Economic Nonmarket Valuation of Instream Flows

The objective of this document is to describe how economic analysis can be applied in the allocation of water among competing off-stream and instream uses. (Chapter 2 presents information on the economic theory of water allocation.) Specifically, the primary issue addressed is that of valuing instream flows. Data and methods for valuing traditional off-stream and instream uses are readily available and generally lacking in controversy, given that these goods and services are exchanged within a market setting. As a result, the emphasis of this document is placed on the more difficult and controversial estimation of nonmarketed instream flow benefits related to recreation and nonuse valuation. While the valuation of recreation is a well accepted concept, nonuse valuation is still controversial. Nonuse values refer to society’s willingness to pay (WTP) to preserve a resource even when the resource may never be used.