Throughout the past three months, I have been working with Professor Jon A. Krosnick to explore, analyze, and generate recommendations for using a unique econometric/survey methodology known as contingent valuation (CV) that can be employed to estimate the economic value of natural resources. Using new data from six previously unpublished, massively funded CV studies in addition to meta-analyses and literature reviews of previous work, I was able to test over 25 separate hypotheses designed to answer questions about the reliability, robustness, and wider applicability of the contingent valuation methodology. I then compiled the results of these statistical analyses, reported and summarized six exemplar CV studies, and wrote guidelines for future CV studies into a book that will hopefully be published sometime next year. Overall, I concluded that contingent valuation represents a valid and robust hypothetical market technique that produces reliable estimates for the economic value of natural resources that conform to expected theories from neoclassical economics, behavioral economics, and human psychology.
Some of my most interesting findings this summer came from working with data from a CV study conducted soon after the devasting Deepwater Horizon oil spill in 2010. Contingent valuation studies comprise two primary phases: (1) educating a representative sample of Americans about the natural resource in question, and (2) allowing these respondents to vote in a referendum with regard to the particular natural resource. As a consequence of the referendum (usually worded as, “Would you vote for the good or against it at a price of $X?”), we are able to elicit the respondents’ willingness to pay (WTP) for the good. Once all interviews have been completed, the lower-bound WTP for the representative sample can be analyzed with several different statistics in order to ultimately construct the total economic value of the good in question. In the Deepwater Horizon case, respondents were educated about the damages to local economies, wildlife populations, and other resources in the Gulf of Mexico. Next, a proposed program to prevent future oil spills (pictured below), namely the drilling of second pipes, was described in detail. Finally, respondents voted to pay or not to pay for the implementation of the prevention program, thereby expressing real economic preferences for the Gulf’s natural resources as they had existed prior to the 2010 oil spill. In total, people exhibited a lower-bound mean WTP between $136.11 and $153.01, and the total value of the natural resources was estimated to be $17,236,150,367.
Due to the pandemic, I have been living and working in my hometown of Boca Raton, Florida (workspace pictured). Thankfully, through communicating with many famous economists and government officials via email and Zoom, I was able to obtain all of the data and insights necessary to complete my research. I was even able to sift through a set of obscure government documents from 1992, six years before I was born. Moreover, although I was working in a different time zone 3,000 miles away from the campus, participating in SUPER meetings allowed me to be very productive while feeling connected to Stanford’s exciting research communities. Working as part of the SUPER team has been a highly enjoyable and informative experience, and I am very grateful to have accomplished my goals of testing numerous facets of the CV methodology and writing a book about contingent valuation this summer. These positive experiences have inspired me to continue studying and conducting research in politics, economics, psychology, and computational/statistical methodologies by applying to graduateschool for political science in the fall.