i “ven the option. The cise where more gis a bait aken up below To begin with the marginal value of small increase inthe reduction i income that Is jst sufficient to maintain wility at is ‘orginal level. ithe marginal value of change in, its given by the deivatve ofthe restricted expenditure function with respect 10 a0 a9, The right hand side ofthis expression i aio lin absolute value) to the slope of the indifference curve through the point at which “Lankford (19 has derived masses for he peer cate wth ima eee ee DEFINING AND MEASURING WELFARE CHANGES 75, th wale change being vale Aeatvy, fom equation ‘The second term, ~trefet the fact that the addtional imposes an cblgation onthe individual to increase the lamp sum payment given By gener postive €quanty-constained nature ofthe problem makes i ipos- sible fran individual to agus the quant Oo satty the conven onal optimizing conditions of ‘equally of marginal rates of substitution and price ration. Therefore, compensating surplus (C3) ‘nd equivalent surpies (ES) ate the relevant measures of Weare ‘hange. And the choice between them depends on te same cone. erations applying othe choice between CV and EV measure for pe changes, There are several waye to present CS and ES for changes ‘uantity onatrained pods, In theft way, from the conditional indirect uit function the 5 and ES measures are defined imply athe solution to the folowing expressions CSisthe solution to 2PM = 999) = 18, M = rg 65,95) and ES ithe solution to OFM =r 98+ ES, 9) = 018 M = ga) ‘These two measures can also be defined in terms of the expendi- ture fancton. Consider at the CS Using the ested expereiare function, CSis. ad 5 = cP, 1.99.0) —e(Pr Meh rah u) “ ‘This cas is shown in gure 38, Te nil postion i at point A wher the individual eonsumes and 1 and shires hay "Lankford (198) calls this the “income vale of the change in 4. An76 MEASUREMENT OF ENVIRONMENTAL AND RESOURCE VALUES Figue 3-8. The compensating surplus measure fran incest ng “The increase ing enables the individual to reach at point B. In come is redced by CS, the individuals pushed back ou at point C “The conditional expenditure function can be wed to show that this welfare measure consists of two components. Recalling that the “conditional expenditre function gives the expeniture on privately ‘chosen market goods necessary to achieve a spected tty level ven the level of, wehave Pg) = P98, A) =o Thus CS = eR gw Fg PERO —re DEFINING AND MEASURING WELFARE CHANGES. 77 ‘The ast term isthe “income value term reflecting the extra expen ture ong given As shown in figure 3, the redaction inthe expen. litures on x that is given by the fist two terms in equation (1) ‘verstats the wellare gain fron the increase in when Fs poste The true welfare gain is found by deducing from Se* an amount ‘equl to the unavokdable increase in expenditure on. rg =), The ES measure is given by ES = R198, 98)~ oP nga) P4821) = M. ‘This is shown in igure 39. As before, the increase in enables the individual to reach point B with ulity qual ou. Altemativly, income were increased by £S while haldingq constant, the individ cul achieve at point C.78 MEASUREMENT OF ENVIRONMENTAL AND RESOURCE VALUES, ‘The second way o present CS and ES measures is based on the conditional expenditure function ES eh 98 wt) rg? e901) rg Since this welfare measure is defined in terms of income changes holding constant at, there ino need to tke acount of the income valve of change in. tira pare pubic good with r 0, then ther is no need fo take {nto etount the inome Value term in either ofthe welfare measures ‘The budge ines are horizontal, as shown in figure 3-10. The fall nd conditional expenditure functions are the same And the CS and ES ‘measures areas shown in the digeam [DEFINING AND MEASURING WELFARE CHANGES 79 The third way to derive the E and CS measures is to make use of ‘uation (6). The value of « onmarginal change in the integral ‘of 16 taken overthe relevant range, none ‘Thisis ether a CS or an ES measure, depending on whether = Oo Another way of looking atthe welfare measurement problem fs to ask what income levels and prices for 4 would be nevesary to support each quantity constrained bundle as rely chosen uty ‘maximizing bundle. For example, consider the inital potion showe in gure 3-1, with 9° and the individual st point A Fealzing uty{80 MEASUREMENT OF ENVIRONMENTAL AND RESOURCE VALUES level w. A “vetual” budget line through point A and tangent x? has slope equal to ~ and an intercept equal to. We can inter pre ba the vital price of and asthe vital income associated tith point A; Band ware functions of, and the prices of marketed goods. The function b(-) isthe compensated inverse demand func fon for gt might also te called either the marginal wilingness0- pay function othe virtual price faction, Also, clea “3 ‘These terms provide yet another basis fr defining ES. Ii reas in virtual income anil viral prices and that requized to Stain the same uty level as canbe atsined with the increase in 0 i ES pF, bP, wa) ~ HP, DUP, wu) ‘This measured by the vertical distance AC, which isthe same asthe etic distance AC that measures ES in figure 39. Simla, CS is the decrease invita income that maintain given the increase in (aman dat 5 = WP, BU, #1). 