Presentation on theme: "1 II LECTURE THE VALUE OF CULTURAL HERITAGE: DEFINITIONS AND METHODS II LECTURE THE VALUE OF CULTURAL HERITAGE: DEFINITIONS AND METHODS."— Presentation transcript:
1 II LECTURE THE VALUE OF CULTURAL HERITAGE: DEFINITIONS AND METHODS II LECTURE THE VALUE OF CULTURAL HERITAGE: DEFINITIONS AND METHODS
2 HOW WE CAN ESTIMATE THE VALUE OF CULTURAL GOODS? The problem of value in economics has traditionally confronted two interconnected issues: how to estimate the value of an economic object (the evaluation issue); how to analyze the process of the formation of value (the value creation issue). The two problems are related in many ways (Pennisi and Scandizzo, 2004). THE VALUE AND ECONOMICS (1)
3 First, evaluating something is the necessary point of departure for any analysis of its value creation function or potential. 1) 2) Second, value reflects willingness to pay ; in turn, this is justified by the creation of utility or value for the subject who intends to be the potential acquirer/consumer. HOW WE CAN ESTIMATE THE VALUE OF CULTURAL GOODS? THE VALUE AND ECONOMICS (2)
4 Third, the sources of value lie both in the desire to use a good or a service or to hold it for other reasons (non-use values), including the expectation that its value may increase. 3) 4) Fourth, rights and responsibilities in a modern society are regulated by contracts ; these almost invariably imply that their object has a value contingent upon the successful completion of what the contract stipulates. HOW CAN WE ESTIMATE THE VALUE OF CULTURAL GOODS? THE VALUE AND ECONOMICS (3)
5 AIM OF THIS SEMINAR The aim of this seminar is to explore the methods for valuing cultural heritage goods.
6 AIM OF THIS SEMINAR What is the economic definition of cultural heritage? What are the main characteristics of cultural heritage? How do economists define the value that an individual (or the community) receives from cultural heritage? How can we estimate this value? What are the characteristics of cultural good projects? In particular, how can we estimate the benefits and the costs of projects in the field of cultural heritage? MAIN QUESTIONS
7 ECONOMIC CHARACTERISTICS OF CULTURAL GOODS Heritage as a local and global public good cultural district Cultural heritage is a local public good, in that it is often linked to a localized concentration of human or social capital, such as a monumental site or a cultural district. Cultural heritage may also be a global public good, if it overcomes geographic barriers, generating values for people who live in distant countries. Local Global
8 ECONOMIC CHARACTERISTICS OF CULTURAL GOODS In order to be a pure public good, a good must have two properties: first, non-excludability; second, non-rivalry in consumption. Are cultural goods private or public goods? Private goods are goods held in private ownership. The right of ownership gives the right to exclude others from enjoying the fruits of the goods and, when a market exists for the good, to transfer the ownership of the good to others. The ownership can be shared in the sense that several individuals have a claim to the ownership. The ownership is well defined legally in the sense that a court of law should be able to determine what is whose (Klamer, 2004). Public or collective goods are goods held in ownership by a collective, usually a state or another political entity. Their possession has a legal status. They are marked by non-rivalry in consumption and non- excludability. Their benefits are quasi universal in terms of countries, people and generations. Global public goods benefit humanity in its entirety (Klamer, 2004). Public or collective goods are goods held in ownership by a collective, usually a state or another political entity. Their possession has a legal status. They are marked by non-rivalry in consumption and non- excludability. Their benefits are quasi universal in terms of countries, people and generations. Global public goods benefit humanity in its entirety (Klamer, 2004).
