Introduction:

... In the present paper we attempt a first stock taking of our views on the range of the corresponding simplifications in the field of our own research during the last 15 years, namely, that of the economic valuation of environmental goods and services. More specifically, we focus on the theory of choice and its particular expression as a microeconomic theory of demand. The latter forms the rational groundwork for the predominant methods of economic valuation of environmental goods and prevails today in the discussion on the direction and range of environmental investments. Its importance for the theoretical foundation of important decisions and legislative texts of environmental management has increased substantially in the last few years.

Two recent examples are the European Community Directive 2000/60 on water resources management (known as Water Framework Directive, WFD) and the European Community Directive 2004/35 on environmental liability with respect to the prevention and restoration of environmental damage (known as Liability Directive). Clearly, the implementation of these Directives will require employing tools of the environmental sciences, and especially environmental engineering and restoration ecology, which are essentially related to the diagnosis and restoration of ecosystem functions. However, this task will require for the first time the systematic application of economic methods and tools (e.g. cost accounting and valuation of non-market goods and services) as well as the consideration of legal and administrative procedures in order to achieve the internalization of environmental externalities.

In particular, the scientifically complex confrontation of the issues that arise from the implementation of the Liability Directive, in conjunction with the potentially significant economic externalities of industrial activities will inevitably lead to judicial disputes and will require the expertise of a wide range of professionals.

In view of these developments and of the potential role of economic valuation results as a judicial means of evidence, it becomes urgent to track down and critically survey the results so far from the empirical applications of the neoclassical theory of choice and demand within the context and through the methods of the economic valuation of the environment. This process, we hope, will highlight those problems that are due not primarily to the incorrect “translation” of the theoretical concepts, but to the intrinsic difficulties of the theory itself.