The concept of ecosystem goods and services used in the EcoValue project is inherently anthropocentric: it is the presence of human beings as welfare-maximizing agents that enables the translation of basic ecological structures and processes into value-laden entities.

In economic terms, ecosystem goods and services can potentially yield a number of important values to humans. When discussing these values, however, we first need to clarify what the underlying concept of economic value actually means. The term 'value' as it is employed in the EcoValue Project has its conceptual foundation in economic theory (see Freeman 1993). In this restricted sense, value can be reflected in two theoretically commensurate empirical measures. First, there is the amount of money people are willing to pay for specific improvements in a good or service, willingness to pay (WTP). Second, there is the minimum amount an individual would need to be compensated to accept a specific degradation in a good or service, willingness to accept compensation (WAC).

Simply put, economic value is the amount of money a person is willing to give up in order to get a thing, or the amount of money required to give up that thing. To date in the valuation literature, WTP has been the dominant measure of economic value. However, WTP is not restricted to what we actually observe from people's transactions in a market. Instead, "it expresses how much people would be willing to pay for a given good or service, whether or not they actually do so" (see Goulder and Kennedy 1997)

In addition to the production of marketable goods, ecosystems provide natural functions such as nutrient recycling as well as conferring aesthetic benefits to humans. Ecosystem goods and services may therefore be divided into two general categories: (1) the provision of direct market goods or services such as drinking water, transportation, electricity generation, pollution disposal and irrigation; and, (2) the provision of non-market goods or services which include things like biodiversity, support for terrestrial and estuarine ecosystems, habitat for plant and animal life, and the satisfaction people derive from simply knowing that a beach or coral reef exists.

By estimating the economic value of ecosystem goods and services not traded in the marketplace, social costs or benefits that otherwise would remain hidden or unappreciated are revealed. While measuring exchange values requires monitoring market data for observable trades, non-market values of goods and services are much broader and more difficult to measure. Indeed, it is these values that are have captured the attention of environmental and resource economists who have developed a number of techniques for valuing ecosystem goods and services.

When there are no explicit markets for services, more indirect means of assessing economic values must be used. A spectrum of economic valuation techniques commonly used to establish the WTP or WTA when market values do not exist are identified in Table 1.


Figure 1 provides a brief summary of the techniques used by authors represented in the EcoValue Project relational database to estimate the economic value of ecosystem services.

Table 1: Ecosystem Valuation Techniques

As these descriptions suggest, each valuation methodology has its own strengths and limitations, often limiting its use by authors to a select range of ecosystem goods and services within a given landscape. For example, the economic value generated by a naturally functioning ecological system can be estimated using the Replacement Cost (RC) method which is based on the price of the cheapest alternative way of obtaining that service: the value of a wetland in the treatment of wastewater might be estimated using the cost of chemical or mechanical alternatives. A related method, Avoided Cost (AC), can be used to estimate economic value based on the cost of avoided damages due to lost services. Travel Cost (TC) is primarily used for estimating recreation values while Hedonic Pricing (HP) for estimating property values associated with aesthetic qualities of natural ecosystems. On the other hand, Contingent Valuation (CV) surveys are often used to estimate the economic value of less tangible services like critical wildlife habitat or biodiversity. In our research, the full suite of ecosystem valuation techniques was required to account for the economic value of goods and services provided by a natural landscape.


In the EcoValue project, our primary interest is to shed light on the economic benefits of ecosystem services associated with habitat and landscapes when it is in a naturally functioning state, as opposed to direct or extractive uses such as forestry, fishing and agriculture. Yet, the problem immediately arises: how does one estimate the economic value of something not traded in the marketplace?

The growing sophistication of estimating the economic value of ecosystem services shown in Figure 1 is matched by the rising costs of conducting new studies for site-specific environmental changes. Only rarely can policy analysts afford the luxury of designing, funding and implementing an original study for estimating the economic value of ecosystem goods or services. When analyzed carefully, however, information from past studies published in the economic literature can form a meaningful basis for directing environmental policy and management. To estimate the economic value of ecosystem services used in this report, we relied on secondary analysis of published results drawn from the peer-reviewed economic literature.

While a fair amount of research has been done on the economic value of ecosystem services globally (Daily 1997, Costanza et. Al. 1997), relatively little has been done explicitly to estimate the economic value of ecosystems located in the Northeastern United States (Desvouges Johnson and Banzhaf 1998). Because relatively little ecosystem service valuation research has been done in Massachusetts, we were required to apply or 'transfer' values from outside the state to land cover within the state. Value transfer is an accepted economic methodology which obtains an estimate for the economic value of non-market goods or services through the analysis of a single study, or group of studies, that have been previously carried out to value similar goods or services. The 'transfer' itself, refers to the application of economic values and other information from the original 'study site' to a 'policy site'.

The critical underlying assumption of the value transfer approach is that the economic value of ecosystem goods or services at the study site can be inferred with sufficient accuracy from the analysis of existing valuation studies. Clearly, as the level of information increases within the source literature, the accuracy of the value transfer likewise improves.