Environmental Economics

I bet you all wonder why my rhyme is so tight ...

... I did stay in a Holiday Inn Express last night. No joke: I stayed in a Holiday Inn Express last night.

Why do real economists hate stated preference methods?

Why? I'll tell you (without saying "Exxon Valdez" once!)! Or, at least, let me tell you what I think I think (with apologies to Peter King).

But first, you go do a Google search for stated preference methods and get an idea about what they are. In short, stated preference methods (i.e., contingent valuation, contingent behavior, choice experiments [sic]) are a way to estimate monetary values for environmental resources. The methods involve asking people about what they might do when confronted with a real situation that involves monetary and environmental quality (for example) tradeoffs.

Here are two reasons:

1. Revealed preference methods are better. Real AND environmental economists love revealed preferences. People reveal their values for stuff with their behavior. In the environmental context people travel,  permanently change locations and make market purchases in response to environmental quality changes. The travel cost method, hedonic price method and averting behavior method are able to capture these sorts of environmental values.

The problem with this view is that the revealed preference weenies fail to provide an alternative. In yesterday's post I provided an example where revealed preference methods would be very difficult to use. In those cases environmental (and a few other) economists might resort to stated preference methods. Then, real economists will say stuff like this when discussing your paper at conferences (not joking):

I really don't like contingent valuation, I wish there was a better way to do this stuff.

And then they proceed to bash contingent valuation without an alternative.

There is more to write here, about the research process, about mitigating hypothetical bias, about real economists misguided relative love for choice experiments and happiness data. But, class beckons so I'll leave it at that.

2. [more speculative] Real economists hate the environment. Economists tend to be conservative folk and this bleeds into their political views. Conservatives tend to hate government action towards the environment (except subsidized mining!) and anything that promotes government action should be hated. Stated preference methods attach values for policy analysis to something that previously had no value. That can only lead more government action, right?

[Note that this somehow fails to explain why most environmentalists hate stated preference methods too.]

Oil prices: It's the economics, stupid

Oil prices did spike to triple-digit levels in early 2008, then drop sharply. But think about the fact that right now, with the world economy still seriously depressed, oil is at $80 a barrel. This suggests to me that high oil prices are largely caused by fundamentals.

And it also suggests that resource constraints will be an issue if and when we do get a full recovery.

via krugman.blogs.nytimes.com

In my presentation on the potential effects of carbon pricing in Ohio yesterday, I made* the following points:

1) Any type of carbon pricing will result in disproportionate economic impacts on states heavily invested in coal-fired electricity generation, manufacturing and transportation and warehousing.  
2) As such, it is tempting to conclude that states heavily reliant on coal-fired electricity generation, manufacturing and transportation and warehousing should oppose any carbon pricing policy.
3) But, if basic economics is right, fossil fuel prices will rise eventually--even in the absence of policy.
4) The relevant question for states like Ohio then becomes: How best to design economic policy to ensure long-term economic sustainability of states disproportionately reliant on carbon intensive production

Seems like Krugman would agree.

*Actually, I attempted to make these points. Unfortunately, this was one of the worst presentations I've given in years. Between too much caffeine, too little sleep, under-preparation and having to use a microphone, I was unhappy with my performance. Outside of the classroom I am a public speaker in progress--inside the classroom I'm an overconfident SOB. I actually got a 'D' in public speaking in high school. Based on yesterday's performance, I deserved it. Beer was in order last night.

A brutal reminder of why I blog...

Just finished an outreach/extension presentation on Cap and Trade...

Things I learned:

I don't like standing behind a podium...

I don't like hearing my voice come out of speakers directly behind me...

Diet Coke makes me burp...

Can it get any worse in DC?

Three days after a sulking Timothy Geithner climbed to the top of the U.S. Capitol dome, the treasury secretary remained steadfast Monday in his refusal to come down. "You all hate me," said Geithner, his arms crossed as he shouted at the crowd of onlookers gathered on the Capitol lawn below. "What do you care if I stay up here? You'll just make fun of me if I come down anyway. Well, I'm not coming down—not ever!" Federal security teams monitoring the situation said they believed Geithner might be planning an extended stay atop the dome, as evidenced by what appeared to be a burlap sack containing various snacks, a six-pack of root beer, and several copies of The Economist.

via www.theonion.com

Ten questions

This is a banner year for the Blue Ridge Parkway as it will celebrate its 75th Anniversary, but the parkway’s superintendent is reportedly submitting a request for emergency funding to the federal government.

WSOC-TV in Charlotte broke the story.  They are reporting that while several stretches of the parkway remain closed because of this year’s brutal winter weather.  Parkway officials have created an “emergency situation” so they can request for federal assistance as they work to reopen the entire parkway by spring.

via www.goblueridge.net

What is the value of a cleaned up National Park as it celebrates its 75th anniversary? Is there any way to get at this value except by stated preferences? Can it be done with the travel cost method? Hedonics? Macro data? the National Longitudinal Survey? Is it and others like it fairly important problems? If 90% of the economics profession rejects stated preference methods do they have an alternative?

