Parting shots

As our course wraps up, I'm curious to know which topics you enjoyed the most and the least. Which topics you'd would have like to spend more time on (or less)? What are your overall impression of the course and the field of study?

Collaboration between competitors to reduce bycatch

Here is a cool story from ScienceDaily on the benefits of networking between commercial tuna fishers.

Read the full article here from Proceedings of the National Academy of Sciences. The authors are a multidisciplinary team from the University of Hawaii and James Cook University.

The value of street trees

Here is a story about a the ecosystem service values of "street trees" in California.
Here is the link to the full article, published in the journal Urban Forestry and Urban Greening, which includes discussion of management implications.

Costa Rica PES

Re-post:

One of the things we learn in natural resource economics is to look at problems in terms of their costs and benefits.  By asking questions about who gains and who loses (and when, and how) we can gain an important perspective on the causes of natural resource problems. 

When given access to private benefits from natural resources, people tend to take actions that promote their own well-being. This access comes in the form of our daily contact with open-access and common property resources as well as extraction and habitat conversion on private lands. We all pollute in numerous ways to promote our own benefits (comfort, convenience, standard of living), because it’s cheap and easy to do so. As individuals, the costs we pay for access to the world’s resources are low because they are shared by everyone. 

How do we change the calculus?  Let’s try everything and see what works. Education, an appeal to “do the right thing”, and legal mandates on acceptable use, all serve important roles.  Monetary incentives that affect individual costs and benefits also can be an effective tool in many situations. These incentives come in several forms, most of which we discuss in this course.

One incentive-based method that seems to be gaining favor in developing nations is PES. PES stands for Payments for Environmental Services. The basic idea of PES is to create incentives for conservation of natural resources by transferring dollars from those that benefit from conservation to those who bear the (opportunity) costs of conservation.  

In some PES arrangements government and/or NGOs pay landowners to engage in activities to conserve or restore biodiversity. This can be as simple as letting a cow pasture revert back to its natural state or setting aside lands that would otherwise be used for another purpose. 

Costa Rica is a leader in PES and a great example of the power of this approach. From the 1940s through the 1980s, Costa Rica had one of the highest rates of deforestation in the world.  As recently as 1987, forest cover in Costa Rica was as low as 21 percent of national territory, down from over 85 percent in the early 1900s. The principle causes of deforestation were incentives for the conversion of land to agricultural uses, such as preferable tax treatment for lands used to cultivate crops and support cattle, and heavier tax burdens for “unproductive” lands (i.e. lands not used to produce market benefits). People responded to the incentives they faced. Given the costs and benefits of land use it made sense to convert lands to other uses. 

In 1996, leaders in Costa Rica decided to try to reverse this path of biodiversity loss. The main idea was simple: reward landowners for conservation rather than rewarding them for land conversion. A series of forest laws were enacted, which gave favorable tax treatment to conservation and reforestation, banned the export of primary forest products, mandated that banks provide low-interest loans for reforestation, created a system of national parks and forest reserves and, in 1997, enacted a PES system.  

Costa Rica’s PES system involves direct payments to landowners in exchange for the adoption of land uses and management techniques that provide one or more of four services:  Greenhouse gas mitigation, provision of water or other hydrological services, conservation of biodiversity or provision of scenic beauty for recreation and tourism. Payments are provided by government. Revenues from a fuel tax (ala Pigou) are a primary source of funding. Other sources of funds include sale of carbon credits to other nations and international loans. Between 1997 and 2005, a half-million hectares of forest lands were enrolled in the program. Forest cover is now over 60 percent and rising.

While this progress is exemplary, the Costa Rican Minister of the Environment recently stated that it is getting increasingly difficult to conserve. Without a system of international carbon markets, such as that which might take place through large scale adoption of REDD and REDD+ schemes, he suggested that the Costa Rican path of conservation will soon be unsustainable.

Read more about Costa Rica’s PES experience here at PaxNatura.

Read more about PES here at UNEP and at Ecology and Society.

Few things are as simple as they seem.

It's hard to be a well-informed voter and citizen. You have to read, and you have to read a lot. You cannot read only one source and you cannot limit your reading to sources that agree with what you think you know. Read both sides. Read like crazy.

The US Clean Power Plan is a great example of why its hard to be informed.

Will it create jobs and decrease energy prices or will it destroy jobs and create higher energy prices?

Here is an academic article on the topic that suggests positive net benefits (really large positive net benefits), despite harm to employment and industries in some locations.

