Environmental Economics

A Case Study of a Hazardous Waste Site: Perspectives from Economics and Psychology, Volume IV of Improving Accuracy and Reducing the Costs of Environmental Benefits Assessments

This 1986 study by the University of Colorado uses concepts and methods of analysis drawn from both economics and cognitive psychology to understand the sources of a large drop in property values that occurred near the Operating Industries Incorporated (OII) Landfill in Monterey Park, California. The study reports on the substantial impact of the Landfill on property values and on the results of a survey of subjective risks. Two main conclusions emerge from the study results: (1) Subjective health risks are likely to be overestimates of the objective risks, and (2) the overestimated subjective health risks are associated with significant property value losses.
The study is organized into the following chapters:

    Introduction and summary
    A brief review of the economic and psychological issues
    Theoretical issues in the analysis of hazardous waste risks--develops an economic theoretical basis for subjective measures of damages, benefits, and costs using concepts drawn from psychology. This provides the economic rationale for benefit-cost analysis of remedial actions at Superund sites including risk communication. Risk communication is found likely to be a cost-effective way of reducing subjective damage.
    Preliminary property value studies--presents data on three hazardous waste sites used to find a suitable site for detailed analysis.
    Survey and sample design
    Data collection and description
    Data analysis
    Concluding discussion.

In addition, there is an appendix entitled "Valuing Risk: A Comparison of Expected Utility with Models from Cognitive Psychology."