On separating defensible benefit transfers from “smoke and mirrors”

Benefit transfer methods increasingly are being applied to value nonmarketed resources for both policy evaluation and natural resource damage litigation. This paper illustrates the need for guidelines for deciding when benefit transfer methods can be used to value changes in environmental resources. It begins by discussing applied economic modeling perspectives and relating them to benefit transfers as tools for evaluating policy. It reviews the history of benefit transfers and summarizes how they are typically undertaken, including the influence of the analyst's judgments on their outcome, by comparing the development of two different analyses that use benefit transfers to consider the same issue: estimating the benefits from limiting industrial effluents discharged into specific rivers. It proposes an agenda for future benefit transfer research: devising strategies for extending available benefit transfer theory, learning from existing research, and formulating transferable versus “portable” modeling strategies.