ECN 325 Topics
Chapter 1:
• natural vs. environmental resources
• how economic and natural systems are linked
Chapter 2:
• review of the functioning of the market system
• demand and supply = mb and mc = max willingness-to-pay and min willingness-to-accept
• consumer surplus and producer surplus
• why is the market equilibrium "efficient"?
• adam smith's notion of the invisible hand
• numerical example: given mb and mc, solve for equilibrium price and quantity, and dollar value of net
benefits (cs plus ps)
• sources of market failure: externalities and public goods
• when there is a negative externality, why is the market solution inefficient?
• what is the underlying "cause" of a negative externality?
• numerical example: given msb, mpc and mec, solve for both market and efficient solutions and be able
to show the welfare gains
• from moving toward the more efficient solution.
• technological vs. pecuniary externalities
• 2 characteristics of public goods that lead to market failure
• deriving market demand from individual demands -- how is it different for private and public goods?
why?
• free rider problem
• inappropriate government intervention into market
Chapter 3:
• pigou's solution for correcting the inefficiency associated with negative externalities (what does he
say is the "cause"?)
• coase's solution for correcting the inefficiency associated with negative externalities (what does he
say is the "cause"?)
• problems with coase solution
• environmental standards for pollution control
• deriving the optimal amount of emissions (mdf and mac)
• questions about an economic definition of standards (why is this theory so difficult to implement in
practice?)
• non-economic definition of standards
• why are performance standards likely to be inefficient?
• efficient control when polluters have different abatement costs
• technology standards for pollution control
• why are tech standards likely to be inefficient?
• when will tech standards be desirable?
• marketable permit systems
• why are they efficient and considered "fair"?
• numerical example: given 2 firm's mac, unregulated emissions, and a regional standard, solve for
optimal abatement by each firm.
• problems with permits
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permits in practice
us emissions trading program
Chapter 4: Valuing the environment
• why do we need to value environmental goods and services?
• market vs. non-market values
• use vs. non-use values (types of non-use values)
• techniques for estimating non-market values
• indirect vs. direct
• what types of values can be captured, when to use, pros and cons of CVM
• CERCLA (the “lesser of” rule and the Ohio case), Valdez, OPA
• CBA vs. marginal analysis
Chapter 6: Ozone Depletion and Global Warming
• why are they economic problems?
• how are global pollution problems different from regional pollution problems?
• Science and history of OD
• Montreal Protocol
• CFC ban with phase-out (why?)
• why so “successful”
• science of GW
• GHG’s and their markets
• projections for future climate change
• markets to be affected
• international differences
• intergenerational differences
• 3 categories of policy responses to GW
• will markets provide the efficient amounts of GHG reduction and new energy R&D/innovation?
• Rio Summit and UN Framework Convention on Climate Change
• will it be as “successful” as MP?
Chapter 9: Minerals Extraction, Trash Generation, and Recycling
• circular flow of materials use
• categories of natural resources
• the extraction decision
• market failure and inappropriate government intervention in extraction industry
• recycling decision
• why do we throw away so much garbage (MC vs. MB of recycling)
• individual recycling numerical example
• recycling incentives in practice
• connecting the materials markets
Chapter 13 – Biological Diversity and Habitat Preservation
• genetic, species, and ecosystem diversity
• extinction
• fundamental and proximate causes of biodiversity loss
- 3 human behaviors, each viewed as the result of market failure
• values of species protection
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- what are they and why are they so difficult to quantify?
option value vs. quasi-option value
the endangered species act (ESA)
what does the ESA imply about the value of species?
the snail darter and Tellico dam
problems with ESA
international issues with species protection
CITES and Rio Earth Summit biodiversity treaty
international “solutions” to conservation
the northern spotted owl (NSO) and pacific northwest timber debate
efficiency of specific recovery plans
- should species recovery be a CBA issue or a marginal issue?
The red cockaded woodpecker and Georgia Pacific Corp.
Chapters 11 & 12 -- Temperate and Tropical Forests
• consumptive vs. non-consumptive values of the timber resource
• optimal rotation model and decision rule for t*
- growth function
- two costs of waiting to cut
- stumpage value and marginal stumpage value
- benefits of waiting to cut
• what happens to t* when price changes?
• what happens to t* when a tax on value harvested is imposed?
• what happens to t* when an annual property tax is imposed?
• what happens to t* when the non-consumptive values of the timber are accounted for?
• how can government extend the rotation time on privately held lands?
• how can private conservation groups extend the rotation time on privately held lands?
• two main differences between temperate and tropical deforestation
• international “solutions” to tropical deforestation
Chapter 10 – Fisheries
• fundamental economic problem that causes over-fishing
• finding the efficient levels of stock and effort
- the growth function and biological equilibria
- critical depensation vs. full compensation model
- maximum sustainable yield
- what constitutes “over-fishing”?
- is MSY efficient?
- the Gordon model
- maximum economic yield
• will open access fishing allow for MEY? MSY?
• policy solutions to over-fishing (1st best, 2nd best, 3rd best)
• factors that complicate fisheries management (“pathologies” of over-fishing)\
• “The Tragedy of the Commons”