A larger topic here is the impact of environmental regulations on economic growth.  One side of the political spectrum will routinely claim that regulations designed to protect the environment will inhibit economic growth.  But there is mounting evidence that environmental regulations can promote economic growth through improved health and productivity.  Another topic is the impact of economic growth on the environment. One side of the political spectrum often argues for slower economic growth to benefit the environment. But, there are a lot of reasons and evidence supporting the idea  that economic growth can lead to substantial environmental improvements. 

It's enough to make your head explode. But the truth is that these topics are messy! What to do?

When faced with controversial topics I tend to rely on academic research published in reputable peer-reviewed journals.  I read a lot of newspapers and online popular press material, but when push comes to shove, I want to see the data, the science and the analysis. When these topics come up in social settings, a common response of mine is "I really don't know enough about that topic to have an opinion".  And that's OK, because controversial topics are controversial for a reason. Most actions will have both costs and benefits and unintended consequences. Things are rarely as simple as they initially seem.  

There is plenty of landfill space but ...

Trash and recycling are interesting topics to really dive into, because a lot of what we think we know with certainty may be a case of "it depends". For example, recent evidence is showing that recycling is not always good for the environment. The blog post before this one has more readings on this topic.

Here is another article from the Washington Post on contamination from single-stream bins.

The main takeaway seems to be that some recycling is definitely very favorable both environmentally and economically (e.g. recycling aluminum cans prevents destructive mining of virgin bauxite and helps us avoid the polluting generated in processing the ore) while the benefits of recycling other materials may depend the material and your location . Glass recycling in particular looks much less appealing on both environmental and economic grounds than other products.

On the consumer demand side, the fact that we can now recycle products with very little effort may cause us to think less about reducing waste at the source. That is, if we know that we can simply drop a "recyclable" plastic water bottle into a recycling bin, we may worry less about our consumption of single-use beverage containers and other material. This is simple economics:  when the cost of doing something decreases, we tend to do more of it.

We also recently learned that we are disposing of much more municipal solid waste that originally estimated by the US EPA. However, we are not running out of landfill space any time soon.  The problem with sending MSW to landfills is not capacity, but no one really wants to live near one. Here is a link to a summary of a recent study suggesting that living within 5 km of a landfill could cause serious health effects.

Market forces and recycling

Here is an interesting article from CBS News on the impact of low gas prices on recycling. It directly relates to the 'big picture' connections between extraction and recycling. Given that petroleum extraction and use imposes negative costs on society and recycling can be viewed as providing positive external benefits, is there a potential policy solution here? 

Here is a story from the Wall Street Journal on an unintended negative consequence of single-stream recycling (and an argument for deposit-refund systems for glass bottles).

Here is a thought-provoking article from the New York Times on the subject of recycling, which challenges much of the conventional wisdom that we take for granted. Read it all the way to the end for a policy suggestion ala Pigou. 

Valuation

The topic for this week is non-market valuation.

Valuation means estimating what something is worth (to people, usually in dollars).

Non-market means that the goods or services that we are attempting to value are not traded in markets. That is, these are things of value, but we do not have prices to serve as signals of what they are worth.

There are a lot of misconceptions about the non-market valuation of natural resources of environmental goods and services.  The first and perhaps biggest misconception is that economists want to go around estimating the monetary value of things for no particular reason. This is far from true. We only attempt to understand the value of environmental goods and services when there is a reason to do so. For example, we might wish to understand the the tradeoffs that society faces for a development decision or a conservation project. Understanding the opportunity costs of lost environmental quality helps decision makers understand the worth of what stands to be lost.  Understanding the benefits of conservation (again, in dollar terms) helps us see if conservation initiatives are "worth it". In short, understanding the value of things can be useful for informing policy.

Another misconception is that if and when the monetary value a natural resource is estimated, this somehow "cheapens" the resource.  Again, I do not think this is true at all. Indeed, the default value of many environmental resources is zero, because many goods and services provided by the environment can be obtained for free. Valuation helps remind society that just because something is free, this does not mean it is not valuable.  

Finally, its important to consider that the process of non-market valuation is simply formalizing something that we do (implicitly) every day. For example, when you decide to drive your car instead of walking, you are implicitly stating that you value your own convenience more than you value the pollution that you cause by driving. On an aggregate level, when we vote for policies or politicians that favor other spending opportunities over spending on the environment, we are implicitly stating that we value those other things more than we value the environment. We even implicitly value human lives, including our own. When we choose to spend less money on road repair or highway safety, we are implicitly valuing human life. We could spend more money and have fewer people die, but we choose not to because it's "too expensive". When someone chooses to look at their phone when they are driving, they are revealing that they value that bit of information over their own safety and the safety of others. Our actions (individually and collectively speaking) reveal what we value.
The process of economic valuation makes the tradeoffs easier to understand and compare by expressing them in dollar terms.

