Environmental Economics

Stavins: The Myths of Market Prices and Efficiency

Rob Stavins' third installment of his The Environmental Forum®, Economic Perspective series, "The Myths of Market Prices and Efficiency" deals with valuing the environment:

... the economic value of some parcel of the Amazon rain forest is not limited to its financial value as a repository of future drugs or as a location for ecotourism. Such “use value” may only be a small part of the properly defined economic valuation. For decades, economists have recognized the importance of “non-use value” of environmental amenities such as wilderness areas or endangered species. The public nature of these goods makes it particularly difficult to quantify the values empirically, as we cannot use market prices. Benefit-cost analysis of environmental policies, almost by definition, cannot rely exclusively on market prices.

Rob concludes with this:

Like our colleagues in the other social and natural sciences, academic economists focus their greatest energies on communicating to their peers within their own discipline. Greater effort can certainly be given by economists to improving communication across disciplinary boundaries. And that is my goal in this column in the months ahead.

And thanks for sharing your column with env-econ.

From the Big Picture (Oiloholics)

At least one faction at env-econ is agreeing with The Economist on gas, er, petrol, taxes. From the Big Picture (Oiloholics):

Here's what The Economist had to say:

"The best long-term solution—for America as well as the world economy—would be higher petrol taxes in the United States. Alas, there is little prospect of that happening. America, unlike Europe, has preferred fuel-economy regulations to petrol taxes. But even with those it has failed abysmally. These regulations have been so abused that the oil efficiency of its vehicles has fallen to a 20-year low. This week, the Bush administration announced proposals for changing the fuel-economy rules governing trucks and sport-utility vehicles, but failed to close loopholes that allow these gas guzzlers to use more petrol than normal cars, a shameful concession to carmakers.

America and China, in their different ways, are drunk on oil consumption. The longer they put off taking the steps needed to curb their habit, the worse the headache will be. George Bush once learned that lesson about alcohol. It is time for him to wean America off oiloholism too."

Quelle surprise . . .

After a weekend in Raleigh listening to outdoor music with friends, I understand the -oholism analogy.

Also, high gas prices are starting to hit home. It took a full tank to drive the 5 hours round trip. At $2.69/gallon for unleaded regular, it cost $51 to fill up the tank. Ouch-ee.

"'Conservation Reconsidered' -- Reconsidered"

I came across David Warsh's eulogy of John Krutilla at economicprincipals.com, "'Conservation Reconsidered' -- Reconsidered":

Often noted is the impact on popular opinion made by those first photos of the earth from the moon -- the blue green planet framed by the lifeless surface and set against the emptiness of space.

Among expert economists, "Conservation Reconsidered" had something of the same effect -- a sophisticated challenge to take responsibility for a living world changing faster than anyone could yet guess.

If you have ever wondered from whence the field of environmental economics sprang -- this is it.

The env-econ blog produces social benefits of, at least, $364.40/day

Matthew Kahn at the Env-Urb-Econ blog is still working on the benefits and costs of blogs:

How much do people gain from reading economics blogs? Since the price equals zero for accessing everyone’s blogs, we have no way to sketch out a demand curve and measure consumer surplus. ... But putting a dollar value on the benefits of economics blogs would be harder problem to solve.

I left this comment:

The data to estimate the cost/lower bound benefit of visiting your blog is in your site meter data. Assume the average wage rate, multiply by time spent at blog, multiply by number of visits and bingo, an estimate.

So what is the lower bound of the social value of the env-econ blog?

CAFE standards and gas taxes, again

Cherry picking from other blogs on the weekend: From Vox Baby, a post on comparing the effects of CAFE standards and gas taxes (Academic Work on Cafe). After reading Goldberg (J Ind Econ, 1998, link at JStor) he concludes:

CAFE standards have not been particularly effective, but the gas tax required to mimic their effects on utilization would have to be pretty steep.

More recent research (Fullerton and West, JEEM, 2002) suggests that a gas tax would be effective/efficient (efficiency maximizes the differences between the benefits and the costs). But, yes, the efficient gas tax would be steep. Ian Parry at RFF says it would be about $1.

I've read several places, not at Vox Baby, the excuse that since gas taxes are politically infeasible and CAFE standards are feasible then we should embrace the standards. Not many economists buy into that argument, I don't think. Even so, I'm not sure if it is a good idea to try to convince non-economists otherwise.

Economic Incentives and Political Inertia

This one's a little off topic so I'm posting it late at night on a Friday.  I was sitting in a dissertation proposal defense yesterday on the U.S. crop insurance program and an interesting discussion came up.  It's relevance here is two-fold. 1) Any discussion of agricultural policy has environmental consequences and 2) I think the implications of the discussion are important for environmental policy (I just haven't quite figured out why yet). 

Book Review: Natural Capitalism

Env-Econ reader Eric Husman provides this book review of:

Natural Capitalism, Hawken, Paul; Lovins, Amory; and Lovins, L. Hunter; Little, Brown, 1999; ISBN 0316353167 http://www.natcap.org/

Green vs Poverty

John's interesting series on Green vs Green highlights the dilemma that arises when environmental concerns conflict.  Well, here's another interesting example of trade-offs:  Would you rather help the poor or combat global warming? 

Economics and good economics blogging

Matthew Kahn at Environmental and Urban Economics asks Do You Need a PHD to Write a Good Economics Blog?

For the last month, I’ve been pretty carefully reading many economics blogs. I’ve wondered what determines whether a site is popular and I’ve tried to learn about what blog authors consider to be a “good posting”. In my opinion, a large [number] (90%?) of the blog entries posted on Economics Roundtable require no graduate training in economics to produce. Is this surprising? Is this bad?

...

Carrots versus Sticks

In previous posts I've argued that companies can be shamed into environmental compliance and that companies may argue for tougher environmental regulations if they can be viewed as the industry leader.  Yesterday, the U.S. EPA announced it's list of firms that voluntarily exceed environmental performance standards.