Monday, June 14, 2010


I've been teaching this class for a long time (over 15 years), and I always encounter this word (greed) as a supposed explanation for environmental problems. "It's greed!" they shout... "People just need to stop being greedy!".

I have to tell you. I couldn't disagree more with this perspective.

Let's think about this for a second... what is greed? Are people truly greedy? I know some people sure are, but is this really the best way to explain over-use of the environment?

Is it "greedy" to pursue your own best interest? If so, aren't all living things greedy? Indeed, if this is a workable definition of greed, then are humans not one of the only creatures on the planet that are NOT greedy? Higher-order mammals are just about the only living things that display altruism aren't they? Ever seen fish on a reef? What are they all doing? Well, every one of them is trying to eat as much as possible and have the biggest cave to live in and attack (till death if necessary) anything that gets in their way. Are the fish "greedy" for doing so?

Is the slash & burn farmer in the Amazon greedy for trying to feed his family? Is a commercial fisher greedy for eking out a living doing what his family has done for generations? Are YOU greedy for driving your car every day and consuming hundreds of products that cause pollution?

Or is it that we're all just doing what is perfectly rational given the rules of the game.... if you benefit from something and someone else pays (most of) the costs, you keep doing it.

If you believe that "greed" (self interest) is the cause of environmental problems, what are you saying about the potential for solutions? Do you think there is any way to stop people from pursuing their own self interest?

Friedman is channeling me!

Ok, maybe that's a bit strong... but he does seem to agree that when it comes to assigning blame for the BP spill, we all need to look in the mirror.

The editorial I'm referring to appeared in today's Star News (and Friday's NY Times).

Sunday, June 13, 2010

Summary & common themes

Blogging (class participation) opportunities:

(1) Develop short summary sentences for main points of the class.

We covered many resource issues (pollution, land use, mineral extraction, deforestation, over-fishing), but there were some common themes throughout.

(2) What are common themes regarding the economic perspective on natural resource problems?

(3) What are common themes regarding the economic perspective on solutions to those problems?

Big oil, big profits and the future of energy production

Deborah Gordon and Daniel Sperling of The Washington Post provide a thought-provoking look at what the big oil companies see in terms of the future of energy production. In short, same-'ol same 'ol. Energy demand is increasing at an astonishing rate. Renewable energy supplies are not. Market answer: more oil. And, if this problem is left to market forces, its more oil for a very long time.

Obviously, this is a real problem for society. As Gordon and Sperling put it "...oil companies are, quite rationally, investing the equivalent of pennies in biofuels and other alternative energies, compared with dollars in unconventional oil prospects. But while they are behaving logically in economic terms, they aren't serving the public interest."
Hmm... that sounds familiar.

Household waste and recycling in New Hanover County

An article from today's Star News highlights some of the issues inherent in municipal solid waste management. New Hanover County is currently negotiating a 10-year $71 million deal with a company called R3 Environmental Inc. to take over the county's waste management operations.

R3 is a relatively new company, and aspires to succeed in an area where numerous North Carolina operations have failed in the past: reducing landfill use, turning waste into bio-fuel energy and profiting from the sale of recycled raw material. The article highlights some past failures, noting in particular the technological difficulties in separating trash into usable and unusable components.

Here's another short article on the company and the NH County deal. Perhaps one of the more interesting aspects of the proposal is that - despite the known difficulties of separating trash from usable material - R3's procedure will eliminate the need for curbside recycling. All the trash will be collected together and sorted by R3.

Cost and benefit considerations? Other thoughts on this?

Friday, June 11, 2010

Energy, politics and the costs and benefits of extraction

Matthew Yglesias at The American Prospect has an interesting piece on energy and the surrounding issues. The notion that our attention to environmental matters tends to be short-lived is one that we've seen quite a bit lately.

As the economic downturn really started hitting home, concern for the environment waned. The BP spill has brought environmental concerns to the forefront again, but as some of you commented in response to my last post, we don't expect people to change their behavior (at least not for very long) unless the issue hits them in the wallet.

This is one of the main ideas I want you to leave this class with: notions of ethics, morals and environmental stewardship are real motivators to engage in conservation, but when push comes to shove, people make decisions based on their own costs and benefits. In the context of the environment, the costs and benefits that individuals act on are different than those that affect us as a society. And there's big rub. If we want what's "best" for society, we have to develop policy tools that push individual costs and benefits toward those of society at large. This is not news. But as Yglesias points out, people tend to balk at the very solutions that we know will work, because implementing proper market signals for energy will raise resource prices. Again, people seem to want a solution, but they don't seem to want to pay for it.

Yglesias also points to the idea that our concern for nationalism might not be as fickle as our concern for the environment. But he questions the underlying net gains of "energy independence", because home-grown energy means that the external effects occur in our front yard.


Tuesday, June 8, 2010


From USA Today: Another Gulf rig has been leaking oil for 5 weeks

This is obviously disturbing news. I'm going to go off-script a bit and ask for your opinion (related to the econ perspective of course) ... Do you think that people's values will change as a result of all of this? Do you think that people will change the way they view driving their cars and heating their homes? Do you think people will be more open to policy change (e.g. carbon taxes or cap-and-trade legislation) that will cost them money but promote more sustainable uses of natural resources? Have you changed your behavior, your willingness to pay, your appreciation of the fact that your "need" to purchase so much gasoline is partially to blame for this? Sorry about that last bit, but I have to keep reminding you that you this is just an example of Hardin's tragedy, and we are all the herdsmen. It's too easy to blame BP (though they most certainly are responsible for blatant rule-breaking) and shirk personal responsibility. All of us that drive cars and demand low prices for gasoline (and other petroleum products) share in the blame here.


"Bag-and-tag", "pay-per-throw", "polluter pays", it's all the same idea:

Impose Pigouvian taxes on things that cause external damage and society will be better off, because raising marginal costs creates an economic incentive for people to reduce quantity.

Here's a writer in Washington DC lamenting the lack of pay-per-throw trash disposal.

A related issue: plastic grocery bags.

What do you think about this approach versus this approach?
Is there another way?

Friday, June 4, 2010

Breaking news

Here's another local story, just posted at the Star News Online.

Sewage spills into Smith Creek

How does this relate to class topics like cost-benefit analysis and valuation?

How does this story relate to the other local stories in the previous post in terms of the economics?

Today's local paper

Today's Wilmington Star News is chock full of local environmental/natural resource issues:

Titan Cement appeals SEPA ruling

House of Reps votes to prohibit funding for new "megaport"

Business leaders pushing for Skyway bridge

Local group wants more recycling on Pleasure Island

Rare leatherback turtle nest on Holden Beach

In preparation for Monday's exam, choose one of these issues and describe how a benefit-cost analysis might be useful for policy makers. What economic values would need to be measured and what valuation procedures might be useful?

Wednesday, June 2, 2010

Higher profit from sustainable uses

An interesting angle on market incentives from Reuters.

More info about REDDs here and a recent news article here.

More about carbon offsets here.

And carbon markets here.