The Center for Natural Resource Economics and Policy (CNREP) is announcing a call for abstracts and session proposals for CNREP 2019: Challenges of Natural Resource Economics & Policy, the 6th National Forum on Socioeconomic Research in Coastal Systems.
The conference is scheduled for May 19-21, 2019 in New Orleans, Louisiana. This triennial forum focuses on the opportunities and challenges of socioeconomic research in the development and evaluation of coastal resource restoration and management. Potential session topics include, but are not limited to: valuation and application of ecosystem services, environmental benefit-cost analyses, economic linkage/impact assessment, comparative assessments of resource management and restoration policy; human dimensions of climate change, risk perception and environmental hazards. Basic and applied research, extension-oriented, and policy discussion submissions are all welcome.
The deadline for abstracts and session proposals is December 15, 2018. Additional information on the conference is available at: https://www.cnrep.lsu.edu
For additional information, contact: Rex H. Caffey, Professor and Director, Center for Natural Resource Economics & Policy LSU AgCenter and Louisiana Sea Grant College Program 225-578-2393 [email protected]
I recently got around to reading the 2010 book "Identity Economics: How our Identities Shape our Work, Wages, and Well-Being," by George Akerlof and Rachel Kranton. It is a lay summary of some of the work that Akerlof and Kranton have been doing to incorporate identity and social norms into economic modeling of decision-making. Basically, identity economics modifies a person's utility function - in addition to caring about the normal stuff like consumption, people also care about how their actions conform to the norms of the identity that they belong to. For example, if an employer wanted its workers to work harder or better, standard economic theory would suggest that the employer could modify the contract and include standard economic incentives like merit pay or output-based bonuses, since workers respond to these incentives. Identity economics suggests that the employer alternatively could attempt to create norms for the workplace and encourage workers to identify with those norms, such that the norms themselves and workers' identities would provide incentives for working hard. I might work hard or long hours because I get paid more to do it, or I might do so because I feel like I am an important part of a team, and I believe in the mission of the firm, etc.
After reading it I was struck by the potential application to environmental policy. We want people to reduce their energy consumption, say, by purchasing fuel efficient cars or appliances. Standard economic theory (Pigou) would suggest that we can price the externalities from energy consumption correctly so that everyone's incentives are such that they purchase the right amount of fuel efficient cars and appliances based on financial considerations alone. Looking out my window, it seems pretty obvious that lots of people who buy fuel efficient cars like hybrids and electrics (perhaps most of them) are doing so for other reasons - and perhaps the financial reasons aren't a part of it at all. People buy a hybrid because they are (or want to be seen as) a "green" - this doesn't mean that they're image-obsessed jerks, but it does mean that identity economics seems to play a part in these decisions.
This is somewhat related to the idea of intrinsic motivation, and how it may be crowded out by government policy (some people have studied this in relation to environmental policy). And it's also kind of related to the huge "behavioral nudge" literature on environmental policy (maybe).
But I think there's something innovative about the approach of identity economics that can yield some insights into the optimal design of environmental policy. Someone should write a paper, I decided, incorporating identity economics into a model of optimal externality policy.
Then a few days ago I see that someone basically did. "Environmental Policy When Consumers Value Conformity," by Alistair Ulph and David Ulph, has recently been online-published by JEEM. Their model is one in which consumers value conformity - sticking with the norms of a group. This is similar to the modification of the utility function in identity economics, though (I think) they don't have in their model the endogeneous creation of norms for different identity groups (e.g. the greens and the browns). This yields some striking policy implications, including the fact that the Pigouvian tax could be welfare-reducing.
Here is a link from 2017 with some background: BP has funded a book critical of the CVM. In that post I boasted that my review would be forthcoming in 2018. That boast was a commitment mechanism. I don't know if it would have worked unless Marit Kragt had not invited me to review the book for the Australian Journal of Agricultural and Resource Economics (thanks for the invitation!). Here is the link: https://doi.org/10.1111/1467-8489.12280.
I knew the second review was out but I refrained from reading it until today. Ferrini and Turner point out a major concern:
In total, the book presents 11 chapters co-authored by 21 researchers. The majority of the authors (16) are established consultants, and with the exception of chapter 6 by McFadden, all chapters are partially funded by BP Exploration & Production Inc., as reported in the book acknowledgement. The book’s strength lies in the clarity and simplicity of the argumentation presented, with many chapters that do not get bogged down in details and technicalities. However, the reader might worry that BP sponsorship influenced the authors’ objectivity in testing SP failures. The authors are professional researchers and experienced consultants and readers might wonder whether researchers’ expectation (or preference) in poor results impact studies lay out [sic?]. Economists can easily spot a potential moral hazard here!
