This column is to appear in the Augusta Business Chronicle (August 2001). Values and Prices Let's assume that to you trees are vertical stalks of fiber, that a forest carries no more spiritual or aesthetic value than a parking lot, that woodland creatures are uninteresting sacks of calories, and that the smell of sunbaked pine needles on a breezy June afternoon merely matches the scent that comes from those conifer-shaped air fresheners that dangle from your rearview mirror. Let's assume, in other words, that you've done something rotten and God has turned you into an economist. So writes Bill McKibben. But the villain is McKibben, not the economist. Value is neither an absolute nor is it a category of morals. The value of one thing, writes one economist, is "always phrased in terms of how many units of another thing a person would be willing to give up for it. To say that the value of an apple is fifty cents and that of an orange a dollar is just another way of saying that one orange is worth two apples." Value is not "trees," but trees as compared to some alternative such as "parking lots;" it is not "woodland creatures," but those as compared to some alternative. It is the apple as compared to the orange. Value is not absolute but one thing relative to another. This also implies, much more tolerantly, that value is not what McKibben thinks it is but what each one of us thinks it is. Value is not a moral category, but an instrumental one. Price and value are not the same. I may be willing to pay up to 50 cents for a pound of bananas, and if the posted price at the grocery store is 33 cents, I happily pocket the difference and keep it for myself. While the price is 33 cents, I value the bananas at up to 50 cents. The 50 cents limit is my "reservation price," the 33 cents is the "market price." Economic valuation techniques are methods that put reservation prices, not market prices, on environmental and natural resource goods and services. Indeed, environmental goods often do not posses market values. For example, timber harvesting from a forest does possess market value but the trees' role in stabilizing water flows does not and might falsely lead one to conclude that the timber is more valuable than the trees. Or, when a choice is to be made between forest cover and farm crops, forest conversion might seem beneficial since farm crops carry market value but forest cover does not. If a value for the forest could nonetheless be derived, a cost-benefit analysis might arrive at different results. Economists separate total economic value into use values and existence values. Use values in turn consist of actual use values (from current, actual benefits received, such as for the bananas) and option values (on likely future benefits to be received, including those we bequest to future generations). Existence values refer to the idea that people value the very existence of certain resources even though they might never use or see them. For example, many people feel huge sympathies with various kinds of whales, or spotted owls, never having seen one. McKibben might call them "intrinsic" values, i.e., values unrelated to any actual or potential use of the good. Economists nonetheless deal with them and try to estimate their dollar equivalent to allow us to make comparisons to other things we value. For a long time economists had been excluded from relevant policy-making about environmental goods even though we are exceptionally well positioned and qualified to contribute to thinking about solutions. If we like clean air or undisturbed forests or pristine marine ecosystems, we must value them. "How can we compare the value of the better housing people will enjoy as a result of lower timber prices with the value of the amenities preserved when a forest is left standing, without placing some kind of dollar value on the latter as well as the former?" asks economist Paul Heyne. When we fail to attach prices to valued alternatives, things become difficult because we then cannot compare. But the prices we attach are reservation, not market prices, i.e., prices that reflect values. When the Irish poet Oscar Wilde once quipped that "economists know the price of everything and the value of nothing" he displayed his great ignorance of economics. We now know that while economists do not know the price of everything we do know the value of many things. Dr. J. Brauer is Professor of Economics at Augusta State University's College of Business Administration. He can best be reached via his web site (http://www.aug.edu/~sbajmb).