P. 4: Nonmarket goods are not traded in conventional markets. Their use for decision purposes-as part of a framework whereby tradeoffs are made between competing sources of value-too often is neglected. When this occurs, decisions about the allocations or value of all goods will be skewed, and public policy decisions may poorly reflect the nation's objectives.

P. 18: The larger culture criticizes and sometimes tries to expel subcultures. We are left with an enormous variety of subcultures, each of which has a distinct set of commonly held structures of valuation. It is important of recognize that valuation is a process of judgement and as such is a form of thought in action, not an object.

P. 20: In the participative democracy of the United States, fullest citizen representation is the critical factor in guiding societal values about the use of natural resources. Control of such value agendas by powerful interest groups creates a setting for a perverse conflict of value interests, protracted political conflict, and thus ultimately an erosion of decision making competence in implementation of public policy and in meeting the public interest. Therefore, in this complex political process there must be opportunities for preserving common values rather than to guard against their cynical manipulation by shortsighted and selfish interest groups.

The mind and the heart of the average citizen are ultimately the most important loci of common values about the environment. Conflicts will never disappear in the political system and should not. But, disputes can be resolved in better ways with more equity in outcomes of such disputes. [These] outcomes [would] represent the diverse bases of life in the United States, rather than certain narrow special interest values that represent uncritical exploitation of natural resources.

P. 32: Freeman and Frey (1986) proposed two levels of valuation: "a technical level . . . where the analyst specifies and justifies value criteria, and a political/administrative level . . . where decisionmakers make tradeoffs among competing value criteria."

P. 35: If not the most difficult, certainly the most fundamental task of any analysis is defining clearly the variables to be measured. . . . The first task is to define the gains and losses (i.e., impacts in conventional parlance) associated with changes in use of the goods and services that would result from implementation of the proposed allocation. To answer the question "What are the gains and losses that will occur? we need to know who gains and who loses and how.

P. 43: The democratic-political process (public involvement, professional judgement, compromise among elected officials) must continue to guide public amenity resource allocation decisions. The ideal republican form of government provides for the recognition and clear articulation of all countervailing values in public resource allocation decisions.

P. 45: We believe economists' frequent use of the words "the benefits" and "the contributions to social welfare" is quite presumptuous for two reasons: They can now only monetize part of the benefits that are amenable to "pricing," and many benefits are not amenable.

P. 58-59: Some goods, called "public goods," are not consumed by a single individual. For example, national defense, clean air, outdoor recreation areas, or fisheries are all resources shared by more than one user. In contrast, stumpage, grazing land, and mining are primarily private goods, consumed totally by the party given the rights to use the land at each moment in time. The value of jointly consumed resources is not captured entirely by what any one single person will pay for them. The value of public goods, because they are jointly consumed, is the sum of what all the users would individually pay for the good. . . . Note that private markets have trouble providing public goods.

Another problem with market prices of goods as a measure of social value is the presence of externalities, the production of by-products that cause damage that the creator does not have to pay for. . . . To the extent that society regulates pollution, noise, and other such disamenities, the magnitude of this problem is reduced and is potentially eliminated. However, with imperfect regulation (emphasis added), several consumption and production activities continue to produce side effects that they do not have to pay for. In such cases, market prices overestimate the value of these goods and services. The true monetary value of marginal goods and services that produce disamenities is the market price minus the value of the marginal disamenity (emphasis added).

Part 2: Questions for the Panel of Economists

1. How can the Virginia General Assembly keep the citizens of the Commonwealth, whose environment may be at risk from forest over-cutting, from becoming victims of an upward-spiraling global demand for paper? What is the alternative to standing by and watching the effects of Adam Smith's invisible hand change Virginia's environment for the worse?

2. Should the Virginia Tech extension staff and the staff of the Virginia Department of Forestry offer forest landowners the same quantity of advice on how to manage their lands for alternative steams of income such as that from outdoor recreationists (for campsites, trails, hunting and fishing access, firewood, etc.) as they now offer with regard to traditional wood-harvest management plans? Such alternative streams of income come in continuously, rather than just once every 20 to 50 years, and do not cause externalities with which the surrounding community must deal.

3. Can you show the Committee graphically how benefits and costs of a proposed resource allocation, such as a timber sale and associated chip milling, net out economically? You would need to combine private and societal benefits and costs to calculate a "societal bottom line." Such a calculation would include opportunity costs (such as wilderness, high scenic quality, increased tourism and related opportunities foregone) and externalities such as the cost of treating polluted water and the cost of health treatment for people made ill by air pollution and excessive noise.

4. Please explain how an economic impact analysis of a proposed natural resource allocation on private land differs from one made on public land.

Please include reference to the "public trust" responsibilities of public officials, as they carry out their constitutional responsibilities by protecting the public health, safety, and welfare and the public's natural legacy including endangered species. Please include references to the responsibilities or duties of private landowners as they relate to impacts on neighbors and on downstream riparian users of water flowing through and off the operator's land (under riparian water law doctrine).