It concludes like this:
The key meritocratic conclusion that this book suggests is that ‘experts’ are the best judge of many environmental damages and the general public is often not capable of expressing a meaningful value. However, SP valuation economists do not seem to have a place in the ‘experts’ set.
Last week the Trump administration took a crucial step toward de-emphasizing the life and health benefits in this calculus when the Environmental Protection Agency said it would rethink a major regulation that restricts mercury emissions by coal-burning power plants.
The 2011 mercury rule — based on decades of research showing that mercury damages the brain, lungs and fetal health — is among the costliest but most effective clean-air policies put forth by the Environmental Protection Agency. Utilities estimate they have spent $18 billion installing clean-air technology, and mercury pollution has fallen by nearly 70 percent.
Modifying the rule could have an impact far beyond any immediate concerns about the release of toxic mercury into the air and water. In fact, the re-evaluation fits into a far-reaching administration strategy to loosen environmental rules affecting countless other industries for years to come by adjusting the factors used to judge the benefits to human health that the rule has brought.
“This goes way beyond just weakening the mercury rule,” said Alan Krupnick, an economist at Resources for the Future, a nonpartisan Washington research organization. “This is part of a change that would give the Trump administration a way to more easily justify loosening many other pollution regulations, such as rules on smog, and rules on climate-change pollution.” ...
The electric utilities that operate the nation’s coal-fired plants, and thus are heavily affected by the mercury rule, are urging the administration to leave the rule alone. They have already spent billions of dollars to become compliant, the utilities say, so changes are of little benefit to them. ...
The calculations that the E.P.A. conducts for every major new air or water regulation lie at the philosophical heart of the agency’s work. And its process for that analysis has long been in industry’s cross hairs.
That’s because the agency has long counted not just the direct health benefits of pulling a certain pollutant out of the atmosphere, but also what are called the “co-benefits” that occur when, as a result, other toxins are also reduced.
For example, in the case of the mercury rule, the Obama administration found between $4 million to $6 million in health benefits directly from curbing mercury. But it further justified the regulation by citing an additional $80 billion in health benefits a year by, among other things, preventing as many as 11,000 premature deaths. Those savings come from a reduction in particulate matter linked to heart and lung disease that also occurs when cutting mercury emissions.
So, you can see why industry and the Trump administration is so upset. The co-benefits of 11,000 premature deaths should be worth zero in the mercury rule because mercury ain't whats killing them.
At a press briefing in mid-August, Bill Wehrum, the appointed head of the US Environmental Protection Agency’s (EPA’s) Air Office, reiterated the Trump administration’s position that ancillary benefits are not to be counted in cost-benefit analysis of major rules. The context this time was the Affordable Clean Energy Rule (ACE) proposed by the current regime to replace the Obama administration’s Clean Power Plan (CPP). If only the forgone carbon dioxide (CO2) benefits of pulling back on the CPP are counted, the cost savings from ACE outweigh these forgone benefits. But adding the ancillary health benefits that are lost with the ACE rule—the value of 1,400 fine particulate matter (PM2.5)-associated deaths related to greater coal use under the ACE rule—turns ACE into an economic loser, with net social costs relative to the CPP.
At the briefing, Wehrum said: “We’re not dealing with [sulfur dioxide] SO2. We’re not dealing with [nitrogen oxides] NOX. We’re not dealing with particulate matter. … We have abundant legal authority to deal with those other pollutants directly, and we have very aggressive programs in place that directly target emissions of those pollutants. So our view is, if we want to regulate PM, we regulate PM straight up. If we want to regulate SO2, we regulate SO2 straight up.”
The overarching response to this statement, as we have written on previously (here and here), is according to (1) theory (basic economic welfare analysis); (2) practice (OMB’s and EPA’s own guidance documents on the conduct of the analysis of the impacts of rules and statutes); and (3) case law—allbenefits and costs of a rule are to be considered. Just because the stated purpose of a rule is to reduce CO2 does not give license to ignore other impacts that occur. Consider how much the administration cares about looking at employment impacts of a rule. Surely environmental rules are not issued to change employment, but are written to protect public health and the environment, making the employment impacts ancillary. Yet the administration certainly wants these ancillary impacts on jobs to be considered, including not only employment impacts but also the ancillary health damages that occur from employment loss.
