Environmental Economics

Env-Econ 101 Case Study: Inelastic Supply

We spend a lot of time talking about the elasticity of demand: That is, how consumers react to higher (or lower) prices.  Just as important, but less often mentioned--probably because it's harder to measure--is the elasticity of supply:  How does the amount producers produce react to higher prices?

First, some motivation:

Some kinds of fertilizer have nearly tripled in price in the last year, keeping farmers from buying all they need. That is one of many factors contributing to a rise in food prices that, according to the United Nations’ World Food Program, threatens to push tens of millions of poor people into malnutrition.

The failure of U.S. ethanol policy

Sometimes ecological economists sound like real economists*.  That is, every once in a while they make sense.  From Lester Brown and Jonathan Lewis in today's Washington Post:

Taking these together -- the environmental damage, the human pain of food price inflation, the failure to reduce our dependence on oil -- it is impossible to avoid the conclusion that food-to-fuel mandates have failed. Congress took a big chance on biofuels that, unfortunately, has not worked out. Now, in the spirit of progress, let us learn the appropriate lessons from this setback, and let us act quickly to mitigate the damage and set upon a new course that holds greater promise for meeting the challenges ahead.

Happy Earth Day.

*Relax, I'm joking.

Forecast those corn prices

Big decison: how much corn to plant?

As spring planting nears, farmers are making a choice that could affect what Americans pay for everything from car fuel to chicken wings.

Lots of development in a city best known as the place of my birth

In 25 years, county's green could disappear:

Mecklenburg County is on pace to have all of its available land developed within 25 years, according to a new UNC Charlotte study.

The 24-county project on new urban growth, released Tuesday, paints the clearest picture yet of how population increases and commercial development are changing the region.

The study area, which ran from the Blue Ridge Mountains to Rockingham, lost more than 100 acres daily to development from 1976 through 2006, the study found. That amounts to an area of about 75 football fields each day.

The article does not mention efforts to preserve the Whitehead homestead.

An odorous hedonic study just waiting to happen

"Our business is good, even if it stinks" (Dairy farm's odor ...):

"I'd like a show of hands of anyone who feels their house has lost value because of Wallace Farm," a Skybrook resident said. Hundreds of hands went up around the hall at Highland Creek Elementary School.

Large farm animal poop-onomics

Let the record show that I think that animal poop is a potential negative externality (Farms may be exempted from emissions rules):

Under pressure from agriculture industry lobbyists and lawmakers from agricultural states, the Environmental Protection Agency wants to drop requirements that factory farms report their emissions of toxic gases, despite findings by the agency's scientists that the gases pose a health threat.

When was the last time you called 9-1-1 and reported a large farm animal poop-related emergency? Never? If I'm reading this article correctly the EPA sees as a reason to keep large animal poop a secret.

The curious incident of birds in the backyard*

A strange property rights dispute in my town:

Dublin officials ruled in 2004 to allow [Dublin resident YinJin Sun] to build the pigeon hutch as an accessory structure, like a shed, but they mistakenly failed to address what it would be used for, said Steve Langworthy, Dublin's development director.

"Any logical person is going to say, 'You're going to keep pigeons in it,' " Langworthy said.

But Dublin law allows the birds only in rural districts, not residential areas such as the Lowell Trace subdivision where Sun lives.

Last month's decision by Dublin's Board of Zoning Appeals "really turned on a fairly narrow issue: Is this poultry husbandry?" said Chris Cline, attorney for the Lowell Trace Homeowners Association.

Yes, the board ruled unanimously, and denied Sun's appeal to keep the birds.

In other words, Sun applied for a building permit for a pigeon coup in his backyard.  The city said 'sure.'   He built it.  Now the city says zoning laws prevent him from keeping pigeons in the pigeon coup.  What did they think the pigeon coup was for in the first place? 

*I stole the idea for the title from John.  I'm halfway through The Curious Incident of the Dog in the Night-Time.  So far, one of the best books I've read in the last 5 years.  Original, funny and heartbreaking at the same time.  Thanks for the recommendation John.

An example of eminent domain and fair market value

A case study:

Suppose a local government decides to invoke eminent domain on a piece of property to build a continuous bike path for a town.  In return for taking the land, the government offers the land owner the 'fair market' value based on comparable pieces of land in the area.  The land owner argues that by taking the piece of land, not only am I losing the land, but also access to a large part of the the rest of my property which reduces the possibilites for future development of the land. 

What is the taken land worth?  The market value today for the piece taken or the lost future value of the entire lot?

Wanna buy a horse?

If you've ever driven through central Kentucky you know that horse farms are an environmental amenity. Therefore, it is appropriate that we follow the Keeneland market (Yearling sale ...):

The September thoroughbred yearling sale concluded this afternoon at Keeneland with sharply lower prices.

The average fell 9.9 percent and the median price dropped 6.7 percent.

The $101,347 average and $42,000 median failed to top last year’s record average of $112,427 and median of $45,000.

This is an interesting market. If you don't believe me, read this paper and tell me why. Funny story: this authors of the paper asked me for comments. I read the paper, suggested they split it in two and send it to lower level journals. They ignored my advice and it was published in REStat. I tell this funny story in an attempt to dissuade future researchers from asking me for advice.

Down on the Farm Bill

I think I've been asleep for the last week.  Somehow I missed the 2007 U.S. Farm Bill passing the House of Representatives.  Here's a fairly lengthy description of the bill from the environment news service.  Before I offer some comments, I should state up front, I'm not a fan of farm policy.  If for no other reason, farm policy ruins a perfectly good textbook example of competitive markets (large numbers of identical price taking producers) I could use to illustrate market efficiency in my introductory econ classes.  Anyway, here are some of the highlights of the latest farm bill...