Techniques for Valuing Heritage in Economic Terms

Conventional valuation techniques undervalue heritage

Heritage is not fully traded in markets but there is plenty of evidence showing how people value heritage and heritage is important for people’s welfare.  For example:

• According to the Taking Part Survey, 94% of people agree or strongly agree with the statement ‘it is important to me that heritage buildings or places are well looked after’ (DCMS, 2017)
• More recent examples in the news such as the demolition of the Crooked House pub in Staffordshire (Cook, 2023) or the felling of the Sycamore Gap tree, Hadrians Wall, (Robinson, 2023) demonstrates just how emotive heritage and the loss of heritage can be for local and non-local populations

The disconnect between economic valuation and how people value non-market goods and services has resulted in increasing pressure to improve and develop methods in economics to better value goods and services that are not traded in markets. In the UK, HM Treasury’s revised Green Book guidance recommends a welfare approach including consideration of “non-market” outcomes, health and wellbeing outcomes, emphasising valuing all benefits and costs, not just financial benefits such as jobs and other standard measures of economic output such as GDP (HM Treasury, 2022).

The total economic value of heritage

Many of the benefits obtained from heritage are not supplied (or only partially supplied) in private markets and therefore do not have a market value. In the absence of assigned market values, businesses, governments and individuals are likely to underinvest in heritage, which can lead to suboptimal economic outcomes for society, particularly over the long term and between generations.

Economists have developed the concept of Total Economic Value (TEV) to categorise the different ways in which individuals value goods and services which are not (fully) traded in markets based on use values and non-use values. Non-use values are economic values assigned by individuals who do not consume the good/service.

Total Economic Value is made up of the following:

For unique assets such as heritage, non-use values can in fact outweigh use values. Different approaches are needed to capture the ‘Total Economic Value’ of heritage. Non-use valuation techniques are used to assess non-use values using two main methods for both Use and Non-Use values.

• Revealed preference techniques involve inferring the price or value which individuals place on something by examining their actual behaviour. Examples include:
  • Hedonic Pricing: Estimating values by observing how heritage and cultural assets affect the prices of related goods and services, such as property prices
• Stated preference techniques use questionnaires which describe a hypothetical choice to obtain estimates of the willingness to pay for a particular outcome. Examples include:
  • Contingent Valuation: Directly asking people how much they would be willing to pay (WTP) for specific outcomes related to heritage and cultural assets
  • Choice Modelling: Presenting individuals with hypothetical scenarios and choices to infer their preferences and values

Key heritage valuation studies

There are a small and growing number of valuation studies that have applied non-use valuation techniques to the heritage sector in England. Some of the evidence is presented below.