Wehrum’s statement further suggests that he wants the public to trust EPA to “aggressively” target NOX and SO2 emissions in their own right and with the knowledge that they cause PM2.5 concentrations that harm health. Yet, the administration’s proposed rule on the use of science at EPA is targeted at relaxing rules on PM2.5 and its precursors by challenging the science linking PM2.5 to deaths and the process of including these and other scientific studies in RIAs. If Wehrum really believes that we should regulate PM2.5, SOX, and NOX “straight up” to make up for the increases in these pollutants caused by ACE, then the issuance of the proposed ACE rule should be accompanied by the issuance of a PM2.5, SOX, and NOX mitigation rule that would bring these pollutants down to where they would have been under the CPP. Otherwise, the planned actions under ACE are merely about reducing the costs of regulations with little concern about the health impacts on the American people.
Note: The new name of the Environmental Economics blog (my posts, at least) is "Common Resources Echo".
It really is irritating that some people need to use economic measures to value our environment.
The reality is our environment, air, water, seas, national parks & Great Barrier Reef are truly priceless & must be treated as such ie no cost benefit BS studies needed.
My response is really quite simple. If we don't measure the value of environmental goods and services and place them on par with marketed goods, we risk some acting as if the environment is free.
It's like the nice neighbors who are going to be out of town on Halloween, so they leave a bowl of 'free' candy out for the neighborhood kids. Most of the kids (mainly the supervised ones) are good citizens and only take one or two pieces of 'free' candy. But it only takes one obnoxious teenager to recognize that 'free' means take all you can, and everyone loses out.
So think of those who treat the environment as 'free' as the obnoxious teenage neighbor who needs more adult supervision.
Earlier this year, President Trump proposed significant cuts to the USDA's Economic Research Service--50% cuts in fact:
Funding for ERS would be slashed by 50 percent, to $45 million, in part by eliminating "low-priority research" that the administration said was already being done by the private sector or nonprofits. The administration asks for the ERS to focus on core programs of data analysis and forecasts.
These cuts were restored by Congress in later versions of the budget--but that wasn't the end (see the third bullet below).
The SAB approved retiring the Ecological Processes and Effects Committee (EPEC), the Environmental Economics Advisory Committee (EEAC) and the Environmental Engineering Committee (EEC). When issues arise in these three areas, the current make-up of the Board sufficiently represents expertise to oversee work on these subject matters and convene panels as statutorily authorized.
By my count, only three of the 43 current members of the Science Advisory Board have advanced degrees in economics. I will leave it to you to decide whether that is sufficient.
In a recent editorial in Science, Kevin Boyle and Matthew Kotchen--both members of the now-defunct Environmental Economics Advisory Committee--write:
...in June 2018, the EPA's Science Advisory Board (SAB) eliminated its Environmental Economics Advisory Committee (EEAC). The agency should be calling for more—not less—external advice on economics, given the Trump administration's promotion of economic analyses that push the boundaries of well-established best practices. The pattern is clear: When environmental regulations are expected to provide substantial public benefits, assumptions are made to substantially diminish their valuations.
Secretary Sonny Perdue’s surprise announcement last week that the department’s National Institute of Food and Agriculture and the Economic Research Service would be packing up and moving from D.C. was news to an important group of people — the staff members themselves. Department staff were informed of the plan about an hour before USDA unveiled it to the public...
But economists inside and outside ERS told POLITICO they are skeptical of the administration’s motives and worry that it will eventually lead to their work being overlooked, underfunded and potentially more susceptible to political influence.
Echoing the words of Boyle and Kotchen, the pattern in indeed clear: Objective economic research is being driven out of D.C.
Pollution and health have always been directly linked, both environmentally and medically, but few people consider the economic impact felt by countries afflicted with poor outdoor air quality. The World Health Organization estimates that the cost of disability and premature death from air pollution in Europe totalled close to $1.6 trillion USD in 2015. Each form of pollution presents its own unique challenges, while resulting in a hefty expense and posing a threat to human health.
Particle pollution is a major air quality concern. Microscopic fibers from combustion, dust, and debris are spread through the air in a mix of solids and liquid droplets. Activities like industrial processes, construction, and burning emit particles that are easily inhaled or consumed. Particle pollution becomes increasingly dangerous when it includes harmful toxins like asbestos, which has direct ties to cancerous conditions including peritoneal mesothelioma. Natural disasters, demolition, and climate change can all contribute to particle pollution, sometimes causing levels to spike during certain times of the year.
