Journal of Environmental Science and Engineering B 6 (2017) 339-343
doi:10.17265/2162-5263/2017.06.007
D
DAVID
PUBLISHING
The Contingent Valuation Method for Thessaloniki’s
Aesthetic Pollution in Greece
Odysseas Kopsidas
Department of Industrial Management and Technology, University of Piraeus, Piraeus 18534, Greece
Abstract: The purpose of this study is to provide an evaluation of the possible criteria used by the people of Thessaloniki for the
evaluation of public goods and the investigation of the benefits of the conservation and restoration of city structures affected by carbon
monoxide. These benefits are expressed in monetary units by using the CVM (Contingent Valuation Method). The maintenance of the
urban environment often entails excessive costs paid by the people through taxation. A city free of aesthetic pollution results in an
increase in tourism. A portion of taxation paid by the citizens is allocated to cleaning the city. An increase in tourism provides the
government with additional revenue through VAT (Value Added Taxes). The main findings show that in a large proportion, 28% of the
interviewees are willing to pay, but those that are willing to pay significant amounts tend to prefer mild interventions to the buildings,
while those (42%) that agree with minimal to null amount demand radical intervention. The latter group, also, considers any
contribution of theirs to restoration as unfair, judging that this expenditure should be covered exclusively by the State. Last but not
least, from a sociopsychological point of view, this attitude could be attributed to extreme personalities which tend to prefer more
holistic and direct solutions (i.e., no mixed strategy involving people and the State is acceptable by interviewees who consi dered
themselves as having no further obligations after regular tax-paying); as a result, they think that the State is exclusively responsible to
resolve the situation.
Key words: Public goods, WTP (Willingness To Pay), CVM (Contingent Valuation Method), taxation.
1. Introduction
According to Ajzen, I., et al. [1], from an economics
perspective, public goods are of interest
because—unlike private goods—they are a source of
market failure. The problem is ‘free riding’: individuals
have little incentive to voluntarily provide public goods
when they can simply enjoy the benefits of non rival
and non excludable pubic goods provided by others. A
practical example of free riding could be the
construction of a bridge where the societal benefits
exceed the costs. How successful do you think a
campaign would be to finance the bridge with
voluntary donations? It is not hard to imagine how such
a campaign would fail, because many (if not most)
individuals would choose to make no donation, hoping
others would contribute enough to finance the bridge
Corresponding author: Odysseas Kopsidas, Ph.D., main
research field: environmental economics and technology.
for everyone to enjoy. In this scenario, the market
failure would be that no bridge is constructed despite
the fact that a bridge would make everyone better off.
Seeking to prevent such under provision of public
goods is one of the primary economic rationales for
government. While markets allocate private goods
efficiently, governmental intervention is usually
required for the efficient (or even reasonable)
allocation of public goods. Indeed, this explains why
goods such as bridges, parks, police protection and fire
departments are usually financed with tax revenues that
governments collect. Governments can thus serve as a
coordinating mechanism that provides public goods for
the benefit of society.
This research investigates the aesthetic pollution
caused by carbon monoxide on building structures in
the historical sectors of Thessaloniki and will be
conducted with a methodology related to
Environmental Economic demonstrated by Bedate, A.,
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The Contingent Valuation Method for Thessaloniki’s Aesthetic Pollution in Greece
et al. [2]. This evaluation method will calculate the
total benefit for the city of Thessaloniki [1].
Kahneman, D. and Knetsch, L. J. [3] argue that the
potential problem of microeconomic theory is how
natural resources are optimally distributed. The basic
idea behind the evaluation of environmental public
goods, is based on the individual’s WTP (Willingness
To Pay) or alternatively, should be compensated with
monetary units (Willingness To AcceptWTA), and
accept the loss of this public good. In the case of the
aesthetics of the urban environment, this could be
demonstrated by willingness to pay for a cleaner urban
environment and enjoy the environmental public good.
The citizens receive a benefit from the consumption of
private and public goods [2].
The criteria used to show the evaluation of public
goods and the costs related to the impact of the natural
environment and the potential benefits that the citizens
receive are determined in this study. However, as
pointed by Bateman, I., et al. [4], it is difficult to
reconcile the utility value of public goods such as the
environment (natural or urban) because the values of
these goods cannot be seen directly or indirectly
through transactions [2].
