A broad definition of socio-economic assessment is the analysis of “social, cultural, economic and political conditions of individuals, groups, communities and organisations” (adapted based on Bunce et al, 2000). Key parameters to explore whilst undertaking such an analysis should ideally include the following:
• resource use patterns;
• stakeholder characteristics;
• gender issues;
• stakeholder perceptions;
• organisation and resource governance;
• traditional knowledge;
• community services and facilities;
• market attributes for direct uses; and
• non-market, indirect and non-use values.
There are various potential socio-economic assessment techniques that can be used to elicit the above-mentioned information (Bunce et al, 2000). These include:
• secondary data sources (e.g. reports and statistics);
• observation;
• consultation (e.g. with experts and key informants);
• questionnaire surveys (structured or semi-structured);
• interviews (individuals and groups);
• focus groups; and
• visualisation techniques (e.g. maps, physical transects, timelines, historical transects, decision trees, ranking etc).
Due to various constraints, the assessment for this study has been based on secondary data sources, observation, consultation and brief interviews. The other more in-depth approaches are recommended as future follow-up studies.
Economic valuation of environmental resources such as mangroves should be based on neoclassical economic welfare analysis (see Grigulas & Congar, 1995; Gregersen et al, 1995; Dixon et al, 1997; Bann 1997). As such, this approach enables the net economic benefits to society from schemes (e.g. local mangrove management and restoration) and policies (e.g. national mangrove management) to be determined. This is achieved through use of cost-benefit analysis, whereby total scheme costs and benefits are compared. The costs and benefits should be converted to equivalent present day values by means of a discount rate, which takes into account people’s time preference for money.
Economic valuation can also be used for assessing the economic losses associated with natural resource damage (e.g. from an oil spill). In addition, the overall economic value of an asset (Total Economic Value – see below) may need to be assessed for national accounting purposes, or to determine how much it is worth spending on environmental protection.
Economic costs and benefits should generally be measured in terms of:
• willingness to pay (WTP): the amount individuals are prepared to pay for goods and services.
• consumer surplus (CS): the benefit an individual receives from utilising a resource over and above what they have to pay for it.
• producer surplus (PS): the profit that a producer makes from selling a product (i.e. the difference in the cost of producing the product and the market price).
• opportunity cost: the value of something in its next best alternative use.
The economic benefit associated with using an environmental asset is known as economic surplus which is a combination of CS and PS. However, where the costs of production are not known, some studies have adopted valuations based on gross revenues and consumer surplus (Dixon et al, 1996). However, this is more in line with Economic Impact Analysis.
Economic impact analysis: This type of assessment focuses on the overall contribution to local, regional & national economies. As such, it uses data on gross expenditure, taking into account further related expenditure (indirect and induced impacts) using multipliers. The number of direct and indirect jobs provided is also of relevance.
Financial analysis: This type of assessment is used to assess the financial viability (profit/loss) of a scheme or organisation. It is based purely on monetary (cash) transactions in the market place. Converting economic values to financial values is important because organisations and individuals generally depend upon cash to operate effectively in modern life.
The most appropriate framework to assess the overall economic value of habitats such as mangroves is that of Total Economic Value (TEV), as shown in Figure 1. This is based on the theory that environmental assets give rise to a range of economic goods and services (functions) that include direct use values, indirect use values and non-use values. The latter are also referred to as “passive-use” values, which comprise option, existence and bequest values. As based on World Bank definitions (Munasinghe, 1993):
• Direct use value is determined by the contribution an environmental asset makes to current production or consumption through direct use of the site (e.g. recreation and wood harvesting).
• Indirect use value includes the benefits derived from functional services that the environment provides to support current production and consumption (e.g. mangroves providing biological support to near-shore fisheries, and a coast protection function to shoreline assets).
• Option value is the premium that consumers are willing to pay for an un-utilized asset, simply to avoid the risk of not having it available in the future. This is sometimes considered a non-use value because there is no current use of the resource.
• Existence value arises from the satisfaction of merely knowing that the asset exists, although the person valuing the asset has no intention of using it. Part of the motive can be for future generations, in which case that element of value is known as “bequest value”. These non-use values also capture some of the biodiversity, social, heritage and cultural values associated with natural resources.
Figure 1 Total Economic Value framework
There are many techniques available to estimate the economic value of environmental goods and services. A summary is provided below in Table 4, which highlights the techniques most relevant to this study. Further details and guidance on how and when they should be applied can be found in Hufschmidt et al (1983), Barbier et al (1996), Dixon et al (1997), Bann (1997) and Bennett & Blamey (2001).
Table 4 Environmental valuation techniques
Category of technique |
Name of Technique |
Description of approach |
Market price based |
Market values |
Value based on market prices (less costs of production) and taking into account any artificial Government intervention such as taxes and subsidies. |
Change in productivity |
Value is based on the change in quality and/or quantity of a marketed good and the associated change in total net market value (e.g. measuring fishery support function). | |
Damage costs avoided |
Value of an asset is equivalent to the value of the economic activity or assets that it protects (e.g. the damages avoided by maintaining a coast protection function) | |
Substitute/surrogate prices |
Value of a non-marketed product is based on the market value of an alternative product providing the same or similar benefits. | |
Expected values |
Value is based on potential revenues (less potential production costs) multiplied by probability of occurrence. | |
Cost based |
Replacement cost |
Value is based on the cost of replacing the environmental function. |
Revealed preference or surrogate market (uses market based information to infer a non-marketed value) |
Travel cost method |
Value can be inferred from the cost of travel to a site (i.e. expenses and value of time) using regression analysis. |
Hedonic price |
Value of goods is based on the value of individual components (e.g. the landscape premium of property prices) which can be determined through regression analysis. | |
Stated preference or constructed market approach (questionnaire surveys to ask people’s direct willingness to pay) |
Contingent valuation |
Carefully constructed and analysed questionnaire survey technique asking representative sample of individuals how much they are willing to pay to prevent loss of, or enhance an environmental good or service. |
Choice experiments |
As above, but involves asking respondents to select their preferred package of environmental goods at different prices and then inferring specific component values via econometric analysis. | |
Transfer of values |
Benefits (value) transfer |
The transfer of economic values estimated in one context and location to estimate values in a similar or different context and location. |
In environmental valuation, it is important that the most appropriate technique is used to value each different type of good or service. Choice of valuation technique generally depends on the availability of resources, time and data for the study. In particular, it is essential not to double count benefits by valuing any type of benefit more than once.