Contingent Valuation Studies

Hedonic Price Modelling

Wellbeing Valuation Study

Discrete Choice Technique

References

1. Ahlfeldt, G., Holman, N., Wendland, N., Gotca, A., Theodhori, A., Degoulet, C., Ganemtore, C., Gundry, D., Pani, E., Fossé, I., Shirin, I., Wetzel, E., Panayotou, J., Lynen, L., Rackwitz, M., Tornack, S., Wayman, S., Holman, A. and Wendland (2012). ‘An assessment of the effects of conservation areas on value’ * Final Report Executive Summary Motivation: The preservation and designation of built heritage. Available at: https://historicengland.org.uk/content/docs/research/assessment-ca-value-pdf. (Accessed: 15.10.23)
2. Arber, M., Bakhshi, H., Cranmer, H., Davies, J., Fujiwara, D., Incarnato, D., Lagarde, A., Lawton, R. and O'donovan, P. (2023). ‘Measuring the economic value of the digital offer of galleries and museums: an exploratory use of contingent valuation techniques.’ Available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1165079/Digital_Offer_Report_September_26_2022.pdf. (Accessed: 16.10.23)
3. Bakhshi, H., Fujiwara, D., Lawton, R., Mourato, S. and Dolan, P. (2015). ‘Measuring Economic Value in Cultural Institutions A report commissioned by the Arts and Humanities Research Council’s Cultural Value Project.’ Available at: https://www.cultureforumnorth.co.uk/wp-content/uploads/2015/11/Measuring-Economic-Value.pdf [Accessed: 2.11.23).
4. Boys Smith, N. Venerandi, A. and Toms,.K. (2017) ‘Beyond Location. Create Streets.’ Available at: https://www.createstreets.com/front-page-2/campaigns-copy/beyond-3/ (Accessed: 6.11.23).
5. Cook, A. (2023). ‘The Crooked House: Mystery and anger surround wonky pub destruction.’ BBC News. Available at: https://www.bbc.co.uk/news/uk-england-birmingham-66465558 (Accessed: 3.11.23)
6. DCMS (2017) ‘Heritage Statement 2017 Department for Digital, Culture Media & Sport.’ Available at: https://assets.publishing.service.gov.uk/media/5a81e562ed915d74e3400a2c/Heritage_Statement_2017__final_-_web_version_.pdf (Accessed: 27.10.23)
7. Eftec (2014). ‘Economic Valuation of Heritage.’ Available at: https://historicengland.org.uk/content/heritage-counts/pub/2014/economic-valuation-of-heritage-report-pdf/ (Accessed: 09.09.23)
8. Fujiwara, D. Lawton, R., Murato, S. (2019). ‘More than a good book: contingent valuation of public library services in England’. Journal of Cultural Economics, 43(4), pp.639–666. Available at: https://ideas.repec.org/a/kap/jculte/v43y2019i4d10.1007_s10824-019-09369-w.html (Accessed: 23.10.23)
9. Fujiwara, D., Lawton, R., Hotopp, R. and Lagarde, U. (2018). ‘The Economic Value of Culture: A Benefit Transfer Study Report to the Department for Digital, Culture, Media & Sport, Final report.’ Available at: https://assets.publishing.service.gov.uk/media/60338821e90e0766066037a9/The_Economic_Value_of_Culture_-_A_Benefit_Transfer_Study_-_Final_report_V2.pdf  (Accessed 3.11.23)
10. Fujiwara, D., Kudrna, L., Cornwall, T., Laffan, K. and Dolan, P. (2015). ‘Further analysis to value the health and educational benefits of sport and culture.’ Available at: https://assets.publishing.service.gov.uk/media/5a75815ee5274a1242c9ed6f/Health_and_educational_benefits_of_sport_and_culture.pdf. (Accessed: 12.10.23)
11. Garrod, G., Willis, K.G., H Bjarnadottir and Paul Erik Cockbain (1996). ‘The non-priced benefits of renovating historic buildings.’ Cities, 13(6), pp.423–430. Available at: https://doi.org/10.1016/0264-2751(96)00029-7 (Accessed: 23.09.23)
12. Highways England (2017) ‘A303 Stonehenge Amesbury to Berwick Down Technical Appraisal Report.’ Available at: https://highwaysengland.citizenspace.com/cip/a303-stonehenge/supporting_documents/Volume%201%20%20TAR%20red%201.pdf. (Accessed: 04.10.23)
13. HM Treasury (2022) ‘The green book central government guidance on appraisal and evaluation.’ Available at: https://assets.publishing.service.gov.uk/media/623d99f5e90e075f14254676/Green_Book_2022.pdf. (Accessed: 24.10.23)
14. Jura Consultants (2005). ‘Bolton’s Museum, Library and Archive Services: An Economic Valuation’ Available at: https://webarchive.nationalarchives.gov.uk/ukgwa/20120215214224/http:/research.mla.gov.uk/evidence/documents/bolton_main.pdf (Accessed: 24.10.23)
15. Kinghorn, N. and Willis, K. (2008) 'Valuing the components of an archaeological site: An application of Choice Experiment to Vindolanda, Hadrian’s Wall'. Journal of Cultural Heritage, 9(2), pp.117–124. Available at : https://doi.org/10.1016/j.culher.2007.05.006 (Accessed: 10.11.2023)
16. Lawton, R.N., Fujiwara, D. and Hotopp, U (2022). ‘The value of digital archive film history: willingness to pay for film online heritage archival access.’ Journal of Cultural Economics, 46(1), pp.165–197. Available at: https://ideas.repec.org/a/kap/jculte/v46y2022i1d10.1007_s10824-021-09414-7.html (Accessed: 25.10.23)
17. Lawton, R., Dr Daniel Fujiwara, Dr Madeleine Arber, Dora Radosevic, Augustin Lagarde, Peter O’Donovan. (2021b). ‘Arts Council England: Regional Galleries and Theatres Benefit Transfer Report.’ Available at: https://www.artscouncil.org.uk/sites/default/files/download-file/Arts%20Council%20England%20-%20Regional%20Galleries%20and%20Theatres%20Benefit%20Transfer%20Report.pdf (Accessed: 15.10.23)
18. Lawton, R., Fujiwara, D., Szydlowska, A., Lagarde, A., Radosevic, D., Arber, M., van Emmerik, I.. (2021c) ‘Heritage and the value of place.’ Available at: https://historicengland.org.uk/content/docs/research/heritage-value-of-place/. (Accessed: 17.10.23)
19. Lawton, R., Fujiwara, D., Mourato, S., Bakhshi, H., Lagarde, A. and Davies, J. (2018). ‘The economic value of heritage in England: A benefit transfer study.’ Available at: https://media.nesta.org.uk/documents/Cathedrals_and_Historic_Cities_report_Nesta_and_Simetrica_021018.pdf (Accessed: 07.10.23)
20. Pollicino, M. and Maddison, D. (2004), ‘Using Contingent Valuation to Value Maintenance Options for Oxford’s Historic Buildings’, unpublished paper, Institute of Archaeology, University College London and Institute of Economics, University of Southern Denmark
21. Pollicino, M. and Maddison, D. (2002). ‘Valuing the Impacts of Air Pollution on Lincoln Cathedral.’ Available at: https://ideas.repec.org/h/elg/eechap/1759_5.html (Accessed 2.11.23).
22. Powe, N. and Willis, K. (1996). ‘Benefits received by visitors to heritage sites: a case study of Warkworth Castle.’ Leisure Studies. Available at: https://www.semanticscholar.org/paper/Benefits-received-by-visitors-to-heritage-sites%3A-a-Powe-Willis/4752ce50a4bece9a762a52007bf3bf0440678a8b (Accessed: 2.11.23).
23. Robinson, C. (2023). ‘Sycamore Gap tree: The story so far.’ BBC News. Available at: https://www.bbc.co.uk/news/uk-england-tyne-66994729 (Accessed: 3.11.23).
24. Sagger, H., Philips, J. and Haque, M. (2021). ‘Valuing Culture and Heritage Capital: A framework towards informing decision making.’ Available at: https://assets.publishing.service.gov.uk/media/600b02c78fa8f5655299d204/GOV.UK_-_Framework_Accessible_v2.pdf (Accessed: 3.11.23)
25. Stiglitz, J.E. (2018). ‘Beyond GDP’ Project Syndicate. Available at: https://www.project-syndicate.org/commentary/new-metrics-of-wellbeing-not-just-gdp-by-joseph-e-stiglitz-2018-12 (Accessed: 28.11.23)
26. Willis (1994). ‘Paying for heritage: what price for Durham cathedral?’ Available at: https://doi.org/10.1080/09640569408711975 (Accessed 2.11.23)