Economics Symposium, tomorrow, Thursday, October 23 🕖 7:00 PM 📍 ECU Life Science Building and Biotechnology Building Room 1006
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Chat GPT 2025-10-24
✅ Was It True That Economics Initially Focused Only on Market Goods?
Yes — for most of its early history, economics focused almost entirely on goods that were bought and sold in markets. Value was thought to be revealed through prices, and if something had no market price (like clean air, biodiversity, national parks, or scenic beauty), it fell outside traditional economic analysis. Economists viewed these as moral or political issues, not economic ones.
🌿 When Did This Change?
The turning point began in the early 20th century, but became mainstream only after 1950s–1970s.
🌟 Key Pioneers Who Revolutionized Non-Market Valuation
| Economist / School | Revolutionary Idea | Key Contribution |
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| Arthur Pigou (1920) | Externalities | Showed that some costs/benefits are not reflected in market prices, laying groundwork for valuing pollution, public goods |
| Harold Hotelling (1949) | Valuing public lands | Proposed methods for valuing national parks based on people’s travel costs (Travel Cost Method) |
| Ronald Coase (1960) | Property rights | Demonstrated that environmental goods could be valued through bargaining even when no market exists originally |
| John Krutilla (1967) | "Conservation Reconsidered" | Argued that nature has economic value even without use, introducing idea of existence value |
| Clive Granger and later economists (1960s–80s) | Contingent valuation | Developed survey-based methods to measure people’s willingness to pay for non-market goods |
| Elinor Ostrom (1990s) | Common pool resources | Showed the economic value and governance possibilities of resources without market pricing |
🔥 The Most Revolutionary Idea
John Krutilla's 1967 paper "Conservation Reconsidered" is often considered the birth of modern environmental economics. His radical claim:
"A person may derive satisfaction from knowing that a natural environment exists, even if they never visit it or use it."
This was a new economic category: existence value — value without consumption.
📌 Before This Revolution:
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If there was no market, economists assumed no value could be measured.
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Nature was seen merely as input for production, not as a source of utility in itself.
📌 After This Revolution:
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Economists began using survey methods, travel cost models, and hedonic pricing to infer value from people's behavior or preferences.
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Environmental economics emerged as a formal subfield.
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Today, ecosystem services (like pollination, flood protection, carbon storage) are routinely valued in billions of dollars.
🎯 Final Answer (in simple terms):
Yes, historically economics only valued goods traded in markets.
The revolution began with Arthur Pigou's concept of externalities (1920) and came to full maturity with Harold Hotelling (1949) and John Krutilla (1967), who proved that economists can measure the value of environmental goods even if no market exists. This gave birth to environmental economics and fundamentally expanded the scope of what economics can analyze.
The truly revolutionary step was Krutilla’s idea:
Nature has economic value even if no one ever uses it.
That changed the field forever.
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QUERY: Who was the first one to attempt to put actual value on it, not just argue that it was possible and that there was value?
Great question — you're asking specifically:
Who was the first to actually attempt to measure or quantify the economic value of a non-market good, rather than just argue that such goods have value?*
🎯 The First Real Attempt to Quantify Value of Non-Market Environmental Goods:
Harold Hotelling (1949)
Hotelling is widely credited as the first economist to propose an actual empirical method to measure the economic value of non-market goods — specifically, U.S. national parks.
🔍 What Did He Do?
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In 1947, the U.S. Department of the Interior asked economists how they might justify funding for national parks.
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Hotelling responded (published in 1949) with the idea that:
The value of a national park could be estimated by observing how much people spend to travel to it (gas, lodging, time).
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This became known as the Travel Cost Method, which is still one of the main tools in environmental economics today.
✅ Hotelling was the first to move from philosophy to actual economic valuation using observable behavior.
🧠 Why Hotelling is Considered the First:
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Pigou (1920) talked about externalities in theory but didn't estimate actual dollar values.
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Coase (1960) discussed property rights and bargaining but didn’t calculate values.
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Krutilla (1967) argued for existence value but did not measure it.
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Hotelling (1949) actually gave a workable method to measure a non-market good using real data.
🚩 Therefore:
The first serious attempt to put a numerical economic value on a non-market environmental asset (like a national park) was by Harold Hotelling in 1949.
He didn’t complete an empirical study himself, but his method directly led to Clawson & Knetsch (1966), who carried out the first full empirical valuation using the travel cost method based on Hotelling’s framework.
🧾 Summary Answer:
Would you like a simplified timeline table showing how valuation evolved from theory → method → measurement?