9 ECONOMIC CHARACTERISTICS OF CULTURAL GOODS In general, cultural heritage goods are mixed goods, showing both public and private good characteristics. Cultural goods as mixed goods
10 ECONOMIC CHARACTERISTICS OF CULTURAL GOODS Cultural goods as non-market goods Cultural heritage goods are typically public goods, meaning they have two precisely defined characteristics. First, the benefits (values) generated by cultural heritage goods are typically non-rival, that is the benefit enjoyed by one individual does not come at the expense of the next individuals enjoyment. This is in contrast to market goods, where a given unit of the good can be consumed by one individual only. Second, it is often difficult to force people to pay a price before they can enjoy the benefits from the cultural heritage good. Even where an entrance fee can regulate entrance to a building, the non-user benefits accrue regardless of whether they have been paid for. We say that the good, or that enjoyment of the good, is non-excludable. Source: St å le Navrud (2004, p. 1)
11 ECONOMIC CHARACTERISTICS OF CULTURAL GOODS Cultural goods as non-market goods These two conditions lead to a situation where markets cannot be trusted to provide an adequate supply of cultural heritage goods. It is for this reason that such goods are usually provided collectively, either by governments or by groups of people working cooperatively. Source: St å le Navrud (2004, p. 1)
12 ECONOMIC CHARACTERISTICS OF CULTURAL GOODS Economic value and willingness to pay Source: Randall (1986, p. 83) "The economic value to an individual of an increment in any good or amenity is the maximum amount of money he/she is willing to pay for it. These value measures are conceptually valid whether or not an adequate market exists in the good or amenity of interest."
13 The willingness to pay principle (WTP) ECONOMIC CHARACTERISTICS OF CULTURAL GOODS WTP denotes a theoretical price, dependent on the preferences of the consumer, or on the technology, that assigns a subjective value to a given quantity (taken as a unit) of an economic (public or private) good. It is related to the concept of a demand function, or rather of a correspondence between quantities consumed and prices. If a market for the good in question does not exist or its prices are distorted, the WTP is the principal source of estimation for the social benefit of the production of the good under consideration.
14 The willingness to pay principle (WTP) ECONOMIC CHARACTERISTICS OF CULTURAL GOODS Numerous simplified procedures can be used to develop WTP estimates. The most common procedures consist of: the analysis of consumers response to price changes; the analysis of the consumption basket of the consumer; the analysis of the best alternatives to obtain the good. In all these methods, a concept related to WTP is the so called consumer surplus.
15 CATEGORIES OF VALUE The total value of a cultural heritage good is divided into a number of categories, summarized in the following figure: Source: Serageldin (1999, p. 27).
16 CATEGORIES OF VALUE Total value can be divided into the following categories of value: TOTAL ECONOMIC VALUE Extractive, or consumptive, use value; Non-extractive use value; Non-use value.
17 cultural heritage sites Let us examine value categories using cultural heritage sites as an example. VALUES AND CULTURAL HERITAGE VALUES AND CULTURAL HERITAGE CATEGORIES OF VALUE Definition of cultural heritage sites Based on: UNESCO (www.unesco.org/culture/)www.unesco.org/culture/ Definition of cultural heritage sites Based on: UNESCO (www.unesco.org/culture/)www.unesco.org/culture/ In-depth study n. 7
18 Source: Pagiola (1996, p. 2). Extractive and non-extractive values are generally referred to as use values. Each is often further subdivided into additional categories. By disaggregating the value of a cultural heritage site into various components, the problem generally becomes far more intelligible and tractable. USE VALUE or ACTIVE USE VALUE (the case of heritage sites) USE VALUE or ACTIVE USE VALUE (the case of heritage sites) CATEGORIES OF VALUE
19 Extractive use value derives from goods which can be extracted from the site. This category of value is generally the easier to measure, since it involves observable quantities of products whose prices can usually also be observed. EXTRACTIVE USE VALUE (the case of heritage sites) EXTRACTIVE USE VALUE (the case of heritage sites) CATEGORIES OF VALUE Source: Pagiola (1996, p. 2).
