Embedding effect

rdf:langString Embedding effect

rdf:langString The embedding effect is an issue in environmental economics and other branches of economics where researchers wish to identify the value of a specific public good using a contingent valuation or willingness-to-pay (WTP) approach. The problem arises because public goods belong to society as a whole, and are generally not traded in the market. Because market prices cannot be used to value them, researchers ask a sample of people how much they are willing to pay for the public good, wildlife preservation for example. The results can be misleading because of the difficulty, for individual society members, of identifying the particular value that they attach to one particular thing which is embedded in a collection of similar things (e.g. The Tower of London within the set of all globally important historic monuments or Caernarvon Castle within the set of all Welsh Scheduled Monuments). A similar problem occurs with a wider selection of public goods (for example whether spending on preserving a specific wetland is more important than preserving a specific persons life for the next two years using taxpayers' money). The embedding effect suggests the contingent valuation method is not an unbiased approach to measuring policy impacts for cost-benefit analysis of environmental, and other government policies.