1
II LECTURE
THE VALUE
OF CULTURAL HERITAGE:
DEFINITIONS AND METHODS
HOW WE CAN ESTIMATE THE VALUE
OF CULTURAL GOODS?
2
THE VALUE AND ECONOMICS (1)
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).
HOW WE CAN ESTIMATE THE VALUE
OF CULTURAL GOODS?
3
THE VALUE AND ECONOMICS (2)
1)
First, evaluating something is the necessary point of
departure for any analysis of its value creation function or
potential.
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 CAN WE ESTIMATE THE VALUE
OF CULTURAL GOODS?
4
THE VALUE AND ECONOMICS (3)
3)
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.
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.
AIM OF THIS SEMINAR
5
The aim of this seminar is to explore the methods
for valuing cultural heritage goods.
AIM OF THIS SEMINAR
6
MAIN QUESTIONS
 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?
ECONOMIC CHARACTERISTICS OF CULTURAL GOODS
7
Local
Global
Heritage as a local and global public good
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.
ECONOMIC CHARACTERISTICS OF CULTURAL GOODS
8
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 nonexcludability.
Their benefits are quasi universal in terms of
countries, people and generations. Global public
goods benefit humanity in its entirety” (Klamer,
2004).
In order to be a pure public good, a good must have two
properties:
• first, non-excludability;
• second, non-rivalry in consumption.
ECONOMIC CHARACTERISTICS OF CULTURAL GOODS
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Cultural goods as mixed goods
In general, cultural heritage goods
are mixed goods, showing both public
and private good characteristics.
ECONOMIC CHARACTERISTICS OF CULTURAL GOODS
10
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 individual’s 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: Ståle Navrud (2004, p. 1)
ECONOMIC CHARACTERISTICS OF CULTURAL GOODS
11
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: Ståle Navrud (2004, p. 1)
ECONOMIC CHARACTERISTICS OF CULTURAL GOODS
12
Economic value and willingness to pay
"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."
Source: Randall (1986, p. 83)
ECONOMIC CHARACTERISTICS OF CULTURAL GOODS
13
The willingness to pay principle (WTP)
 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.
ECONOMIC CHARACTERISTICS OF CULTURAL GOODS
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The willingness to pay principle (WTP)
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.
CATEGORIES OF VALUE
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The total value of a cultural heritage good is divided into a number
of categories, summarized in the following figure:
Total Economic Value
Use Value
Non-Use Value
Direct Use Value
Indirect Use Value
Option Value
Existence Value
Other non-use Value
Direct Benefits
Indirect Benefits
Preserving Option for
Future Use Value
(direct and/or
indirect);
Future Direct &
Indirect Benefits
Intrisic Value
Bequest Value
Income/Revenue
Residential Space
Commercial Space
Industrial Space
Circulation Space
(vehicle, pedestrian)
Economic Activity
Tourism
Recreation
Leisure
Entertainment
Community Image
Environmental Quality
Aesthetic Quality
Valorization of Existing
Assets
Social Interaction
Identity
Uniqueness
Significance
Decreasing “tangibility” of value to individuals
Source: Serageldin (1999, p. 27).
Historic legacy
CATEGORIES OF VALUE
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TOTAL ECONOMIC VALUE
Total value can be divided
into the following categories of value:
Extractive, or consumptive, use value;
Non-extractive use value;
Non-use value.
CATEGORIES OF VALUE
17
VALUES AND
CULTURAL HERITAGE
Let us examine value categories using
“cultural heritage sites” as an example.
In-depth study n. 7
“Definition of
cultural heritage sites”
Based on: UNESCO
(www.unesco.org/culture/)
CATEGORIES OF VALUE
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USE VALUE or ACTIVE USE VALUE
(the case of heritage sites)
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”.
Source: Pagiola (1996, p. 2).
CATEGORIES OF VALUE
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EXTRACTIVE USE VALUE
(the case of heritage sites)
“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”.
Source: Pagiola (1996, p. 2).
CATEGORIES OF VALUE
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EXTRACTIVE USE VALUE
(the case of heritage sites)
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”.
Source: Serageldin (1999, p. 27).
CATEGORIES OF VALUE
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NON-EXTRACTIVE USE VALUE
(the case of heritage sites)
“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”.
Source: Pagiola (1996, p. 2).
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: Serageldin (1999, p. 27)
CATEGORIES OF VALUE
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AESTHETIC AND RECREATIONAL VALUE
(the case of heritage sites)
“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 [...]”.
Source: Pagiola (1996, p. 3).
CATEGORIES OF VALUE
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AESTHETIC AND RECREATIONAL VALUE
(the case of heritage sites)
“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 [...]”.
Source: Pagiola (1996, p. 3).
CATEGORIES OF VALUE
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AESTHETIC AND RECREATIONAL VALUE
(the case of heritage sites)
“Non-use value. Non use value tries to capture the enrichment
derived from the continued existence of major parts of world heritage
[...]”.
Source: Serageldin (1999, p. 27).
“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.
CATEGORIES OF VALUE
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OPTION VALUE AND QUASI OPTION VALUE
(the case of heritage sites)
“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 people’s behavior and is thus
wholly unobservable [...]”.
Source: Pagiola (1996, p. 3).
“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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27
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RELEVANT LINKS
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• ORGANIZATION OF WORLD HERITAGE CITIES (OWHC)
http://www.ovpm.org/
• BIBLIOTHECA ALEXANDRINA – CENTER FOR DOCUMENTATION OF
CULTURAL AND NATURAL HERITAGE
http://www.cultnat.org/
• UNESCO – CULTURE
http://portal.unesco.org/culture