20 Source: Serageldin (1999, p. 27). historic living cities For example: In the context of a forest, extractive use value would be derived from timber and other harvests. In historic living cities, there are direct uses being made of the building, for living, trading and renting or selling spaces. Many of these categories of use are captured by markets and transactions in markets. Unlike a forest, the use of a historic city does not deplete it unless the use is inappropriate or excessive, denaturing the beauty of the site or the character of the place. At some level a parallel exists to extractive use of a forest being kept at sustainable levels. EXTRACTIVE USE VALUE (the case of heritage sites) EXTRACTIVE USE VALUE (the case of heritage sites) CATEGORIES OF VALUE
21 Source: Serageldin (1999, p. 27) Non-extractive use value derives from the services which the site provides [...] Measuring non extractive use value is considerably more difficult than measuring extractive use value. NON-EXTRACTIVE USE VALUE (the case of heritage sites) NON-EXTRACTIVE USE VALUE (the case of heritage sites) CATEGORIES OF VALUE For example: Wetlands offer filter water, improving water quality for downstream users and national parks provide opportunities for recreation. These services have value but do not require any good to be harvested. The parallel for historic cities is clear, some people just pass through the city and enjoy the scenery without spending money there, and their use of the place is not captured by an economic or financial transaction. Source: Pagiola (1996, p. 2).
22 Among the non-extractive use values generally considered in environmental economics, those which are likely to have the most relevance to cultural heritage sites are the aesthetic and recreational values: Aesthetic value [...] Recreational value [...]. AESTHETIC AND RECREATIONAL VALUE (the case of heritage sites) AESTHETIC AND RECREATIONAL VALUE (the case of heritage sites) CATEGORIES OF VALUE Source: Pagiola (1996, p. 3).
23 Aesthetic value. Aesthetic benefits are obtained when the fact of sensory experience is separate from material effect on the body or possessions (Graves, 1991). Aesthetic effects differ from non-use value because they require a sensory experience. However, aesthetic benefits are often closely linked to physical ones. Recreational value. Although the recreational benefits provided by a site are generally considered together as a single source of value, they are the result of different services which a site might provide. The extent of recreational benefits depends on the nature, quantity of these services [...]. CATEGORIES OF VALUE Source: Pagiola (1996, p. 3). AESTHETIC AND RECREATIONAL VALUE (the case of heritage sites) AESTHETIC AND RECREATIONAL VALUE (the case of heritage sites)
24 Source: Serageldin (1999, p. 27). Non-use value. Non use value tries to capture the enrichment derived from the continued existence of major parts of world heritage [...]. CATEGORIES OF VALUE Non use-value derives from the benefits that a site may provide which do not involve using the site in any way. In many cases, the most important benefit of this type is existence value: the value that people derive from the knowledge that the site exists, even if they never plan to visit it. Source: Pagiola (1996, p. 3). Bequest value reflects the desire to conserve cultural heritage for the benefit of future generations. AESTHETIC AND RECREATIONAL VALUE (the case of heritage sites) AESTHETIC AND RECREATIONAL VALUE (the case of heritage sites)
25 Other aspects of non-use value include: - option value, which is the value obtained from maintaining the option of taking advantage of the good use value at a later date (akin to an insurance policy), and - quasi-option value, which derives from the possibility that even though a site appears unimportant now, information received later might lead us to re-evaluate it. Non-use value is the most difficult type of value to estimate, since in most cases it is not, by definition, reflected in peoples behavior and is thus wholly unobservable [...]. OPTION VALUE AND QUASI OPTION VALUE (the case of heritage sites) OPTION VALUE AND QUASI OPTION VALUE (the case of heritage sites) CATEGORIES OF VALUE Source: Pagiola (1996, p. 3).
Use and non use value: Existence, option and quasi option values in museums (Arrow, Krutilla 1960)Use and non use value: Existence, option and quasi option values in museums (Arrow, Krutilla 1960) Existence values are assigned to museum objects for the very fact that they exist and testify of the existence of the past. Option values are generated by the fact that the objects collected offer a partly uncertain set of opportunities for knowledge, aesthetic fruition, emotions, and entertainment
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32 RELEVANT LINKS RELEVANT LINKS ORGANIZATION OF WORLD HERITAGE CITIES (OWHC) BIBLIOTHECA ALEXANDRINA – CENTER FOR DOCUMENTATION OF CULTURAL AND NATURAL HERITAGE UNESCO – CULTURE