Due to worsening conditions, gaseous air pollution like ozone and carbon monoxide have been hot topics in recent years. Levels often increase during the summer when higher temperatures and sunlight stimulate chemical reactions in the lower atmosphere. Gases like ozone can aggravate the respiratory system, resulting in conditions such as chronic obtrusive pulmonary disease (COPD) and worsening asthma and emphysema. Although urban areas are often the most affected, the impact of air pollution reaches far into the rural and natural world.
The toll air pollution takes on the environment is costly. Heightened levels of smog or haze can prevent plants from receiving needed sunlight exposure, while certain chemical emissions, like halons, deplete the upper ozone level that protects us from harmful UV rays. Crop and forest damage are a result of air pollution as well, causing land fertility issues and stunted growth.
Although some headway has been made in terms of sustainability and cutting back on toxins, pollution from energy production continues to cost the U.S. hundreds of billions of dollars each year. According to a report by the World Bank, this rounds out to about $5 trillion in welfare expenses annually, with developing countries seeing some of the worst effects. Much of this is attributed to healthcare costs, as more people are being exposed to harmful airborne toxins. Additional financial burdens can develop from labor productivity and insufficient crop yields.
A number of studies surrounding the economic result of air pollution recommend policy change. One report from the Organization for Economic Co-operation and Development (OECD) encourages the use of local policies to directly target and break down the issue. Certain global cities like Beijing or Dubai are experiencing increasingly dangerous air quality levels, sometimes resulting in city-wide smog warnings that bring businesses to a halt. Although there may be fears that industrial-centric jobs may be lost while attempting to reduce pollution, the economic model suggests those positions will be balanced out by gains made in other industries, including green building and architecture. Environmentally conscious policy will benefit and stimulate the economy by encouraging efficient use of resources while lessening healthcare costs.
Participating in clean air initiatives and sustainable development are attractive markets for many countries. Those that enter into clean technologies have the advantage of growing and leading the industry, all while improving national health and increasing GDP. Perhaps if those financial gains were highlighted, countries like the U.S. would feel more incentivized to adopt green and non-toxic technologies to help reduce the effects of air pollution.
Emily Walsh Community Outreach Director Mesothelioma Cancer Alliance
This was my first time attending a World Congress. As a non-market valuation economist specializing in revealed and stated preference methods, I enjoyed the opportunity to discuss these methods and network with others from around the globe. For me, the week started off on a high-note as Gina McCarthy, the opening keynote speaker, publicly praised stated preference methods and the rigor with which these studies are conducted. In a benefit-cost analysis (BCA), accounting for benefits of a policy often is more difficult than accounting for the costs, thus making non-market valuation a fundamental part of BCA. Methodological issues transcend differences in institutions, policies and applications, a major point and key takeaway from this conference. (Some of these issues are explored in a symposium in the Spring 2018 issue of the JBCA: The Application of BCA in Europe – Experiences and Challenges.)
Another highlight with direct applications to BCA was the policy session, “Best Practices in Revealed Preference Approaches for Nonmarket Valuation Methods that Inform Environmental Policy,” organized by Catherine Kling (Iowa State/Cornell University). The session included talks on best practices for hedonic property value studies, hedonic wage studies, and recreational demand models. The three papers presented in this session were commissioned by the Review of Environmental Economics and Policy, and will be part of a future symposium on the topic in that journal.
The Best Practices session built on a recently published paper recommending best practices for stated preference studies (Johnston et al. 2017); this large scale effort in turn updated the findings in the report of the NOAA Blue Ribbon Panel on Contingent Valuation in 1993—an early effort that involved Nobel Prize winners Kenneth Arrow and Robert Solow, as well as other prominent economists and sociologists. The papers presented in the session further underscore the importance of work by economists to produce robust estimates of non-market values that can be used in BCAs, and thereby support evidence-based policy decisions. ...
Don't read this if an increase in someone else's utility reduces your own (i.e., you are so jealous that people got to go to the World Congress and you didn't).
"This blog aims to look at more of the microeconomic ideas that can be used toward environmental ends. Bringing to bear a large quantity of external sources and articles, this blog presents a clear vision of what economic environmentalism can be."
Don't believe what they're saying
And allow me a quick moment to gush: ... The env-econ.net blog was more or less a lifeline in that period of my life, as it was one of the few ways I stayed plugged into the env. econ scene. -- Anonymous
... the Environmental Economics blog ... is now the default homepage on my browser (but then again, I guess I am a wonk -- a word I learned on the E.E. blog). That is a very nice service to the profession. -- Anonymous
"... I try and read the blog everyday and have pointed it out to other faculty who have their students read it for class. It is truly one of the best things in the blogosphere." -- Anonymous