Model building and judgment: Implications for benefit transfers with travel cost models

Benefit transfer is the process by which researchers take recreational demand models or other models which are estimated for one site or region and apply them to another site or region. Model estimation is frequently viewed as a simple exercise in classical statistics. Here it is argued that, while standard hypothesis testing plays a role in model estimation, it may be less important than the researcher's judgment about how the model ought to work. The power of economics lies principally with the logic of theory, and then with the strength of empirical evidence. These arguments are illustrated using the travel cost approach to estimating the demand for recreation. There are several major research issues (for example, the role of substitute prices) which influence the final estimates of benefits but which must be determined at least in part by the researcher. The implication for benefit transfer is that this is also within the realm of judgment for the researcher, but that it will be more acceptable when judgment is recognized. That is, the original benefit estimates are tailored for a specific application. They cannot be treated as if they came from a strictly random process. Recognizing this tailoring process will put the researcher in a better position for transferring model results.