Handbook of Environmental Economics

Chapter 18

COGNITIVE PROCESSES IN STATED PREFERENCE METHODS

BARUCH FISCHHOFF

Department of Social and Decision Sciences, Department of Engineering and Public Policy,

Carnegie Mellon University, Pittsburgh, PA 15213-3890, USA

Contents

Abstract 938

Keywords 938

1. Overview 939

2. Origins 940

2.1. Psychophysics stream 940

2.1.1. History 940

2.1.2. Design framework 941

2.1.3. Evaluative extensions 943

2.2. Decision theory stream 945

2.3. Confluence 948

3. Evaluating environmental changes 949

3.1. Psychophysics stream 949

3.2. Decision theory stream 952

4. A cognitive approach to eliciting stated preferences for environmental outcomes 956

5. Conclusions 963

6. Contingent valuation: a postscript 963

References 964

Handbook of Environmental Economics, Volume 2. Edited by K.-G. Mäler and J.R. Vincent

© 2005 Elsevier B.V. All rights reserved

DOI: 10.1016/S1574-0099(05)02018-8

938 B. Fischhoff

Abstract

Cognitive psychology is best known, to many environmental economists, through the

filter of acrimonious debates over the validity of contingent valuation methods (CVM).

Psychologists’ views on CVM reflect concerns that are deeply rooted in their profes-

sion’s history and theories. Although psychologists have participated in some CVM

studies, their roles have rarely allowed them to present a comprehensive design phi-

losophy, illustrated in actual studies. This chapter sets psychologists’ critiques and

alternatives within a general cognitive perspective on value elicitation, including stated

preferences for environmental goods. It begins with a historical review, organized

around two converging streams of psychological research. One stream leads from psy-

chophysics to attitude research. The second leads from decision theory to decision

analysis and behavioral decision research. The next section reports some environmen-

tal valuation studies arising from each tradition. These studies do not directly monetize

environmental goods. However, they can still directly inform policies that do not re-

quire monetization and indirectly inform policies that do, by shaping studies with that

ambition. The following section considers the role of cognitive studies in helping in-

vestigators to know what issues matter to people and present them comprehensibly. The

concluding section of the chapter presents a cognitive approach to stated preference

methods for environmental values – one that could be developed most fully in collab-

oration with economists. It is built around a cognitive task analysis of the four main

elements in any evaluation process: (a) specifying the valuation question, (b) under-

standing its terms, (c) articulating a value for that specific question (from more general

basic values), and (d) expressing that value in a public form.

Keywords

environment, preferences, elicitation, values, uncertainty

JEL classification: Q51, C9