0) = WH BAP, 18) “The virtual incomes and prices can sluo be used to define air. tual” equivalent varlation abled “ET the increase in income {hat has the same effect as the postulated increase ing, assuming. however, thatthe individual cant chooee an optimal uantty of. A ‘rtual budget lin tangent othe indifference curve representing at point 8 in igure 3-11 The increase in virtual income necessary t9 chive point Bis "EV" "EV" Is less than ES, showing that less ‘ional income is necessary ifthe individual can optimally aust Compared to what i necessary inthe quantity contained regime. Siar reasoning can be used to derve a vistual” CV, denoted as (CW. and toshow that “CV” is ager than CS forthe sae change in| 442 This is because more income can be taken away from the individ thal when that person can optimally adjust 9 than in the quan constrained rege. “The virtual budget line and price, b sed to drive "CV" i tangent to DEFINING AND MEASURING WELFARE i CES. The virtual price functions can also be used to define welfare measures. Since the vitual price i equal tothe slope ofthe indi ference curve at that pont, is sso eal to 3'3y evaluated a that point Thus W, [Parone Titer Sra aca, ping on es 0 vac and Approsimate Welfare Measures ‘The question tobe considered now is whether theres some relation- ship describing the individuals behavior with respect to chosces Of that is at leas in principle, observable and that canbe used to sve {or the indirect uty funtion oF expenditure fonction in'a manner sinula tothe Hausman (1981 method for exact welfare measurement for price changes. Lankford (188) and Bergland and Randall (1988) have described techniques for recovering the expenditure function ot Indisect utility function when the individual fees a quantty cone sHraint, But these techniques requite information that is ot ten avaable, especially in the case of public goods and nonmarketed environmental and resource service flows, ‘What al ofthese techniques have in common isthe requirement for information that reflects the choices ofthe individual who is max ‘izing utlty subject only to pice and income conaesnts Simply inthe absence of quantity constraints and when price ratios a ‘known, marginal rates of substation can be infeed frm tity ‘maximizing choices. But as is lest from figures 38 though 311 the presence of quantity constraints means that marginal rates of subst {ution are notin general equal to price ratios, 0 marginal rates of substation arena directly revealed, The Lankford and the Bergland and Randall techniques require some knowledge of what the individ would choose fo doi he of she could freely choose q at exogenous prices. The required date -might be avilable, for example, in the case of wartize rationing in hich the quantiy-constained goods were previously avaiable in unconstrained markets. But these data are et likely 1 be avaiable forenvironmental and resource services, A related question is whether there is an observable counterpart to the Marshalian measure for price changes and, if so, what is relationship isto the exact £S and CS measures for quantity chengen a{82 MEASUREMENT OF ENVIRONMENTAL AND RESOURCE VALUES (CS measures and thei relationship to a Marshlian measure. How fever their Marshallian surplus somewhat andl, and Wi not ‘Grey bervable. In order to explain this, ee need to define wo ‘ther functions, The fit isa bid function conditional oa Mand. ‘Assume thatthe individual receives and pays r per wnt. This bid function gives the maximum willingness to pay for one additional tnit of ya function of, while holding constant the other prices lind the income avalable to allocate between additonal 4 and X (7 4) This bd function ean be weiten a5 emg Mara) a) ‘This gives the slope ofthe indifference curve passing through the point defined by 4, M "r= g. At point A in figure 11, 8 = , but at other levelsotg 5 For example atin figure 3-1, °(-givesthe slope ‘of at pine D, while 6) a given by equation (18) gies the slope of ‘atthat level of: and b> > b This function cannot be inverted to get the optimal choice of qa function of by excep in the special case ‘where = 7 Forexample, at ths funtion would yield the slope of 1 at