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Averting Behavior Method Explained

The Averting Behaviour Method is a revealed preference technique that estimates the economic value of non-market environmental goods by observing expenditures made to avoid negative externalities. It assumes individuals act rationally to minimize costs, but may underestimate true value due to imperfect information and the disutility of averting actions. Other related methods include the Preventive Expenditure Method, Relocation Method, Replacement Cost Method, and Forgone Earning Method, each measuring costs associated with mitigating environmental impacts.

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68 views7 pages

Averting Behavior Method Explained

The Averting Behaviour Method is a revealed preference technique that estimates the economic value of non-market environmental goods by observing expenditures made to avoid negative externalities. It assumes individuals act rationally to minimize costs, but may underestimate true value due to imperfect information and the disutility of averting actions. Other related methods include the Preventive Expenditure Method, Relocation Method, Replacement Cost Method, and Forgone Earning Method, each measuring costs associated with mitigating environmental impacts.

Uploaded by

chakmajoykumar416
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© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Averting Behavior Method

Averting Behaviour Method


The averting behaviour method is a revealed preference technique used to
estimate the economic value of a non-market environmental good by
observing how much people spend to avoid or mitigate a negative
externality. The central idea is that the cost incurred to avert a negative
environmental effect can be used as a lower-bound estimate of the value of
avoiding that effect.
For instance, if a homeowner buys a water filter to avoid consuming
contaminated tap water, the cost of the filter serves as a measure of the
minimum value they place on having clean water.
Similarly, the cost of installing an air purifier to safeguard from outside air
pollution is an example of an averting behaviour method.
Averting Behaviour Method
The method assumes that individuals are rational and will choose the least-
cost option to address the environmental problem. It provides a useful way
to value a component of environmental quality that has a direct impact on
human well-being, like health or comfort.
However, a significant limitation is that it often underestimates the true
value, as people may not have perfect information about the problem or
may not be able to fully avert the damage with their expenditures. The costs
measured also don't capture the disutility or inconvenience of the averting
action itself. For instance, people often move to large cities for jobs, even
with high pollution, perhaps because they aren't fully aware of the adverse
health effects.
Preventive Expenditure Method
Preventive Expenditure Method: Averting Behaviour can also be said as the
Preventive Expenditure Method. It values an environmental good by
measuring what people spend to avoid or mitigate a negative environmental
effect. For eg, constructing houses on pillars to mitigate the effects of coastal
and tidal flooding, and constructing retaining walls to prevent shallow
landslides.
Relocation Method
Relocation Method: Relocation method values an environmental attribute
by measuring the costs people incur to relocate to a cleaner or more
desirable area to escape pollution or other negative environmental
conditions. For example, the costs for relocating families who are residing in
regions that are highly vulnerable to climatic hazards. Relocation method is
one form of averting behavior method.
Replacement Cost Method
The replacement cost method is another form of the revealed
preference method. It estimates the value of an environmental good or
service by calculating the cost of replacing it if it were lost. It is often
used as an Ex-post valuation technique. For example, the costs of
constructing the buildings that were devastated in an earthquake.
Forgone Earning Method
The forgone earning method is a distinct form of the revealed preference
method used to value the impact of any negative externality on human
health. It estimates the cost of an illness or injury due to pollution/natural
hazards, etc, by calculating the wages and earnings lost during sickness or
injury.

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