And while I'm at it, Andy Rooney style, what is "experimental" about choice experiments? If choice experiments are experimental then contingent valuation should be called the contingent valuation experiment method, shouldn't it?

And the Glitter is Gone (2009)

Craig Landry's 2009 compilation:

1. Second Star – Ravens
2. Handsome Furs – I’m Confused
3. Bowerbirds – Crooked Lust
4. The Decemberists – The Rake’s Song
5. We Were Promised Jetpacks – Quiet Little Voices
6. Atlas Sound – Walkabout
7. Royal Bangs - Brainbow
8. Neko Case – This Tornado Loves You
9. Foreign Born –Winter Games
10. M. Ward – I’m a Fool to Want You
11. Animal Collective – My Girls
12. Grizzly Bear – Two Weeks
13. Bishop Allen – The Ancient Commonsense of Things
14. Seal Cub Clubbing Club – Lone Planet
15. John Vanderslice – D.I.A.L.O.
16. St. Vincent – Actor Out of Work
17. Edward Sharpe and the Magnetic Zeros – Home
18. Sunset Rubdown – Paper Lace
19. The Intelligence – Sexual Sewer
20. Girls – Lust for Life
21. Andrew Bird – Anonanimal
22. Lightning Dust – Never Seen
23. Yo La Tengo – Outro (And the Glitter is Gone)

I have Neko, and that's that. Totally un-hip.

More on RePEc rankings of environmental economics institutions

Rob Williams updates Kolstad on the RESECON listserv about the RePEc rankings of environmental economics institutions:

I don't want to nitpick, but REPEC doesn't actually rank universities: it ranks "institutions," which in a university context usually correspond to departments.  The top ten academic institutions from that ranking are:

#1 -- MIT, Economics
#2 -- University of Zurich, Economics
#3 -- Harvard, Economics
#4 -- Free University, Amsterdam, Economics and Business Administration
#5 -- Harvard, Kennedy School of Government
#6 -- UC Santa Barbara, Economics
#7 -- University of Maryland, Economics
#8 -- University of Maryland, Agricultural and Resource Economics
#9 -- Columbia University, Economics
#10 -- Erasmus Univeristy, Economics

The list Charlie posted effectively ranks a university based only on its highest-ranked department.  That's simple, but somewhat inaccurate: all else equal, a university with multiple top departments ought to rank higher than a university with only one top department.  And based on the REPEC methodology, if a university were to merge two departments, the merged department would almost certainly rank higher than either department on its own.

Unfortunately, REPEC doesn't provide the necessary information to calculate such a university-level ranking.  But a quick look at the top nine suggests that Harvard and Maryland would both very likely move up in the rankings, given that each of those two universities has two top-ten departments (Harvard with #3 and #5, and Maryland with #7 and #8).

I replied to RESECON with this:

Another problem with the RePEc rankings is that individuals in the department need to register before their work is counted. I imagine that may be why Appalachian State University is ranked ahead of the University of Wyoming.

Would you rather get your PhD at Wyoming or Appstate? Er, Appstate doesn't have a graduate program! But, still, Appstate is ranked in the top 5% of the world's top institutions in environmental economics (in the world).

Which begs the question: Why am I allowed to brag about my department's standing in the RePEc rankings and Mankiw is not? My answer: it is based on perceptions and expectations. Everyone knows that Mankiw and Harvard are at the top of the economics profession, so, shhhhhhhh about it. Appstate? Jeez, give me a break and let me point something good out! geez.

N.C. faces a $500 million gap

Barry Boardman, chief economist on the staff, said the state could face a $500million gap when the budget year ends June 30. He offered a little more optimism than lawmakers, though: He said if April tax collections are higher than anticipated, the shortfall could be cut in half. Those collections, though, are so difficult to predict that they could just as easily balloon the budget gap.

via www.newsobserver.com

World Congress of Environmental and Resource Economists here I come (not ... if rotten news like this translates into a budget freeze)!

Laying pipe

The Boone Town Council unanimously voted last night to extend water services to Watauga County for its future mountain bike park that will be constructed off Highway 421 near the county landfill.

Watauga County only requested water service for water pumps similar to those on the State Farm Fields.  Eric Woolridge of the Watauga County Tourism Development Authority explained that at this time, the county is not requesting water services for restrooms at Rocky Knob Park.

Boone’s Public Utilities Director Rick Miller explained this situation will be much like a private property case because the county will be responsible for running water from the town’s water meter.  This means the town will only be responsible for tapping the water main and installing a water meter.  If there are water pressure issues, the county will be responsible for installing pressure pumps.

Woolridge said after researching, he believes the county will only need to lay a two-inch pipe from the town’s water meter to serve the water pumps.

via www.goblueridge.net

The expected value of the economic benefits of outdoor recreation just rose.