Here are links to some good sources:

Why Economics Matters for Endangered Species Protection (Shogren et al., 1998)

The Role of Economic Valuation in the Conservation of Tropical Nature (Naidoo, 2008)

Conservation Pays (Yuskavitch, 2007, Defenders of Wildlife)

Marine Conservation: How Economic Valuation of Ecosystem Services Can Help (Environment Matters, 2008)

Can Environmental Economic Valuation Techniques Aid Ecological Economics and Wildlife Conservation? (Loomis, 2000, Wildlife Society Bulletin)

Of additional interest:

Economic Incentives and Wildlife Conservation (Bulte et al., 2003)

Tons of references and links here:  Economic Valuation References WRI

Information on coral reef  valuation can be found here and here and here and here.

Valuation and the endangered species act here.

More on the economics and value of endangered species here and here.


This is a tiny fraction of what's out there. What are your thoughts on valuation?  I'd especially like to see if students from different backgrounds look at valuation differently. When you post a reply, let us know your primary field of study. 

Memorial Day

Today is Memorial Day.  I hope you enjoy time with family and friends. Take time to not only consider, but celebrate our collective and individual freedom. Freedom to pursue happy and productive lives, to express our thoughts, to worship as we choose and to move about our lands unimpeded. Celebrate these amazing things that you have been gifted by the ultimate heroes, the more than 1.1 million men and women that gave their lives so that we could.

Externalities

Externalities are a type of market failure that occurs when the costs or benefits of a good sold in a market are not entirely paid or received by the market participants. When this happens, the market fails to produce the best outcome for society. That is, the market fails to be efficient in the sense that total economic surplus is not maximized.

Negative externalities occur when someone other than the buyer or seller of a good incurs a cost when that good is produced or consumed. Many forms of pollution can be classified as generating negative externalities. If the pollution is unregulated (i.e. there is no government intervention into the market), then the market that produces the pollution is inefficient. 

When visualizing negative externalities from pollution, students often think of a factory emitting harmful substances from a smokestack, or an industrial agricultural facility creating water pollution from pesticide runoff. That is, we tend to conceptualize pollution externalities as the result of production (the supply side of the market), and place blame on "big corporations". 

But we must keep in mind that as consumers we are largely responsible for pollution impacts, because if we didn't demand those goods and services, they would not be produced. Here is a link to a story at EurekAlert regarding pollution from consumption. The main takeaway is that consumers are mostly responsible for pollution, albeit indirectly. Which country's citizens have the biggest impact via consumption?  Which products that you consume every day generate the most pollution? 

When we speak of "external costs", what types of costs are we talking about?  The first thing that comes to mind for me is loss of human health. Here is a story about the health effects of air pollution. The numbers are staggering. 

I'm often asked to comment on the idea that environmental regulations make the economy less productive. My reaction is typically that it's exactly the opposite. There is a vast amount of evidence suggesting that reducing air and water pollution can make the economy more productive, not less. 

Here is an article at The Atlantic outline the healthcare costs savings of the Clean Air Act. 

Here is a good description of the benefits of clean water from David Brodwin at US News.

Here is a brief outline of negative externalities associated with air pollution from transportation from Hofstra University. 

Here is some good background reading on negative externalities and public goods from the IMF.

What are we going to study in natural resource economics?

What are we going to study in natural resource economics?  

 

Students new to economics or new to environmental studies may be unsure about how these topics come together.  

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 can we manage fisheries in a way that balances the competing needs of commercial and recreational fishers and maintains a biologically sustainable stock?   

  

Is pollution bad for an economy?  Do dirty beaches prevent tourists from returning?

 

Tradeoffs between development and conservation...  How much are scuba divers willing to pay for healthy coral reefs and marine turtles?  

 

How to best manage wildlife populations?  What hunting regulations would maximize the net gains to society from white tailed deer populations?   

 

If we continue to use marine resources in unsustainable ways, will we lose potentially lifesaving medicines? 

 

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. 

It should also be obvious is that these are potentially 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. without personal opinion or bias). In short, our job is to search for the truth, or as close to it as we can get.

Below are links to an overview of environmental economics and 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 summer. 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).

 

What is environmental economics?  (The Economics Network at the University of Bristol) 

How do Economists Really Think About the Environment (Fullerton and Stavins, RFF, 1998)
 
Economic Values without Prices (Loomis, Choices, 2005)

What are your thoughts on economics and the environment?  At the beginning of the course, do you see a role for economics in the environmental policy debate? 

Welcome UNCW Summer School Students!

Hello! This blog is primarily used by students of Professor Schuhmann. Others may find it useful...
The purpose of this blog is to provide a forum for extra discussion about topics related to natural resource economics.