Role of knowledge in assessing nonuse values for natural resource damages

Measuring nonuse values is one of the mast controversial topics facing envi ronmental economists today. One important issue that has received little at tention is determining who has economic standing with respect to nonuse los ses from natural resource injuries. In this paper, a conceptual model for d etermining compensable nonuse losses is developed that is consistent with t he Kaldor-Hicks principle of potential Pareto improvement, and then that mo del is applied to the results of a telephone survey on industrial water pol lution in the lower Passaic River in northern New Jersey. One proposition f rom this model indicates that only people who have knowledge of the injured resource (i.e., 10 to 44 percent of respondents) can incur a compensable n onuse loss. A second proposition from the model indicates that demand for i nformation about an injury to a familiar resource is a necessary condition for compensable nonuse losses. It was found that 81 percent of the responde nts who were familiar with the lower Passaic River were likely to read, lis ten to, or watch a news story about the river. However, fi fewer respondent s familiar with the lower Passaic River were willing to engage in more acti ve, and costly, information-acquisition activities (such as conducting rese arch at the library and attending public meetings). Finally, the model sugg ests that geographic proximity to nondescript resources may affect nonuse v alues, information costs, or both, helping define the potentially affected population. The empirical results for the lower Passaic River support this third proposition. The overall conclusion is that only a small fraction of the population in New Jersey and New York might reasonably experience a non use loss as a result of industrial water pollution in the lower Passaic Riv er.