2. Literature Review
According to Ajzen, I., et al. [1], a factor of potential
relevance for CVM (Contingent Valuation Method)
estimates concerning public goods and it is the salience
of altruistic or individualistic motives. Altruistic as
opposed to individualistic orientations may, therefore,
be particularly relevant motivational cues in contingent
valuation surveys. Empirical research has suggested
that WTP is related to the moral satisfaction that can
derive from making a contribution to a public good.
This is in line with the study of Kahneman, D. and
Knetsch, L. J. [3] whose results suggest that the
adoption of the WTP measure does not really avoid
moral concerns because the voluntary contribution to
the provision of such goods can be morally satisfying.
A treatment that interprets contributions to public
goods as equivalent to purchases of consumption goods
is inadequate when moral satisfaction is an important
part of the welfare gain from the contribution. The
amount that individuals are willing to pay to acquire
moral satisfaction should not be mistaken for a measure
of the economic value of public goods [5, 6].
When respondents lack prior knowledge about the
public good, as is the case with most goods considered
in CV surveys, information bias is likely to occur, as
claimed by Ajzen, I., et al. [1]. At the very least, their
results indicate that extreme care should be exercised in
designing the information presented to respondents so
that it contains as little bias as possible. In addition,
findings of other researchers as Bedate, A., et al. [2],
show that the expected value of WTP jumps markedly
and significantly with any positive amount of
experience of the proposed resource for particular
environmental
enhancement.
Their
Poisson
censored-normal specifications with endogenous
experience are consistent with the prevailing intuition
that more experienced respondents provide more
precise WTP information [6, 7].
According to the theoretical perspective of Kling, R.
W., et al. [8], analysis results show that the provision of
richer site-specific information to household
respondents has the main result of making demand for
preservation much more inelastic with respect to price
[3, 8]. This result also signals that non-substitutability
is a major factor behind how households value this type
of heritage asset. The impact of site-specific
information is especially strong on respondents who
expressed a neutral attitude towards historic
preservation in general and on respondents who had
lower general educational achievement. These findings
contribute to the line of research regarding differential
effects of information provision and suggest a need for
further investigation into the relative roles of ‘narrow’
versus ‘broad’ concepts of respondents’ prior
understandings [8-11].
3. Data and Statistical Methods
The Contingent Valuation Method for Thessaloniki’s Aesthetic Pollution in Greece
Authors estimate approximately the size of the
external economy by the method of the CVM. The
CVM is a survey-based technique, frequently used in
Experimental Economics, especially useful for the
valuation of non-market resources/goods/services and
cultural heritage objects (of aesthetic, historic,
scientific or social value), such as conservation of
monumental remains and preservation of the physical
and anthropogenic environment. The basic dependent
variables used in CVM are (i) WTP, which is the
maximum monetary amount that an individual would
pay to obtain/preserve a good, and (ii) WTA
compensation, which is the minimum monetary
amount required to relinquish the good. Therefore,
WTP provides a purchase price, relevant for valuing
the proposed gain of the good while WTA provides a
selling price, relevant for valuing the proposed loss of
the good. According to classic economic theory [5], a
significant difference between WTP and WTA should
not occur, on condition that there is (i) no transaction
cost; (ii) perfect information about goods/services and
corresponding prices; (iii) no income effect; (iv) a
market that engenders truthful revelation of
preferences.
Although these conditions were generally met in
several economic experiments that used inexpensive
market goods with readily available substitutes, the
ratios WTA/WTP obtained were significantly greater
that unity. This result, according to Liao, T. F. [10],
was attributed to the fact that participants in these
experiments lacked market experience.
In case that the CVM is applied for monumental
remains, certain specific problems arise, because (i) the
‘good’ under examination has a subjective value,
dependent on the cultural level of each reviewee; (ii)
the intangibles associated with this ‘good’ are related to
the present political behavior of each individual as
regards his/her attitude to the local authorities or the
central government; (iii) as a result, the answers may be
biased, a matter that becomes evident only after final
statistical processing, thus calling for supplementary
341
information, possibly by means of an additional
post-questionnaire; and (iv) the adopted/developed (for
elicitation of people’s WTP) technique itself should be
revised (possibly by means of a meta-questionnaire) by
the same group of experts who processed the answers
in order to improve the questionnaire and store it into a
dedicated KB (Knowledge Base) for future usage,
since each monument is unique and the results coming
from examining quasi-similar cases are of limited
value.
The sample Ν-valid are 100 responses regarding the
Willingness To Pay and N-missing is null. The
descriptive statistics provide helpful information on the
percent frequency of the WTP-value: 36% of the
sample suggested WTP = 0 €, 16% agreed with WTP =
1-10 €, 10% accepted WTP = 11-50 €, 20% mentioned
WTP = 51-100 €, while 18% was willing to pay > 100
€.
