ECONOMICS UNIQUENESS

xxii ■ OVERVIEW
and captures the ways in which heritage investment contribute, in combination
with other inputs, to the production of further cultural goods and services, job
creation, and well being of local communities.
Interpreting heritage as cultural capital has a clear parallel with the defi nition
of environment as natural capital. Like any other form of capital, both cultural
and natural capital have been inherited from the past, might deteriorate or
depreciate if not maintained, and impose on the present generation a duty of care
so they can be handed down to future generations. Th e long-term management of
both cultural and natural capital has been integrated in sustainable development
and experts have developed practical tools to operationalize this new paradigm.
A central issue in heritage economics is the question of valuation of these
assets. As is the case of environmental economics, it is customary to distinguish
between use 3 and non-use values. 4 Th ese are also referred to, respectively, as
market and non-market values. A third category of value—the cultural value 5 —
should be added to the equation in order to capture the full benefi ts of heritage
investment. While the fi rst two categories of value are easier to measure, cultural
value, by contrast, is a multidimensional concept. Chapter 3 proposes that the
various elements contributing to cultural value can be similarly assessed.
Economic valuation of heritage investment evolved from methods traditionally
used in environmental economics. Five valuation methods are used to
address diff erent aspects of heritage valuation, and chapters 4 and 9 discuss their
features. Th e fi rst method is compensation, which seeks to evaluate the cost and
benefi ts derived from changes in the availability or quality of a heritage asset. Th e
second method is social cost-benefi t analysis, which captures the benefi ts of an
investment with large spill-over eff ects. Th e third method is stated preference,
which is rooted in behavioral economics, and aims to uncover what individuals
are willing to pay or accept when the availability of a public good changes. Th ere
are also revealed preference methods, which include travel cost (fourth method)
and hedonic price (fi ft h method). Travel cost is based on calculating the fi nancial
sacrifi ce that a visitor makes to travel to a city or a site of cultural signifi cance, but
it has some limits, especially due to attribution and opportunity cost.
Th e hedonic price method, widely used in urban economics, is emerging
as a better tool for evaluating heritage-related investments. Th is model can
help gain a better understanding of the value of heritage assets by leveraging
databases having detailed information on transactions in the real estate market.
Such databases are especially useful if they comprise disaggregated data on
the characteristics of the properties sold. In this context, Geographic Information
System (GIS) techniques oft en off er the possibility to further enrich data
with mapping of information about geographic neighborhood characteristics.
It is, however, important that this method takes distributional implications into