3.0 METHODS OF ECONOMIC VALUATION OF NATURAL
RESOURCES AND ECOSYSTEM SERVICES
3.1 REVEALED PREFERENCES
In this text, we take great concern as it is a case study. The research is more connected to the development of people. The approach, as well as the context that is applied in the case study, is most likely to affect how nature is taken care of and the way land is degraded. It will impact the level of worthiness that is taken care of by people when it comes to ecosystem services in the Amazonian region of Peru. Based on the case study approach mechanism used, it is accompanied by a plan that will ensure that a detailed rise in the natural, standard life scenario in the manner in which the different communities in this selected part of Peru view the determined advantages that natural forest can come along with, and the various ways in which cultural behavior of conserving this forests can be developed.
The above case study was selected based on the fact that it takes more consideration in the accuracy of data. As a result, it assured that by using such as case study and the methods chosen will make the data obtained to be more accurate as no alliterations or change of data is possible. In other words, the chances of manipulation of data are minimal (Ozdemiroglu, 2016). AMNR Loreto is one of the largest provincial regions in the Republic of Peru, and considering that the areas are a bit more protected and restricted, it makes it easy for the outcome of the case study to be more accurate. The region covers the Amazonian areas of Peru hence making it the most suitable place to carry out the research.
Valuation relies on the information provided by the natural resources in the chosen region. In the travel cost methods, many people in the globe take much of their time to visit the forests and other natural resources in the northern parts of Peru specifically to leave back a trail of evidence that is not supported.
3.1.1 MARKERT PRICE
The method is used in the process of making approximations of the economic value that is possessed by the goods and services from the ecosystem. The technique is best suited in the method of measuring the quality as well as the quantity of the goods and services that come from the economic resources. It puts into use the standard economic criterion that approximates the degree of economic benefit that is brought about by the natural resources in this region. However, the approximation is majorly based on the quantity that the surrounding community buys at varying prices, as well as the number of goods and services that is distributed at different rates.
When applying the method, the researcher is required to approximate the demand function. By doing this, one will be able to predict the market demand by the use of market data. The estimation of the demand function should be done before and after the alliteration and changes in provision. The evaluation in the economic gains the next value that requires to be approximated. The supply function needs to be estimated before and after the changes in the economic benefit to the producers.
When using this method to carry out a valuation of the economic benefit of the natural resources in this chosen part of Peru, the focus is based on the direct and indirect evidence from the markets. Considering the economic benefit that is brought about by the forests as well as other natural resources located in the northern Amazonian parts of Peru, the resource avails the water catchment areas that are of great benefit to the farmers in the downstream. It is because they primarily rely on water for all their farming activities. Equally, the water is an excellent asset to the resident that is in the urban areas (Nocker, 2013). It is from this natural resource, including the natural plant that many genetic resources are composed in the forest ecosystem. Some people who visit these natural resources get a deep interest in the resources and even think of residing near the resources. The resources act as commercial goods that improve the economy of the region by bringing in more income.
People will choose to live near these natural amenities to have access to them. However, it should be taken into account that the entire productivity of all these natural resources and their influence on the economic status of a region lie primarily on the organized management that is guaranteed to these resources. Any form of policy amendments that affect the management of natural resources will automatically change the system of income generation by introducing more costs, and equally, any favorable policy formulation will result in indirect benefits that can be observed. The method has quite several strengths as well as weaknesses. Among it is strengths is the fact that the values of the likely to be distinctly defined, thus revealing the people’s willingness to pay for the available goods and services in the market. When using this method, it is comfortable to get the data and the methods put into account data that is practical with direct and indirect references from the customers. The method applied the most standard and supported economic criteria that are considered reliable. On the section of the weaknesses, this method focuses on information that is available for a limited number of goods and services. The exact economic worthiness of the products and the services are not likely to be deduced from the market exchange activities and transactions.
3.1.2 HEDONIC PRICING
The method is applied in approximating the expenses that are linked with the quality of the environment (Abdullah, 2011). The estimation relies on market transactions. The properties of the good that is marketed when using this method are connected with the value of the marketed product. It works best in the case factors that are not linked to the environment are entirely under control. The elements that are connected to environmental quality can only be approximated by this method. In the procedure that is involved while dealing with this method in economic valuation, information is gathered based on the quality of the environment; this assists in the approximation of the hedonic price (James, 2010)The geographical area and size on which the data is collected need to be determined.
In this method, the factors that make a significant contribution to the prices to realize the benefits of the natural amenities make a substantial contribution. The economic benefits that the natural resources bring about reflect a considerable aspect of the characteristics that the natural resources have. The analysis relates to the prices of natural resources concerning their components. Some of the characteristics that are used to make an economic valuation include; the approximation of the total number of the natural economic resources in this Amazonian part of Peru. The quality of the natural resources takes the first account also as well as the environmental amenities like the capability to gain access to bio-diverse resources like the natural forests (Hargrave, 2019).
The implicit marginal price of natural resources is a crucial determinant of the economic benefit of the natural resources in the Amazonian region. The method takes a measure of the margin worthiness of the natural resource (Al-Kandal, 1994). The Hedonic price analysis has implied, based on the records that it is applied, and it can generate accurate and reliable estimates in the hedonic prices of different natural resource characteristics. According to the method, it is advisable to take a keen close check on the non-marginal changes that of the natural resource levels in terms of quantities. It is a requirement that hedonic demands need to be checked on and approximated for sound decision making and valuation (jonhson, 2005). None of the methods of making hedonic applications have been proved to be valid. In this method, marginal changes are best suited when it comes to its valuation, but non-marginal changes are incompatible with this method. The only limitation that can be identified to be linked to this method is the fact that hedonic analysis will only take into account the use of values that are connected to natural resources as the amenities. The technique has strengths in that it can be applied in approximating the information based on the primary values (Mondal, 2011). The report of assets records is reliable, and the method is generally versatile. It only has a weakness in the section, assuming that respondents have the chance to choose a series of features that they prefer. A very larger magnitude of data needs to be acquired for an accurate valuation process.