Environmental Economics

#1 benefit of being a full professor

1. When the moon is full, I get to kill a student.

Source: Daniel Drezner via MR.

Graduating seniors. what are you gonna do?

My email:

Thanks for a great presentation. One more thing, I need the final PPT version.

The reply:

I got your e-mail a few days ago, but unfortunately I've deleted the final power point. I was so excited about being done with school that I eliminated all traces of this hellish semester.

Demand vs Quantity Demanded (Colbert edition)

From the inbox:

More on changes in D vs. changes in QD.  Colbert got it wrong too.  Note the 2min mark.

http://www.comedycentral.com/videos/index.jhtml?videoId=167579

Why weren't you or Tim listed as "prominent economists?"

Here is what Colbert says:

Sure, if you think about it. Lifting the tax will increase demand and ultimately lead to higher gas prices. But doesn't it feel like this is going to help somebody [as "OPEC" appears in the sidebar].

Even serious political satirists get it wrong.

As for the question from the inbox: Krugman, Mankiw, Haab, Whitehead? Princeton, Harvard, Something State U, Something State U?

Must I self-loathe daily?

Where should you go to graduate school in agricultural and natural resource economics?

1. Iowa State U
2. North Carolina State U
3. U Wyoming
4. Harvard U
5. Yale U
6. UC Santa Barbara
7. MIT
8. U Rhode Island
9. Georgetown U
10. SUNY Binghamton
11. Stanford U
12. U Colorado, Boulder
13. Utah State U
14. RPI
15. U Connecticut
16. UC San Diego
17. Rutgers U
18. Brown U
19. U Wisconsin, Madison
20. Georgia State U

Student question on farm subsidies

From the inbox [edited for length]:

Dr. Haab

My name is [blank] and I was in your AED Econ 200 class this past fall quarter. One of my classes this quarter was Rural Sociology 378 which focuses on globalization of the world's economy and how it affects the rural populations of countries...My professor proceeded to tell the class that the main cause of [the expolitation of Jamaican grain farmers] was the farm subsidies given to US farmers...I was wondering if maybe you had any more information regarding subsidies (how they work, who gets them, why they are good/bad). I feel that they are a good thing for most US farmers. I know the professor got some of the information wrong and I called him out on it but I feel really uneducated about them...I wanted another opinion on the issue because my rural sociology teacher is obviously not an economics professor. I'm just curious to hear your take on the issue of farm subsidies.

You asked for it...

Demand vs quantity demanded, ad nauseum

I've been getting my jollies on the misuse of demand for quantity demanded this week (see here and here and here) but the issue won't go away in our nation's top newspapers. In today's online WSJ:

Oil's climb to $122 a barrel has policy makers and presidential candidates scrambling for quick, feel-good solutions. Trouble is, their ideas are exactly the opposite of what straightforward market economics says is needed.

John McCain and Hillary Clinton want to send cash-strapped consumers on holidays from the federal gasoline tax. But the law they can't rewrite -- the law of supply and demand -- suggests it would backfire. Lower taxes would encourage people to drive more, meaning more demand that would push prices higher again. [emphasis added]

Here is how I would write the last sentence:

Lower taxes would encourage people to drive more, leading to more pollution, congestion and  less road safety. In addition the relative unresponsiveness of the amount of gas supplied in the short term to higher after-tax prices would erode much of the hoped-for reduction in consumer prices.

A bit clunky, but at least it is correct!

Update: To clarify, the part about "pushing prices higher again" is wrong. Flat out wrong. Since demand won't increase prices won't go up. The ultimate effect of a gas tax holiday on gas prices is that they will be lower, albeit, imperceptibly lower. It is not terminology that is the problem, it is the resulting analytical errors.

How can it be wrong (when it feels so right)?*

Polley on demand vs quantity demand:

... it is true that the writer confuses demand and quantity demanded. But the greater sin is that the passage was not even consistent with the main critique of the tax holiday. And I don't think that these errors are unrelated. Sloppiness begets sloppiness. Once you introduce that circular logic, the next step is more likely to go off-track. If anything, that's why professors need to continue to instill some professional discipline in the use of language to describe supply and demand.

The Env-Econ Home Game

Spot the problem with this video.

Another inelastic demand example (this time it's not gas)

From the Columbus Dispatch:

FirstEnergy will spend six years and $1.5 billion by 2011 to settle a pollution lawsuit and meet federal clean-air rules at one of its power plants.

By then, three massive scrubbers and two huge filters will operate at its W.H. Sammis coal-fired power plant along the Ohio River, helping remove thousands of tons of pollutants that cause smog, soot and acid rain...

All the work must be completed by 2015 to comply with federal law. Much of the cost will be passed to customers.

Supply decreases, prices go up.  By how much depends on the elasticity (flexibility) of demand.  Since the demand for electricity is inflexible, much of the cost increase is passed through to consumers.  Now whose fault is that?

Get off my back, William J. Polley is concerned about "demand vs quantity demanded" as well

Thank you William J. Polley:

The whole sentence about demand is the sort of circular statement that we caution our students not to make but that newspapers print all the time. Not only is it a terrible misstatement of demand vs quantity demanded, it's not even consistent with the claim (advanced by Krugman among many) that supply is fixed.

Maybe it is only those economists at regional public universities that think this is important? My concern drew 13 comments, a large number for moi.