Constructing Markets: Environmental Economics and the Contingent Valuation Controversy

As economists took up the task of measuring the “demand” for environmental services not traded in markets, some chose to substitute survey-based methods known as contingent valuation (CV). Doing so, they could not help but find themselves in the uncomfortable position of self-evidently constructing their observations rather than merely observing them. Apparent anomalies between the constructs and the predictions for economic man led to a fierce debate over the merits of contingent valuation—a debate that hinged on the question of whether economic theory was being “applied” or “tested.”