Today we'll be talking about externalities.
Alfred Marshall first introduced the concept.
A.C. Pigou (a student of Marshall's) proposed a solution.
Tuesday, August 31, 2010
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?
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.
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)?
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
Welcome!
Welcome to the blog.
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Then simply type your comment in the dialogue box where it says "leave your comment".
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Please be sure to leave your full name so that you can earn proper credit for your contributions.
To comment to a post, simply click on the words "Post a comment" at the bottom of the post.
Then simply type your comment in the dialogue box where it says "leave your comment".
If you have a google account, you can use that user name or you can post anonymously.
Please be sure to leave your full name so that you can earn proper credit for your contributions.
Monday, June 14, 2010
"Greed"
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?
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).
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?
(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.
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?
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?
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