Environmental Economics

Minumum wage revisited

Warning--this post has nothing to do with the environment other than the topic being inspired by a previous post.

Last month, I wrote about obvious headlines in the news.  In the discussion that followed, John and I engaged in a debate with a reader over the efficacy of minimum wage increases.  John claimed that minimum wage increases cause unemployment.  I went a step further to assert that the unemployment would be among the least skilled workers--that is, those most likely to earn minimum wage.  One of our astute readers correctly pointed out:

I've seen many economists assert that this connection, in fact, does not exist as you claim. A rather infamous study from New Jersey, for instance. You could at least point out that the direct immediate effect on unemployment is a matter of some dispute.

In reaction to a recent column by Thomas Sowell, A Glimmer of Hope, Ohio State Professor of Economics, J. Huston McCulloch offers a possible explanation for such a finding in a recent Columbus Dispatch editorial...

...it is quite possible that in low-growth states, proposals to raise the minimum wage are resisted by employers, while in prosperous states, where a higher minimum would make little difference, this feel-good legislation breezes through.

Gas tax tax cuts

A call for higher gas taxes at the Gristmill:

Today, America's and the world's prodigal use of fossil fuels is creating twin crises: a climate crisis from emissions of heat-trapping pollution into the atmosphere, and a security crisis self-created by the industrial world's thirst for other people's oil.

We can solve both crises, but only if we relinquish deep-seated beliefs about fuels and energy. And the attitude we must fling overboard first is our sense of entitlement to cheap energy. We need to recognize that energy does not cost too much; in fact, it doesn't cost nearly enough. To preserve Earth's climate, and wrest political authority from the corporate oil barons and petrodollar sheiks, we must conserve fuel massively and permanently, starting now.

Comment authentication back on...

Another Spam attack (see cocho's comments on the left) means we have to temporarily turn comment authentication back on.  Sorry, but dems da breaks.

Natural Resource Damage Assessment Opportunity in Lebanon

A few weeks back, we received the following request:

Calling for Help from Lebanon! The Israeli attacks on Lebanon caused a major oil spill from raiding fuel tanks in a coastal power plant at the first days of the attacks. We are talking about 10,000 tons of heavy fuel oil which spread along 90 kms of the lebanese coast. It is considered the worst oil spill in the East Mediterranean ever. We need help fo rapid assessment of the economic damages from this spill.

Normally, I would jump at a chance to apply my trade, but at the time I ignored the request because...well...missiles were still flying and I'm a wimp.  Today, the Washington Post has an update:

The Lebanese port of Byblos has survived the Romans, the Crusades and the armies of Alexander the Great but now it faces a 21st century menace, brought to its shores on a tide of war -- oil pollution.

A slick caused by Israel's bombardment of a power plant last month during its conflict with Hizbollah guerrillas has spewed a black tide along a 87-mile stretch of the coastline.

Anyone interested in helping out can contact me, and I'll put you in touch with the right people--what with the strong cease-fire agreement in place.  As for me, I'm staying in the comfort of my office.  Maybe I'll send a graduate student.

Self Interest is the Answer

Many people are critical of economics because it readily embraces selfishness, which in many circles is automatically equated with greed (which it is not).

Since self-interest is the best predictor of people’s behavior, the question is how can people’s self-interest be aligned in ways that benefit the environment (and humanity more generally). There are two paths, both of which fall under the heading of “enlightened self-interest”.

The demand for cruising

Another example of the law of demand in the gasoline market:

With prices hovering around $3 a gallon this summer, driving to the beach and casting off is becoming a luxury.

"My boat sits in the yard way too much," said John Shackleford of Farmville.

He said he used to take at least two fishing trips a week to the central coast, but he has been only once in the past five weeks. Now, he said, it costs about $120 to gas up his truck and the 20-gallon tank of his 17-foot boat. That doesn't include extras such as food and drinks.

Others say they are compensating by cutting back on cruising and anchoring longer or bringing buddies who can help with the costs. Boat builders and dealers are promoting more efficient motors that reduce fuel consumption.

I was wrong

Yesterday I wrote:

...anytime now Iran will announce their intentions regarding their nuclear program.  As a highly trained economist, I have a feeling the announcement will have an impact on oil prices.  Unfortunately I fear the direction will be up.

From the AP:

Oil prices dropped Wednesday as traders locked in profits after Iran offered to continue negotiations on its nuclear program.

Thank goodness for tenure.

"Why do you hate ecological economics?"

The above is one of my FAQs. Answer:

I don't!

Hybrids may breakeven

A new study by online auto reviewer Edmunds.com says:

Some hybrid cars will make up for their premium cost because of higher gas prices and tax credits from the U.S. government on the more fuel efficient vehicles, a study released Tuesday shows.

[...]

The consumer-focused automotive Web site said that, assuming vehicles were driven 15,000 miles per year and gas was priced at $3 per gallon, owners of the Toyota Prius and Ford Motor Co.'s Escape Hybrid would break even within three years.

Buyers of the Saturn Vue Green Line from General Motors Corp., the Toyota Camry and the Civic Hybrid from Honda Motor Co. would break-even within six years, Edmunds.com said.

BUT (dammit)...

Putting Our Values On The Table

The myriad theories that underlie the ever-expanding field of economics are essentially positive in nature; they are descriptive and subject to hypothesis testing.

For example, in the sub-field of environmental economics, economic theory predicts that open access resources will almost always be exploited to ecologically unsustainable levels, that resource scarcity leads to higher prices which leads to technological innovation and substitutes, and that in the short-run the demand for highly inelastic natural resources such as gasoline will not change very much even if the price changes dramatically.

However, as soon as we enter the world of public policy, economic models and their implications are riddled with normative assumptions. Much of the distrust that many environmentalists have towards economics is based on their belief that economists often hide their value judgments behind highly complex mathematical models, instead of being forthright about their normative assumptions. I think there is some truth to this.

Some examples of areas where normative elements are unavoidable in economic analysis are the following: