Select all of the true statements regarding monetary valuation. Group of answer choices Economic value measures are only meaningful for changes in ecosystem services from a known baseline. Cost-benefit analysis uses non-monetary metrics of beneficial outcomes as proxies for social welfare (e.g., lives saved, species extinctions prevented) and evaluates the costs of achieving changes in these metrics (e.g., dollars per extinction prevented).
The Correct Answer and Explanation is:
Correct Answer:
✅ Economic value measures are only meaningful for changes in ecosystem services from a known baseline.
Explanation:
Monetary valuation is a method used in environmental economics to assign a monetary value to ecosystem services — the benefits people receive from ecosystems, such as clean air, water purification, pollination, and recreation. The process of valuation helps policymakers make informed decisions by comparing costs and benefits in common units (usually dollars).
The first statement is true: “Economic value measures are only meaningful for changes in ecosystem services from a known baseline.”
This is because the concept of economic value is based on marginal analysis — which looks at the value of a change rather than the absolute value of nature itself. For example, economists don’t value a wetland in isolation; they estimate how much welfare (measured in willingness to pay or avoid costs) would change if that wetland were degraded, lost, or improved, compared to a baseline scenario (such as the wetland in its current state). Without a baseline, it’s impossible to assess whether the change results in a gain or loss of economic welfare.
The second statement is false: “Cost-benefit analysis uses non-monetary metrics of beneficial outcomes as proxies for social welfare…”
Cost-benefit analysis (CBA) aims to monetize both costs and benefits, including intangible ones like human life, biodiversity, or aesthetic value. While non-monetary metrics (like lives saved or species preserved) are considered, CBA typically translates these into monetary terms using methods like willingness to pay, contingent valuation, or revealed preferences. This monetization allows for comparison of all impacts in a unified framework — dollars — so that decision-makers can weigh total costs against total benefits effectively.
In summary, monetary valuation requires a defined baseline to measure changes in ecosystem services, and CBA generally operates in monetary terms, not just non-monetary proxies.
