Standards vs. Incentives

As we move into discussion of correcting market failures, it’s important to have different perspectives and examples. Below are some links to excellent sources of information regarding standards (command and control) and incentive-based systems.

Here is some excellent reading from the US EPA on standards vs. incentives.
More detail is provided in this document (also from EPA. Note that Coase is covered on page 4-4). 
Here is a nice paper on the topic from the World Resources Institute.

Here is a link to a report on the use of economic incentives for pollution control in the US. You can use the "quick links" on the right to navigate the document.
Environmental Defense Fund has a short piece on how the use of incentives was a powerful solution to addressing acid rain.
The Environmental Literacy Council has a nice short article on standards vs. incentives.
Here's more from the World Bank.
Here is a short article on economic incentives for water quality management from the WHO.
Here is a great article by Robert Stavins on the topic.
Lots of great information in this report on Economic Incentives for Pollution Control from UNEP.

What are some success stories where economic incentives have been used to reduce pollution?

If incentive-based systems are superior, why do we rely so heavily on standards?

Economics and the Environment

As students begin to study the discipline of natural resource economics, there is often confusion about what the subject is about. This is especially the case when students are coming from backgrounds with only limited exposure to economics (e.g. EVS, where you've only had one or two econ classes before this one).

Generally speaking, economists try to solve problems using a combination of theory, empirical analysis (data, statistics, math), and intuition.  For example, macro economists try to address issues such as how to keep an economy growing without significant inflation.  Micro economists might try to find the best way to maximize profit for a particular firm or industry. Natural resource economists try to solve problems associated with scarce natural resources.

Some examples from my work include:  How to maximize fishery value while balancing the competing needs of commercial and recreational fishers and maintaining a biologically sustainable stock?  How can Caribbean tourism grow without harming coral reef quality or marine turtle populations?  How can tourism serve to enhance the livelihoods of local populations?  What hunting regulations would maximize the net gains to society from white tailed deer populations?  In the face of depleted stocks, will a nation's supply of seafood increase or decrease with financial incentives to curtail fishing effort?  What are people willing to pay to view marine turtles in the wild? Will people pay for marine turtle conservation, even if they never see a turtle in the wild?  How can these willingness to pay values be captured and used for conservation?

Obviously, these are complex issues that require interdisciplinary effort. One of the things that I really love about what I do is that I work side-by-side with biologists, policy makers and resource users to address these problems. 

Something that should also be obvious is that these are contentious issues. It is easy to get caught up in the emotion that surrounds any debate about environmental issues. Please remember that an economists job is to provide objective analysis (i.e. no personal opinion or bias).  

Here are links to two excellent essays that provide a nice perspective on the economic view of the environment.

The second essay covers non-market valuation, which we will cover in detail later in the term. It makes a good read now however, as it sets the stage for much of what we're covering at the beginning of the class (e.g. the economic view of value).

How do Economists Really Think About the Environment (Fullerton and Stavins, RFF, 1998)

Economic Values without Prices (Loomis, Choices, 2005)

Welcome Summer Classes

Welcome to all students enrolled in ECN/EVS 330, UNCW Summer 1.

I will periodically post links to class related topics here.

My hope is that you will contribute by replying to my posts with questions, thoughts and/or links to additional material.  Please do not use this forum for expression of political or ideological views.