T HE E CONOMICS OF S USTAINABILITY
BULM 758F 0101
Fall 2008: Tuesday & Thursday
9-10:50am
Meets 10/23/08-12/11/08
Room VMH 1511
COURSE DESCRIPTION:
Firms are increasingly confronted by issues of sustainability, whether via demand side or social pressures (e.g., through changing consumer preferences or pressure from NGOs), a quest for superior and sustained performance or a need to comply with regulation.
Sustainability issues facing firms are multi-faceted and, in most cases, without clear strategic solutions. Firms often must choose between sustainability and short term profitability.
The goal of this course is to better understand the issues of sustainability in a series of different contexts. These contexts include common property problems, such as natural resource depletion, energy, carbon emissions, the industrialization of food production and supply chain issues (e.g., sustainability and safety). Within each context, we examine the underlying market failures that lead to sub-optimal social outcomes along with commonly employed economic solutions to these problems. We will study cases from numerous settings, but we will spend more time on market failures that contribute to environmental problems.
This class will use a combination of analytical tools: case examples, empirical evidence, and guest speakers. It will draw on cases in numerous settings (e.g. utilities, agriculture, banking, food service, and resource extraction). Course requirements include a group project and an optional oral examination. This course should be of value to students interested in corporate strategy, economics, business & society, environmental issues, and public policy.
REQUIRED MATERIALS:
•
Articles Coursepack: distributed in the first class
•
Harvard Coursepack (‘Harvard CP’): available for purchase at the Copy Center in
Van Munching Hall
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EVALUATION
There are two alternative evaluation formats. You may elect, no later than the last day of class (12/11/08), as to which format you prefer. If you do not elect an evaluation format, I you will be evaluated according to ‘Evaluation format A’ (i.e., this is the default).
Evaluation format A:
5% of project:
Evaluation format B:
OR of project: 5%
Oral examination (~30 minutes) during exam week 25%
Letter grades will be assigned only for your final result in the class. Most students will receive the average grade of B. Grades of C, D and F will be assigned to those students whose performance is appreciably below the class average.
GRADED COMPONENTS
To ensure fairness in your evaluation please note the following class policies:
•
I will not accept e-mail attachments for the group project.
•
Deadlines are binding and late materials will not be accepted.
Group project
There will be a group project due at the end of the semester. This project will include a description of a social problem, identification of underlying economic issues, possible private solutions (i.e., not government) along with an analysis of the shortcomings of these solutions. I will ask you to discuss possible topic ideas during the second class
(10/27). Based on these descriptions, you will form groups according to your interest (3 to 4 members). The project is intended to give you both depth within a specific context as well as a deeper understanding of the market failures that have led to the development of the problem. It should be emphasized that the focus is on finding private, firm level solutions that make sense. More details will be given on the first day of class.
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Presentation of Group Project
Towards the end of the term, you will be asked to prepare a brief (7-10 minutes maximum) presentation on your project to date. These presentations will be held in class on Thursday, December 4. The goal of this presentation is to sharpen your thinking around the problem, underlying economic issues and solutions you have defined, via feedback from the class. Everyone is required to attend all presentations.
Given that the goal of this exercise is to solicit feedback and improve the quality of the final product, grading for this presentation will be purely based on making the presentation. That is, if you present the group project and have made a reasonable effort to do so, each member of your group will receive full credit for this component. Note that all members of the group are not required to present. One or two (maximum) members should present the work of the group, with the others available to discuss and answer questions if necessary.
Peer Evaluation
At the end of the semester, you will be required to submit peer evaluation forms for your group project work. These forms will ask you to evaluate your group members in terms of contribution to your project and the intellectual commons. You will be required to evaluate every member of your group (self excluded). How you are ranked by group members represents a substantial portion of your grade.
Optional Oral Exam
You may elect, no later than the last day of class on December 11, 2008, to take an oral examination. If you choose this option, your total grade will be calculated according to
Evaluation format B above.
The oral examinations will be ‘one on one’ and will be conducted during finals week.
Questions will be asked about the economic fundamentals of the market failures we discussed in class and the implications of these market failures for the sustainability questions we cover. Questions will also address the possible public and private solutions to these problems. Thus, this exam will emphasize your ability to apply the economic concepts from class to real world problems.
CLASS PARTICIPATION AND PREPARATION:
The following reflect my teaching philosophy with respect to class participation and preparation:
1.
This class follows a graduate seminar format, which requires participation and preparation by all class members. It is my expectation that you read *all* assigned class materials *before* class.
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2.
Not everyone is able to speak and contribute concurrently during a class session, but you should be prepared to participate in each class session .
3.
Reflection is an important element associated with fully comprehending the material.
I do not grade class participation, per se . It has been my experience (in past years when I have graded participation) that class participation grades are strongly correlated with students’ scores on other graded components.
WEBSITE:
The class website will be maintained via Blackboard at the following address: http://bb.rhsmith.umd.edu
All handouts from class not included in the coursepacks will be posted on the website after the relevant class. I encourage you also to use the message board available on the class website to ask general questions related to the class or to coordinate with group members for the group project.
ACADEMIC INTEGRITY
The University's Code of Academic Integrity upholds the integrity of the University of
Maryland and, as such, violations will be dealt with strictly. Please visit the following website for more information on the University's Code of Academic Integrity: http://www.studenthonorcouncil.umd.edu/code.html
On each exam or assignment you will be asked to write out and sign the following pledge. “I pledge on my honor that I have not given or received any unauthorized assistance on this exam/assignment.”
SPECIAL NEEDS
Any student with special needs should bring this to my attention as soon as possible, but not later than the second week of class.
If you have any questions or concerns about the class, please speak with me.
