ECONOMICS UNIQUENESS

22 ■ THE ECONOMICS OF UNIQUENESS
to a historic landmark or a distinct neighborhood. Th e other approach builds
on urban economics, trying to assess how proximity to historic landmarks or to
buildings with architectural value aff ects property prices. In this case, there is no
attempt to attach a direct use value to aesthetics or culture, but rather to infer how
they infl uence the price of assets for which a market does exist.
An Environmental Economics Approach
In the environmental economics approach, the value of protecting a historic landmark
or a neighborhood with character is generally assessed by seeking views
from the population at large (Pagiola 1996, Navrud and Ready 2002). When this
is done by asking a direct question, the method is called “stated preferences.”
When an indirect question is used instead, it is called “revealed preferences.” Th e
latter method is more reliable if respondents have an incentive to understate their
subjective valuation; for instance, if they fear that expressing their fondness for
a landmark would make them shoulder a bigger share of the associated maintenance
costs. An example of a direct question is: “How much would you be willing
to pay to protect and maintain this historic building?” Th e potential free-rider
problem calls for questions such as “How much would you be willing to spend in
travel to visit this historical building?”
While subjective valuations of this sort may yield some plausible fi gures for
ΔH, they are not directly informative in relation to ΔV. Given the conceptual
parallel between cultural and natural heritage, it is not surprising that those relying
on the environmental economics approach oft en think of the monetary gains
from the project in terms of increased tourism revenue in the intervention area.
Let ΔY t be the additional tourism-related earnings local residents may derive for
an urban upgrading project with a cultural dimension in year t, compared to their
earnings in the absence of the project. In an effi cient property market, the value of
land and dwellings in the area should increase by the present value of additional
tourism revenue over the years. Assuming a zero discount rate for simplicity, the
proponents of the environmental economics approach postulate:
∑
Δ V = ΔYt
Th is is why several of the methods proposed in the literature focus on estimating
ΔY t . Th e environmental economics approach is conceptually appealing, but
it yields an underestimate of ΔV. Th e value of properties in the intervention area
is likely to increase even in the absence of any additional tourism, because of the
better urban infrastructure U provided by the project. Project-funded transfers
T to local residents are also bound to result in improvements in the quality of
t