This is a short overview of the main economic tools that have been used in New Zealand to conduct economic analyses of tourism related activities and resources with emphasis on natural resources.

Non-market valuation is the name given to a group of economic approaches that are used to value goods and services that are not traded in competitive markets. The purpose of many or most non-market valuations is to obtain data suitable for input into cost-benefit analyses, which are used to compare the values from alternative 'uses' of a resource. While in most cases non-market valuation is concerned with 'use' values, there are also 'non-use' values such as existence value, option value and quasi-option value 1.

The major economic approaches to measuring the value of environmental goods developed over the last 70+ years, all use indirect or inferential pricing methods. Economic non-market valuation approaches are based on estimates of consumer preferences, using either expressed preferences or the preferences stated by individuals when directly asked to value an environmental or health good within a hypothetical market setting, or revealed preferences.

The method of expressed preferences involves questioning individuals directly using questionnaires to construct the hypothetical market and to provide the basis for eliciting individual's willingness to pay. The information obtained is an individual estimate and requires aggregation in order to obtain societal estimates.

The method of revealed preferences uses available statistics of behaviour ('revealed' through actual choices made by individuals in the marketplace) to infer underlying preferences. The method of implied preferences looks at societal institutions as a means of reflecting current values, while the method of natural standards uses geological time rather than historical time as a determinant of acceptable risk.

As noted above, the 'values' derived using non-market valuation techniques are often used as input to cost-benefit analyses. Cost benefit analysis is a decision making tool used to compare options such as different activities or alternative uses of a resource. Thus non-market valuation is used as part of a comparative analysis, or a decision making tool.

The main focus of regional economic analysis is associated with deriving multipliers from input-output analysis to estimate the secondary effects of tourism activities and developments. These can be used to predict the flow-on effects of these activities on employment and economic activity.

The Department of Conservation Concessions framework is the allocation model for commercial activity in New Zealand public conservation areas; that is, the Department’s basis of allocation for commercial tourism. The concessions process is analogous to the Resource Management Act consent process but without formal public consultation processes. Assessment is undertaken by Department staff. Concessions are handled by conservancies, with central oversight.

The key non-market tools that have been used in tourism research (in New Zealand) are contingent valuation and travel cost method (see also option value – contingent ranking is another approach that has not been addressed). Choice modelling is a new tool that is being developed and applied in Australia (see contingent valuation).

The context for the application of valuation and allocation tools is generally associated (a) with making decisions about the viability of particular activities, (b) with pricing mechanisms, and (c) with allocation of resources.

In New Zealand non-market valuation (using contingent valuation and travel cost method) has been used to value -

• Public lands (including National Parks and Department of Conservation managed areas)
• Recreational areas
• Specific ecosystems
• Forests
• Rivers
• Roading

Cost-benefit analysis has been used in a range of developments. Input output analysis and multipliers have similarly been used in a range of tourism areas.

Identified problems with the application of these tools in New Zealand practice include -

• Small sample sizes and simplified data collection jeopardising the quality of the results
• No reporting of confidence intervals
• Invalid comparisons (between small and large areas etc)
• Inadequate sensitivity analysis
• Poor response rates
• Naive statistical analyses
• 'Formula' approaches with little understanding of the theoretical foundations

What is required is -

• Better application (general flaw is lack of best practice application), and more realistic discussion of assumptions
• Better alignment of objectives of the 'client' and abilities of the 'model' or technique
• Exploration of new approaches

^[1] Economists sometimes refer to these non-use or passive use values as “intrinsic”, however, many biologists and ethical philosophers would argue that “real” intrinsic value is not based on any measure of human preference.