Tuesday, August 31, 2010


Today we'll be talking about externalities.

Alfred Marshall first introduced the concept.

A.C. Pigou (a student of Marshall's) proposed a solution.

An interesting solution to an invasive species problem

Invasive species can cause serious harm to ecosystems, often out-competing native species.

The economic and biological damage can be significant.

Invasive species can be considered biological pollution and as such we can use externality theory to frame and study the issue. When we get to the topic of solutions, we can also consider addressing invasive species with standards and incentives.

Here's a short article from ENN regarding lion fish and a cool solution ... eat them! I've never eaten lion fish myself (I had one in an aquarium when I was in college), but a student that I had in the Caribbean tells me they're delicious.

Other examples? Other notable solutions?

Friday, August 27, 2010

Coal ash and water pollution

A version of this story from USA Today appeared in today's local paper.

A new study suggests that damages from coal ash pollution are worse than we thought. The results are timely as the US EPA is about to begin a series of regional hearings on whether and how to regulate coal ash waste from coal-fired power plants.

Things to think about:

1. The negative externality. Is this a production externality or a consumption externality? Who are the market participants here? Who is on the demand side and who is on the supply side? Who is the third party affected by the externality? Have the health effects been qualified or quantified? Monetized?

2. Standards for pollution control. We'll get to the study of standards soon. For now, consider how and why EPA is considering restrictions. In terms of the 'how', Are limits (standards) on output or limits on technology being proposed? What should be the basis for the determination of acceptable standards? Health? Efficiency? Something else?

3. What are some important research questions related to this issue that would help inform policy?

Related local news here.

Tuesday, August 24, 2010

Opportunity costs

Ah yes, one of the first things you learned in economics: opportunity costs are real and affect our decisions.

Here are links to a few articles illustrating a common (though often flawed) theme: "The economy vs. the environment":

From Freakonomics: Two economists suggest that consideration for the environment wanes during times of high unemployment.

From ABC: A March 2010 Gallup poll shows a similar trade off.

From Reuters: It's not all bad news... people create less pollution during economic downturns.

Thoughts? Can you think of micro-level examples of this (i.e household, individual, firm)?

Friday, August 20, 2010


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