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The paper focuses on the question of the extent to which individual preference-based values are suitable in guiding environmental policy and damage assessment decisions. Three criteria for “suitableness” are reviewed: conceptual, moral and legal. Their discussion suggests that: (i) the concept of economic value as applied to environmental resources is a meaningful concept based on the notion of trade-off; (ii) the limitations of the moral foundations of cost-benefit analysis do not invalidate its use as a procedure for guiding environmental decision making; (iii) the input of individual preferences into damage assessment is compatible with the basic foundations of tort law; (iv) using individual preference-based methods provides incentives for efficient levels of due care; (v) determining standing is still very contentious for various categories of users as well as for aggregating non-use values. Overall, the discussion suggests that the use of preference-based approaches in both the policy and legal arenas is warranted provided that they are accurately applied, their limitations are openly acknowledged and they assume an information-providing rather than a determinative role.

The Kaldor–Hicks (KH) criterion has long been the standard for benefit–cost analyses, but it has also been widely criticized as ignoring equity and, arguably, moral sentiments in general. We suggest the use of an aggregate measure (KHM) instead of KH, where M stands for moral sentiments. KHM simply adds to the traditional KH criterion the requirement that all goods for which there is a willingness to pay or accept count as economic goods. This addition, however, runs up against objections to counting moral sentiments in general and non-paternalistic altruism in particular. We show these concerns are unwarranted and suggest that the KHM criterion is superior to KH because it provides better information.

In the earlier part of the twentieth century, cost–benefit (CBA) or benefit–cost analysis was used as a vehicle by Congress to curtail its wasteful spending, by using the Army Corp of Engineers to examine Congressional projects using CBA. Theodore Porter here examines the rise of the use of CBA in historical context and finds that the Corp was highly successful in reducing wasteful spending. Regardless of the present day effectiveness of the Corps, CBA currently provides valuable service. To appreciate this one need look no further than the effect Arnold Harberger's work and students have had in less developed countries, and at the several hundred useful evaluations of social programs produced over the last several years. Finally, one can look, criticisms of Ackerman and Heinzerling notwithstanding, at many of the analyses of environmental programs.

This volume brings together work by scholars from around the world dealing with law and economics policy issues. The volume contains several industrial organization articles, including two dealing with definitions of market power. The first provides a dynamic context to market power indices and the second a guide to a better profit measure.