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BULLET Placing a Value on Public Library Services
by
Glen E. Holt, Donald Elliott, and Amonia Moore
COST-BENEFIT ANALYSIS: THE TOOL TO MEASURE LIBRARY BENEFITS

Methods to Measure Direct Benefits


To estimate the range of direct benefits provided to users from public library services, the SLPL researchers selected these methodologies.

Consumer surplus was the first measurement selected. Consumer surplus is used frequently by economists in policy studies. Consumer surplus measures the value that consumers place on the consumption of a good or service in excess of what they must pay to get it. Although library services typically are "free," patrons do pay by the effort they exert and the time they spend to access those services. This time and effort represent an implicit price to the patron. Moreover, many alternatives to library services are sold in the marketplace. For example, households can buy novels rather than check out the library's fiction books. Businesses can purchase CD-ROM databases or subscribe to on-line information services rather than use staff time to undertake library research.

Basing the study on such assumptions, the SLPL researchers moved through the following steps to estimate the consumer-surplus-derived benefits from library service use. In a telephone survey, interviewers asked patrons about the number of books they borrow from the library, the books they purchased, and additional books that they would buy if they could not borrow. By comparing the number of books a patron borrows with the number of books he/she would buy at an established market price, it is possible to calculate the value that library patrons place on borrowing materials above and beyond any cost of traveling to and the time involved in using the library. This value is a dollar measure of the net benefits provided by the library's borrowing privileges. Such estimates can be made for each patron and each service used. The estimates can be summed to provide an estimate of total direct annual benefits measured in dollars. Economists refer to this set of calculations as determination of consumer surplus.

Contingent valuation measures, though controversial, have been used extensively, even in judicial proceedings, to value environmental conditions. Two alternative approaches are available. In the willingness-to-pay approach (WTP), the researcher asks respondents how much they would pay to have something that they currently do not have. In the willingness-to-accept approach (WTA), the researcher asks respondents how much they would accept to give up something that they already have. Generally, WTA estimates of benefits are higher than WTP estimates. WTA estimates are usually considered less reliable than WTP estimates.

In applying contingent valuation analysis to libraries, many alternative hypothetical situations can be used in the survey instruments. For example, library patrons (or the general public) can be asked how much they are willing to pay rather than forego library usage or, if libraries did not exist, how much they would be willing to pay (for example, in taxes) to enjoy the library privileges they have today. Alternatively, patrons can be asked how much they would accept to give up their library privileges or how much of a tax cut they would accept in exchange for closing all public libraries.

Note that both the willingness to pay and the willingness to accept measures elicit some appraisal of indirect or social benefits of public libraries while the consumer surplus measure focuses solely on benefits to individual households. Because the contingent valuation measures elicit some sense of indirect or social benefits, usually the different methodologies produce divergent estimates. With that weakness clearly understood, the SLPL team decided to use both WTP and WTA as methods to value the direct benefits of SLPL services.

Cost of time. Because patrons must exert effort and spend time to access library services, the value that users place on library services must be at least as great as their sacrifice in accessing and using them. By valuing patrons’ time in traveling to a library service point and in actually using library services, cost-benefit researchers can obtain a third estimate of the value of library services. The sum of these time-cost estimates for all patrons provides another estimate of total library benefits. Cost of time also was added to the SLPL valuation methodology.

Each of these approaches has its strengths and weaknesses. Ideally all three approaches provide identical estimates of benefits. In the absence of such convergence, however, the alternative methods provide a range of values from which to infer the magnitude of benefits. That range of values in itself provides significant information where none now exists.

To sum up, the St. Louis Public Library Cost-Benefit Analysis Project researchers decided to use three different measurements to construct a range of values rather than stake everything on the estimation of one value. The rationale was simple: It did not cost much more to undertake multiple measures rather than one, and, if all the methods were used, much more could be learned about how to construct a nationally transportable CBA methodology for public libraries. As the next two sections demonstrate, this strategy worked reasonably well.

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