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T OPICS AND R EADING A SSIGNMENTS
Note: all readings are in the ‘Articles Coursepack’ unless listed otherwise as in the
‘Harvard CP’
Oct. 23 Introduction
Readings:
•
Solow, R.M. (1992) “Sustainability: An Economist’s Perspective.”
National Geographic Research and Exploration Vol. 8:10-21.
•
Elkington, J. (1994) “Towards the Sustainable Corporation: Win-Win-
Win Business Strategies for Sustainable Development.” California
Management Review Winter: 90-100.
•
Elkington, J. (1998) “The Triple Bottom Line: Sustainability’s
Accountants.” Cannibals with Forks New Society Publishers: Gabriola
Island, Canada. p.69-96 (recommended)
Oct. 28 Market Failures & Sustainability
Readings:
•
Pindyck, R.S. & D.L. Rubenfeld. (2009) “Externalities and Public
Goods.” Microeconomics Prentice Hall: New Jersey. p.645-682
•
Coase, R. (1960) “The Problem of Social Cost.” Journal of Law &
Economics 1-44: (read pp. 1-19 & 42-44 only)
Oct. 30
Nov. 4
Externalities, Property Rights and Missing Markets
Readings:
•
Harvard CP Baron David P (Winter 1995) “Integrated Strategy:
Market and Nonmarket Components” CMR, vol.37, no. 2 pp 47-65.
(CMR105)
•
Harvard CP Du Pont Freon Products Division (A) HBS (9-389-111)
Energy I: Petrofuels
Readings:
•
Harvard CP BP and the Consolidation of the Oil Industry, 1998-2002
HBS (9-702-012)
•
Harvard CP BP and the Consolidation of the Oil Industry,
Supplement HBS (9-706-032)
Nov. 6 ***CLASS MEETS IN VMH 1520 TODAY ONLY!***
Energy II: Biofuels
Readings:
•
Harvard CP Mid-Missouri Energy HBS (9-708-021)
•
Grunwald, M. “The Clean Energy Scam.” Time 7 April 2008: 40-45.
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•
Cohen, R. “Bring on the Right Biofuels.” New York Times 24 April
2008.
•
Rosenthal, E. “Europe, Cutting Biofuel Subsidies, Redirects Aid to
Stress Greenest Options.” New York Times 22 January 2008.
•
Hedin, J. “My Forbidden Fruits (and Vegetables).” New York Times 1
March 2008.
Nov. 11 Guest Speaker:
Dr. Edmonds
Chief Scientist and Laboratory Fellow
Address Climate Change
Joint Global Change Research Institute of the Pacific Northwest National
Laboratory
Nov. 13 Carbon I: Climate Change Primer
Readings:
•
McKibbin, WJ & PJ Wilcoxen. (2002) “The Role of Economics in
Climate Change Policy.” Journal of Economic Perspectives 16(2):107-
29
•
Harvard CP Global Climate Change and Emissions Trading HBS (9-
707-015)
•
Carbon Taxes vs. Carbon Markets, Reason.com
(http://www.reason.com/news/show/120381.html)
Nov. 18 Carbon II: Climate Change and Firm Strategy
Readings:
•
Harvard CP UBS and Climate Change--Warming Up to Global
Action? HBS (9-707-511)
•
Elgin, B. “Little Green Lies,” Business Week October 29, 2007 (p.44-
52)
•
Harvard CP Competitive Advantage on a Warming Planet HBR
(R0703F)
Nov. 20 Sustainable Supply Chains I: Economic fundamentals
Readings:
•
Kirmani A & Rao A (2000) “No Pain, No Gain: A Critical Review of the Literature on Signaling Unobservable Product Quality” Journal of
Marketing Vol. 64:66-79
•
Harvard CP Aligning Incentives in Supply Chains HBR (R0411F)
•
Barboza, D. & W. Bogdanich. “Twists in Chain of Supplies for Blood
Drug.” New York Times 28 February 2008.
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•
Povoledo, E. “’Bolt from the Blue’ on a Tuscan Red.” New York
Times 23 April 2008.
•
“Land of Milk and Money.” The Economist 3 October 2008.
Nov. 25 Sustainable Supply Chains II: In Practice
Reading:
•
Harvard CP McDonald’s Corporation: Managing a Sustainable
Supply Chain HBS (9-907-414)
•
Pollan, M. “Power Steer.” New York Times 31 March 2002
(recommended)
Dec. 2 Sustainable Supply Chains III: In Practice
Reading:
•
Harvard CP Monsanto: Realizing Biotech Value in Brazil HBS (9-
507-018)
•
Koeppel, D. “Yes, We Will Have No Bananas.” The New York Times
18 June 2008.
Dec. 4
Dec. 9
Group presentations
Guest Speaker:
Ms. Meghan Chapple-Brown
Director, Client Services
SustainAbility, Inc.
Dec. 11 Should Companies Try to be Green?
Readings:
•
Porter, M. & van der Linde, C. (1995) “Toward a New Conception of the Environment-Competitiveness Relationship.” Journal of Economic
Perspectives Vol. 9(4):97-118.
•
Palmer, K., W.E. Oates, & P. Portney. (1995) “Tightening
Environmental Standards: The Benefit-Cost or the No-Cost
Paradigm?” Journal of Economic Perspectives Vol. 9(4):119-132.
•
Friedman, M. (1970) “The Social Responsibility of Business is to
Increase its Profits.” New York Times Magazine 13 September 1970.
•
“Rethinking the Social Responsibility of Business.” Reason.com
( http://www.reason.com/news/show/32239.html
)
•
Solow, R.M. (1992) “An Almost Practical Step Toward
Sustainability.” Washington: Resources for the Future (recommended)
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