Animal Waste, Water Quality and Human Health

Economic evaluation 431referred to as a numeraire (Pearce 1986). It is then possible to define economicvalue very narrowly in terms of economic behaviour in the context of supplyand demand. Put simply, it is the maximum amount of goods or services – orequivalent money income – that an individual is willing to forego (willingnessto pay – WTP) in order to obtain some outcome that increases his/her welfare. 1These sums of money are demonstrated or implied by the choices peoplemake, and thus reflect individuals’ preferences for the change in question(Pearce 1986).In promoting economic evaluation, there is concern that there is too muchemphasis on assigning monetary values to aspects of health and the environmentthat are difficult—if not impossible—to quantify. There is also concern thatdecisions about health and environmental protection interventions might bemade strictly on the basis of whether their quantifiable benefits outweigh theirmonetized, quantifiable costs.It should be noted though, that decision-makers will often find it hard tointerpret and decide upon health or environmental endpoints that are the subjectof interventions. They will generally find it easier to interpret monetary valuesfor the purposes of making decisions about an intervention. Considering theincremental costs and benefits associated with alternative interventions(including: no intervention) can help to clarify the tradeoffs and implicationsassociated with those interventions and help to set priorities.Economic evaluations can be undertaken at the individual level (e.g. individualfarmer), sectoral level (e.g. farming sector) or societal level (e.g. single country orthe EU). The perspective taken determines which potential costs and benefits areincluded in an economic evaluation. Policy decisions related to public healthand water are mostly taken from the perspective of society, since suchinterventions will have an impact on society as a whole. Nevertheless, furtherboundaries may have to be defined. For example, if an intervention in onecountry has cross-border impacts that benefit individuals in another country,then the geographical scope of the analysis will determine whether the benefitderived by the latter individuals is included in the economic analysis. It isimportant to note that in addition to looking at whether an interventionrepresents an efficient allocation of resources, it may be equally important forthe welfare of people to consider how those resources are distributed in society.Costs and benefits may not be borne equally across society. As discussed later,1If the outcome reduces welfare then this utility loss is measured by the minimum amount of moneythat the individual would require in compensation (willingness to accept – WTA) in order to offsetthe outcome.