One of the principle descriptors investigated in the
main study concerns the preference of the interviewees
about the options (i) leave the situation as is; (ii)
perform only the necessary remediation; or (iii)
proceed with radical restoration. Option (i) has been
selected only by 12.5% of those that stated WTP = 1-10
€, which gives a 2% of the total sample. Option (ii) is
supported by 51% of the total sample, i.e., 61.1% of
those with WTP = 0, 37.5% of those with WTP = 1-10,
40% of those with WTP = 11-50, 70% of those with
WTP = 51-100 and 27.8% of those with WTP > 100.
Option (iii) has been proposed by 47% of the
interviewees, i.e., 38.9% of those with WTP = 0, 50%
of those with WTP = 1-10, 60% of those with WTP =
11-50, 30% of those with WTP = 51-100 and 72.2% of
those with WTP > 100.
It is worthwhile noting the relation between WTP and
preference on restoration options. The interviewees that
are willing to pay significant amounts tend to prefer a
mild intervention, while those that agree with minimal to
null amounts demand radical intervention. The latter
group, also, considers any contribution of theirs to
restoration as unfair judging that this expenditure should
be covered exclusively by the State. From a
342
The Contingent Valuation Method for Thessaloniki’s Aesthetic Pollution in Greece
sociopsychological point of view, this attitude may
reflect extreme personalities with a tendency to holistic
and pure solution (i.e., no mixed strategy involving
people and the State is acceptable by interviewees who
considered themselves as having no further obligations
after regular tax-paying); as a result, they think that the
State is exclusively responsible to resolve the situation.
4. Discussion
In this analysis, it is considered the natural
environment to be a public good and environmental
pollution to be an external economy which the price
mechanism fails to internalize. In all three cases, the
approach of foreign trade was with the CVM and
calculated the external costs generated by the
degradation of the environment from the responses of
respondents in monetary units. Respondents answered
without knowing the environments’ original condition
and without expectations to return to its original form
and not expecting it to return to its original form is the
prerequisite in order to avoid information bias as stated
by Ajzen, I., et al. [1].
The quality of the clean environment and therefore
the estimation of foreign economic burden caused by
contamination depend on personal criteria and the
personal endorsement of the value of that public good.
In addition, the natural environment’s altering of its
original state cannot be determined. Human works and
buildings create new values in the region and, therefore,
the external costs can be measured only by the
expected quality of the environment which is not lost.
Allowances, taxation and value of land use are
calculated solely on the expected image of the
landscape.
5. Conclusion
Therefore, the Pareto optimal socioeconomic lines
status is defined according to the new form of
environment created after the regeneration of areas and
not according to the initial state of the environment.
Also in Kaldor compensation, it should be determined
based on the economic valuation of public goods by
their own people, who judge based on expectations
rather than on the past. The expected form of natural
environment varies from respondent to respondent and
its approach to social welfare units can only be done
through the best and the worst scenario. In any case, the
society wants to reach the minimum point of the charge
received from the pollution and what can be achieved
by the ‘invisible hand’, but the regulation and
government intervention. History has shown that the
charge received by the society because of pollution
varies with the socioeconomic status of citizens. The
more low-income residents, the more elastic the loss of
the natural environment is. The elasticity of citizens
deprived or not of the physical environment is a
measurable size.
Further, the cooperation between private economy
and the financial sector is crucial to improve the urban
environment, as this refers to reduction practice from
micro to macroeconomic environment.
For many years, the urban fabrics of large urban
centers, including Thessaloniki, have faced the
problem of outdoor advertising and the pollution
(aesthetics and material) that it created (posters, giants,
stickers, etc.). The problem has led to a legal ban and
eventually dismantling of outdoor advertisements.
Businesses and advertisers can no longer find a natural
place to display their products, and the only alternative
is electronic advertising. Electronic advertising does
not fully meet the advertiser’s needs as some society
groups (such as elderly people) do not have access to
electronic technology. So, the concern for aesthetic
upgrading has deprived businesses of advertising and
income from dozens of employees.
In this analysis, it is considered the natural
environment as a public good and environmental
pollution as an external economy. Respondents
answered without knowing it was the environment to
its original condition and not expecting it to return to its
original form. In the case of archaeological
monuments, residents have built their buildings.
The Contingent Valuation Method for Thessaloniki’s Aesthetic Pollution in Greece
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