Valuing Environmental Goods and Services: The Past and the Present

Environmental goods and services are non rival and non excludable.  People generally free ride and conceal their preferences for such goods and services.  Thus there is market failure in case of such commodities.  This makes valuation of environmental goods and services difficult.  This paper offers a brief description of two main approaches of non-market valuation, revealed and stated preference methodologies to value environmental goods and services.  The historiography in development of these two methodologies is discussed.  Further, the life satisfaction approach of environment valuation, a relatively newer method of environment valuation, is introduced as an alternative to revealed and stated preference methodologies.  The paper concludes that whereas the stated preference methodologies can estimate non-use values, are prone to hypothetical scenario bias.   The life satisfaction approach does not use a hypothetical scenario but should be used with caution as it uses subjective measures of happiness/life satisfaction/wellbeing.