Choice Modelling in Australia: Insights and Future Directions

1. Choice Modelling in Australia:past, present and future Jeff Bennett Crawford School ANU

2. Some quiet contemplation • Non-market environmental valuation … and choice modelling in particular … appears to have reached a turning point in Australia • Significant interest in applications and useful levels of funding for research • Some strong ‘nodes’ of application and training • Appropriate to contemplate what has happened, to assess where we are, to speculate on future developments and to plan

3. In the beginning … • The Phoenix of Kakadu • Resource Assessment Commission Forestry Inquiry … the appetite for CVM applications had been lost • Contingent Ranking and Rating? • Louviere and Hensher • Vanuatu Forests … CV and CM studies for ACIAR • Flatley, Rolfe • LWRRDC “General Call” application • Blamey, Morrison, Huybers, Whitten

4. Slow and steady • Sequence of applications and developments • National Land and Water Audit • NSW EPA • Fitzroy River Basin • SA - CSIRO • WA - UWA • Vic – Neil Sturgess … Rivers and VEAC • NZ – Kerr and Sharp • Health and transport developments

5. Not always forward • NSW Rivers … two steps forward and one step back • Living Murray … one step forward and one step back • Great Barrier Reef …two steps forward and into oblivion • MBIs … no interest in assessing the level of investment • MCA … advanced as the means for avoiding the need for the hassles of NMV • The politics of economic analysis

6. A new impetus • Inception of the Environmental Economics Research Hub • Specific interest in advancing non-market valuation as a key element of developing government policy • Hub theme devoted to Valuation • Specific projects looking at: • Integrating valuation into bio-economic models • Scope and scale effects • Time • Uncertainty • Expert vs lay values • Preparation of an application guide

7. Why now? • People • demand: DEWHA, State agencies • supply: capacity • Policy • Environmental issues to the fore • BUT the ‘ascendancy’ of economics and finance • Pressure • Regulatory Impact Statements

8. Remaining barriers • Deeply held scepticism in some quarters • The ‘anti-economics’ environmental lobby • The ‘anti-economics’ bureaucrats • The antagonistic economists • The political process … rent seeking rules • Technical issues

9. The research frontier • Demonstrating the accuracy of results remains the ‘holy grail’ … policy makers require the assurance that they are not entering a quagmire of dispute • Incentive compatibility … belief in the results is ‘counterintuitive’ to decision makers • Hypothetical bias … also ‘counterintuitive’ • Context sensitivity … what is the ‘right’ context? • Scope and scale … framing concerns • Questionnaire presentation issues … cognition, comprehension, confusion • Information provision

10. Room for wide-scale experimentation (lab and field) … especially revealed vs stated preference comparisons that are not confounded by the public/private good divergence • Consistency and convergence • Useful to find points of agreement within the profession without ‘standardisation’ • Avoid ‘freezing’ the evolutionary process

11. Contingent behaviour and choice modelling • ‘Green’ accounting … at the national scale and for individual environmental assets … values for stocks and flows of non-marketed assets • Coping with uncertainty • Dealing with the ‘over-surveyed’ respondent • ….

12. Timing is vital for policy making. Without a bank of studies and a well-recognised process of benefit transfer, the time needed to do environmental valuation (esp stated preference work) is a killer. • Benefit transfer – to be widely accepted – needs to be founded on a thorough understanding of the impacts of all the variables affecting value estimates … scope, frame, presentation etc etc