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Subjective values

As regards subjective values, an actual situation of cardinally measurable social welfare is represented by the application of cost-benefit analysis

(CBA) to a project for the conservation of a given natural resource. Under CBA, not only do the benefits and costs measured through market prices have to be considered, but non-market benefits and costs must be considered and evaluated in monetary terms, such as the free use of the resource and its non-use values (option value, bequest value and existence value)14. Non-market values can be estimated through a well-designed contingent valuation survey, whose aim is to establish the willingness to pay of the relevant population for the conservation of that resource (McFadden, 1999; Polome, Marzetti and van der Veen, 2005). The sum of the aggregated marketable and non-marketable values is a cardinal measure of the social welfare from that resource and, subject to known constraints, model (1)-(3) can be applied.

In a situation of ordinally measurable preferences, in contrast, preferences can be measured through a five-point Likert-type response scale (Whishman and Hollenhorst, 1998). Scores range from 1 (strongly nonpreferred) to 5 (strongly preferred). A composite measure of welfare can be created by averaging scores on a certain number of items that contribute to social welfare, such as level of crowding, environmental quality, social experience and facilities. Even in this case a social welfare function can be estimated and, subject to known constraints, the maximization procedure can be applied.

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