Sound appraisal is at the heart of good policymaking, and robust valuation of impacts in
money terms helps decision makers to take proper account of them. Some of the costs and
benefits of policy decisions can be readily valued because they impact directly on markets.
But some cannot, and measures therefore have to be constructed or obtained from
complementary markets. It will never be possible in practice to value all impacts, but we
should aim to extend valuation to as many as we can. Valuation is implicit in most policy
decisions, and it is preferable to make it explicit where possible to improve quality and
transparency, whatever objections some may have.
Of the various valuation techniques available, stated preference (SP) techniques are being
used to an increasing extent. Indeed they are the only kind of technique suitable in many
circumstances. This volume, together with its companion manual,1 was commissioned by
the Department of the Environment, Transport and the Regions in order to increase the
accessibility of SP techniques and to set out what the literature tells us about best practice.
We hope that they will both promote the use of SP techniques and, most importantly,
improve the quality of studies that are undertaken. There are many methodological and
procedural pitfalls in implementing such techniques which, if not avoided, can easily
discredit the results, thus not only failing to help the policymaker but also bringing the
techniques into disrepute.
The material we have put together is addressed to two main groups of people. This
document is targeted mainly at those in the policy community, including people who may
need to commission or manage valuation studies, who have to understand the nature and
quality of the results in order to inform decisions. Policy managers need to be able to
challenge work commissioned from practitioners and to ensure that it can withstand
critical examination when required to support policy. This cannot be done well without
some knowledge of the techniques involved. The companion manual will be most helpful
for students and those who themselves undertake SP studies. They need to be aware of
latest developments and the requirements of good practice.
Stated preference valuation is a rapidly developing field, and this book provides up-to-date
information about the latest techniques and approaches. It has been prepared by a top class
team of experts, led by Professor David Pearce and including many of the leading figures in
stated preference on both sides of the Atlantic. I’m very grateful to all those involved in
getting this material into the public domain.
Appraisal can be contentious and difficult. It is not solely the preserve of economists,
although good appraisal is largely underpinned by analysis of costs and benefits. Cost
benefit analysis aims for a degree of objectivity and impartiality when comparing the
relative merits of feasible options. Nevertheless, the potentially all-embracing nature of
good appraisal means that many disciplines have contributions to make, both in the social
sciences as part of the decision process and in the natural sciences by providing the
1 I. Bateman et al., Economic Valuation with Stated Preference Techniques: A Manual, Edward Elgar,
Cheltenham, 2002.
necessary evidence as inputs for decisions. Cost benefit analysis reaches its limits when
some significant impacts cannot in practice be given money values, and in such cases other
techniques may help, such as multi-criteria decision analysis (see, for example, the guidance
at www.dtlr.gov.uk/about/multicriteria/index.htm).2
My aim is to promote actively the use of valuation where it is a practical proposition.
Valuation techniques are frequently used for measuring environmental impacts. They also
have a long history of use in the health and safety field, where willingness to pay studies of
changes to risk of illness, injury or death have informed many policy and investment
decisions. In transport they are used for valuing time savings, and hence congestion costs.
I hope that by making stated preference valuation techniques more accessible, this guide
and the accompanying manual will enable more policy areas to take advantage of them,
using best practice techniques.