point D; bat this point would not be freely chosen given Mand r ‘od the preferences deseribed by these indifference curves. "The second function tobe defined alo deteraines abi, say B™ ‘but makes thisbid depend on gand virtual income, x = M+ (Dn. ‘Ths income: compensated bid function given by al eo Given gy figure 3:11 shows that x = and H** = bat point A. Ig Increases the compensated bid funcon gives the ew 8°" and ‘Virtual income necessary to support point Das an optimal choice. Ia ‘other words at point D, b= the slope of at pint D. In principe this function could be inverted to find the optimal choice of q given b. But this would not be a true Marshalian de- ‘mand function because assumes compensation forthe income value ‘of the Also, cannot be ertimate from observable dala because ‘only M9, and rare obwerved, not M+ (" — h Ii interesting to note that although these wo forms of bid function are defined diferenty and have differnt forms, they will compute the same bid for given 4, Mand preferences. They both compute the slope ofthe indifference carve passing through the in {ersacton ofthe M'~ rq budget line and the given 9- Yet neither function canbe given a strictly Marsalian interpretation, ete Me DDERINING AND MEASURING WELFARE CHANGES 88 figure 3.12. At ®,bX-) and O°) coincide, But a8 4 increases, 9°) verges from BY). This is because the fist cave holds ty Constant whi the second hale income (constant. ae ankord "0585p. "Ssh it the income: ‘compensa ton is known ie posable fo solve for the conditional expenditure function and through that to ota the CS or the ES welfare measures exactly. CS the mea under) Setneen gt and 5b sea nde) over the sme er . ‘Stl (1980) employed line of reasoning smart wal (875) ani he coe ned in sing the ten net the °C) function as an approximation fo either Cb or ES an the ely magnitude ofthe difference Between CS and ES- As Thane done in this section, they assumed that there i only one quant contained god: Rloring wo igure 312 or a mu om fo the three allerative welfare measures are given by the following seometr ares. eb atbee Randall and tol show that when the eror bounds are sit end where isthe area under (-) and E, isthe price hese 4(-)andE, isthe pice Resi f income,{84 MEASUREMENT OF ENVIRONMENTAL AND RESOURCE VALUES Preis) Pear Peril) ° ¢ 4 Figure 3.12. The compensate inverse demand carves and the bid curve when Es not constant over the relevant range. Genera expressions forthe ror bounds are alo presented. This respi that sing the aes under) to spprosmate CS or ES an seeptable pro cedure But recall hat HC) isnot obser andi His known Somehow should be ponsbl to calelte CS or £5 cect making the approximation unntcesnary “Terao esp hat Sor linge pay ora change) and ES (or wilingnest to accept compensation f0fngo 4 ‘hangs wil be approximately equal in many creumstances. Hane: smn hh wm ats oc oa he ny one guantyconstsned good, He has chown tat Fenty of income ean be expressed a the ato Of tw oer erie DEFINING AND MEASURING WELFARE CHANGES 85 where a isthe aggregate Allen-Uzawa elasticity of substitution be- {ween 4 Sn the composite commosity X and Ey the income sacs ‘ity of demand for. I there are no dose subtitues for among the private goods in X, 0 can be close to 2er, leading to 8 high value for £,and.lagediference between CSand ES. Wheng ina Bad ‘There are two ways in which more 9 could be a bad, rather than a 800d, for an individual. The first wa is when ri greater than Zee and the individ would prefer to have less than the quantity being {imposed given that price. This signes that r > 8 > 0. The welfare ‘measures ES and C3 are stil defined inthe same way, but mow they ‘re negative for increases ing and postive or decreases, ‘The second way in which jean be a bad isthe more fundamental ‘one; i is when the marginal wily of 9 is negative, Ever at aoe rice the individual would prefer o receive a smlorquanty, This ‘means that bis negative In both cases, the welfare measures £5 and CS are defined in the same way, and again they ae negative for increases in g and postive for decreases ing. Also, all of te discs, son of exact wellre measurement technkjues and eppronimations ‘ares over with appropriate changes tthe cae of at bd, AGGREGATION AND SOCIAL WELFARE ‘Assume now that we have obtained measures ofthe welfare changes, either plus or minus, forall individuals Hove can ve use tat infor. ‘ation to make choices about public policy alternatives? To ut the ‘question ints most profound sense, what the appropriate relation. Ship between the welfare of individuals snd the soll wife? In he literature on welfre economies thete ate basally four was (0 ap roach this question ‘The frst approach to the question isthe so-called