Avoided cost and averting expenditure methods
The basis of avoided cost and averting expenditure methods is that economic agents may be able to undertake expenditure to minimize the effect of a fall in environment quality. For example, of the quality of drinking water is considered to have fallen below an acceptable standard in a tourist destination, the local authorities may decide to install a water filter system, the cost to be borne by local suppliers. The sum of these expenditure across all affected parties could be viewed as an implicit valuation of (a lower bound to) the fall water in quality. In a study of direct expenditure by consumer, Hansen and Hallam (1991), for example, use a production function approach in the valuation of recreational fishing benefits of an improvement in freshwater stream-flow relative to consumptive river uses, such as agriculture irrigation. They found that marginal valuations of stream-flow change are higher for recreational fishing than for their corresponding use in agriculture. Clearly, however, it is likely that the averting expenditure and environmental services forgone are imperfect substitutes. For example, many tourist experience a loss of welfare as a consequence of the environmental degradation in general, as well as of unique sites of high scenic value, but do not consider the averting expenditure, which may have a high threshold, for instance the use of public transport at an immediately higher personal cost rather than using a car to reach a holiday destination, or a site for which the visual intrusion of parked vehicles adversely affect its attractive ness. Thus, valuations using avoided cost methods may produce underestimates and this has been found to be the case in many human life valuations ( Dardin, 1980; Dickie and Gerking, 1991) There is, however, no specific evidence of tourism being directly unwillingness to pay avoid being exposed to risky environments that might endanger health and life.
The relevance of these methods to conservation and natural resources is that they potentially can measure the impact on welfare of ongoing changes in the environment, i.e. dynamic benefits and costs. The example cited from the literature largely refer to degradation of the environment and being applied in this way they could indicate the impact of a without conservation situation. However, in principle there is no reason why they cannot measure the impact of an environment. Their main shortcoming is the difficulty of making them operational.