Pareto crite rion. Only policy changes that make at lest one person better ff (that & an individual experiences a positive wellare change) and ‘make no indvidval worse off (thats, no individual experiences 9 ‘What flows ia bri ele of aerate socal welfare eter. Since the main concer ofthis book swith mensuements tne question of so welfare crteria~that how tune the measure of he main ash. Pore ‘more extensive dicusin a the probe, oe Misha (196), especaly Se thon IIL, Boadway ard Bane teas obkem. see Mishan (1960), especially{86 MEASUREMENT OF ENVIRONMENTAL AND RESOURCE VALUES negative wellore change) pss this cron, This citron deer Stely rales out ay temps to add up or ethers ake commence bk th ir ewe diferente. Se ay Setual publi oly proporals impose net costs oma at some ind Sima poly alors by ote ote scp ander this enterion. This woul be partly tru nthe enetonmentl tea, where envionment management cots me often chaneled through the prodacton sector whe heme acre o houston {he frm of ineresed level of envionment secs, Is highly “nll that this would rest in pattern of eden o benefits andonts in which noone woul lose The estrcive feature othe Preto ceteion have simolted an ongoing search for well cite "on tha woul juste state dng cera things tat at Feast some people feat shoud beable odo "the second approach tote question was proposed in sight i {erent forms by Keon (198) and Hicks (1908), These are he we di ferent forms of potential compensation est dscssed ether in the section on Wellare Mesnues or Changs in ries Let us eve these testsin the present context of aggregation and socal wel "As noted eave the Kaldor vero f the teat ake whether those whe gain by the ply can fly compensate forthe were Tosses of those who los by the py. Tne Kaldor version othe est vould be satis the sm of sl nividel CV and CS measures af vellare changes were greater than seo. The cite is esecnialy ‘ne of pent Pareto improvement ince if te compensation were ‘tually pad noone would tase om the poly “The Hicks version of the. potent compensation tex asks ‘whether thowe wh oe rom the oly oul compeneat the gins {ora decison nto proceed withthe poy te anewer ye the [lcy should berejeted cording o he Hicks cite, he pacy tere rejected and compensation were actaly pa thao whe ‘would have gine fom the policy would be jus aswell of ae the Pulicy had been opted, and thxe who would have ls area eet 5S well ofa they would ave been with the ply, The Hicks er Sion ofthe tes lakes acceptance of the projet ase reference poi. Invefec ts decision oForg the proj that crests te pat ond losses that are relevant tothe Hicks veratan of penal Pato Improvement tern “See, for example, lanes Psi, and Wet (187) and Peskin (197), "However lors tong defense the Pareto cferion omc bral ‘grounds, ace Peacock and Rowkey C73) ING AND MEASURING WELFARE CHANGES. 87 neither the Kaldor case or the Hicks case, should the compensa on actly be pad? one think the answer should eyes ew compensation testi transformed into a variation ofthe Pareto cate, ‘om in which the tate serves to enforce the taxes an trates gop. sents that are necessary to ensure that noone actualy expesene welfare los, assuming that such tases and Wansfer would Be cost Jess one thinks that the answer shouldbe no, this sequen ts inefet assuming that alindvidua welfare changes ee commec fate and can be summed together into an aggregate measure of wel, fare change. This i the elficency criterion of the new weine economies. Acconing tothe efcleny erteron, the sbectve of oo, Sal poiy is to maximize the aggregate vale of al ofthe pond series ‘people resive, including environmental and’ esouree Alternatively, one might believe that whether compensation should be paid depends upon who has to pay and whe gts the benef. This requires consideration ofthe equity lament the dlstrbution of income as an element in the evaluation a sca poy The hed approsch othe question of scl welfare citer, proposed by Lite (1957), makes expt the concer or equally: He 4 twofold test. First, does the policy pss the Kaldor test? And noe ond, des the resulting change improve the distribution of enon ‘The Lite caerion egtimizesaconcem with the ditbutona ets of change in resoure allocation, bt it doesnot resolve the question of what conatittes an improvement The fourth approach othe question involves an attempt to make specific social judgments regarding equly and to intodeee eens considerations systematically into the evaleation of socal policy The ‘most common proposal call forthe establishment oft sata ellos function that gives diferent weights to individual sellare cheers Scoring oh reve deneinges ofthe leet nde ‘cours, the main problem withthe sca wellare weight spprosch isthe determination othe weighting funciona "SN SPP One justiaton for the Hicks Kaldor potential cmpension tet that a lage mer of ecient profits wl spread Beefs siete widely stat everyone Isa net aint rm the set fps ele hoe even though some might be losers om Inve poets ee Pa Sak (1972 foraneresting develope ths line tse See or empl, Ecstin (19651) For amore ened dacuson of {his approach ee Haveman and Weis (197%, pp. #8 and eer there88 MEASUREMENT OF ENVIRONMENTAL AND RESOURCE VALUES Nevertheless, willingness to make explict value judgments out equity makes t possible to consider 4 wider range of policy ‘hoses. For sample, fone ops forthe Pareto criterion or the poten til compensation version ofthe Hicks Kaldor test, one rules out the possibly of accepting a project that has a sum of individual welfare hanges that isles than Zeo but that would substantially improve {the distribution of income. An example of rach policy would be one that imposes a welfare loss of 1,000 on a milionaire while bringing benefits of §99 to each of ten impoverished orphans. A wellare- ‘Weighting function could approve negative sum policies ike this p vided thatthe weights given tothe beneficiaries were sufficiently {retterthan the welare weight ofthe lowes In addon, neither of {hese criteria would reject projet that imposes costs on no one bat istribates benefits only to He richest in our society. Some might ia the value judgment that that, ln ise, is desirable, A socal Iwelfare function that incided some measure of inequality ofthe bggreyate stribution san argument might reject inequality ‘eating projects ke this. And would also be Tikely to acept nega tive sam projets that eced inequal SUMMARY In this chapter, have explained the derivation of the compensating and equivalent measures of naval welfare change for changes In [ricer and imposed. quantities. The compensating and equlvalet Iearures anoer diferent kinds of poiyeevant questions because they make diferent implicit ssrumptions about the relevant status v0 Its intererting to examine some hypothetical examples. ‘Suppore thatthe question is whether to locate landfill in 2 particular neighborhood, ‘The neighbors are Hkely +0 oppose this proposal. Suppose that itis accepted that the neighbow have a Fight to an undistarbed neighbortood. Then the relevant measure ‘ofthe harm for locating the andi in their neighborhood would be the sum of their compensating measures of loss (CV and C3). The fpproprste measure of the fain to those who would use the nds would be their willingness to pay to locate it in this eighborhoodalso a compensating measure. Alternatively, 6 Srgusd thatthe larger soety has sight t locate the Landéll ‘anywhere, then what is teevant ie the neighbors” willingness to pay to keep it out their neighborhood. This i an equivalent mea. Sure of the potential loss (EV and 9), And for the users of the ea ee ee ne ane ene ae DERINING AND MEASURING WELFARE CHANGES 89 wht te users would requir fo compensate then fo lating tin a aaa lace, _an equivalent measure of benefit. * vent, hat ending iy i poling at that has been in the neighborhood for long tine the eas sro hac ehh hee ce Fn for wear nearaement the uy oes tr he factory hs wopped te plan. Ths mp ono ‘metre of wel change (EV and) Specialy eis eee Pensa that th nigh would nrc org hag pas Son'tpred and te ocary owner ligne py eee ‘Spas Alaa hey ns hyp compensating mesures of the gin om sopping the plone spproprite (CV and C5). aan i each ae the appropri wolfe measure can be found samining the nature othe oa nen ht epog 6p pally decison at hand andy the npc ghia te eon ne “oe peti bay evn pra eas Scion The ress forthe examples dscaned er ae ae stzed as follows: a “ * pic TaN Pegi Gaines loners Thepresen —Requrecan Neigh _“Paltr i compensating compensating a smensre WIE} peur Ae) he potential Ablow plton? Poller Neighbors vive lene mente WAC) mare) Totheneighiors — Rguzecsan Neighbors Pllotr- - uilene yuo smeare WAC) meaare (WEP) Tetheneehbon Alow pio Pale Negher sree OTB) apse ae) [REFERENCES Bergland, Oba and Alan Randal 184. “Operational Techn ational Techniques for Caw lating he Exact Hikin Varios rc Osea Dat Sal Paper 17 Lengo, Ky: Deparnent of Agra Ecos, Unerey ot kentoay aso, Abram. 196. says in NomalieEaomis. Cami, Mas: Har0 MEASUREMENT OF ENVIRONMENTAL AND RESOURCE VALUES Boadway, bi, and Ne Bre, 1984, Wie Eames: Oxford, England: at awe Docks, Nancy, and Kenneth E. McCann 1980.“Cacating guia Teo and CompsatingVaaton for Nara Resource Facies Land ‘Eom vt 96 001 pp, CCipman, Job Sand James C. Moe 198, "Compensating Varin, "Conners Sapa, and Walle" Annan ome Ree a 7 son pp m9 Cum Jon MJ A. Morphy, nd Anew Schie. 1971. 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