Environmental Economics

Deja vu all over again

Michigan's governor yesterday sharply criticized attempts to contain a large oil spill making its way down the Kalamazoo River after the company responsible for the spill said it had redoubled its efforts to clean up the mess.

Gov. Jennifer Granholm asked the federal government for more help, saying that resources being marshaled by the federal Environmental Protection Agency and Enbridge Inc. are "wholly inadequate."

Enbridge said it has been working to clean up the spill since its pipeline in southern Michigan broke Monday and leaked more than 800,000 gallons of oil into Talmadge Creek, which runs into the Kalamazoo River.

via www2.journalnow.com

#12 all-time most hated sports teams

1991-92 Duke Basketball:

You loathed the second of coach Mike Krzyzewski's title-winning teams for the same reasons you hate boy bands: their nauseating omnipresence, thanks to a Blue Devils-centric, Dick Vitale-fueled TV schedule; an ensemble of well-coiffed prepsters who looked better suited for the cast of School Ties; and an aggravating, undeniable level of talent that justified their cocksure attitudes. Star forward Christian Laettner epitomized that rock-star mentality. He was the ultratalented leader (witness his perfection in the Regional final against Kentucky) and the bad boy (who could forget the stomp he delivered to Aminu Timberlake's chest?) of the group. This Duke team was not built to be loved. It was built to win, quashing the storybook runs of Kentucky's "Unforgettables" and Michigan's "Fab Five" in the process. This was when Duke basketball emerged as a polarizing brand -- a bastion of annual excellence that, simultaneously, became the target of effortless disdain. -- Chris Mahr

via sportsillustrated.cnn.com

The value of a statistical life in developing countries

Edward Carr addresses the Summers Memo and its implications for banning risky stuff in developing countries:

If someone is going to suggest that people elsewhere should “be allowed” to use materials that we have banned here for reasons of public health, then they should also have to address the implicit valuation of human life that makes such a political statement appear “logical” and apolitical.

Now to see if the folks at Environmental Economics let me have it over this . . . they are, after all, real economists.

via www.edwardrcarr.com

The only concern I have with this post is the implication that we are "real" economists. That is an outrage!

Seriously though, the trouble the value of statistical life (VSL) calculations is they are based on willingness (and ability) to pay. Since environmental quality (and health and safety) is a normal good -- people want more if it when their incomes increase -- environmental quality (and health and safety) will be valued lower in places that have lower incomes. This naturally leads to lower VSL calculations and the policy implications are clear. The net benefits of many policies will be positive in rich countries and negative in less rich countries. But, this is not because lives are worth less in less rich countries but because less rich countries can't afford as much environmental quality (and health and safety) as rich countries. Sad, but true.

2 familiar quibbles

Thomas Friedman:

We need less talk about “climate” and more about how conservation saves money, renewable energy creates jobs, restoring the gulf’s marshes sustains fishermen and preserving the rainforest helps poor people.

via www.nytimes.com

The bulk of today's article is about the good news that the BP oil spill seems to be much less worse than feared and the bad news that the U.S. Senate won't pass climate change legislation. The quote above is from the last paragraph.

My quibbles are with the first two things that we need more talk about. First, conservation tends to take a while to save money. You install expensive equipment or perform expensive activities up front and then you whittle away at those up front costs over time. Whether conservation saves money or not, and how long it takes, depends on the discount rate.

Second, renewable energy creates jobs but the policy process that leads to more renewable energy (e.g., a carbon tax [note how I didn't say cap-and-trade]) will lead to fewer jobs in other sectors. The net effect on jobs would likely be small and no one can really say whether it is positive or negative (e.g., did NAFTA create jobs?).

I had a sweet dog named Wilma

RIP: Wilma the Bald Eagle:

Sad news today from Grandfather Mountain, where Wilma the Bald Eagle was humanely put to sleep this weekend after a battle with arthritis and declining health.  Wilma had recently been showing signs of getting older and her bad arthritis was taking a physical toll on her body causing her to lie down frequently.  Landis Wofford said Wilma was at least 34 years old, and said she came to Grandfather Mountain in 1981 after sustaining a gunshot wound in the Western United States.

Of the animals currently at Grandfather Mountain, Wilma had called the Animal Habitats "home" the longest.  Her habitat neighbor, Morely the Golden Eagle, came to Grandfather in 1984.  The Grandfather Mountain Habitat staff remembers Wilma as an independent and outspoken animal.  Animal Habitat Manager Christie Tipton said "Wilma wasn't able to fly because of her injury," and said.  "She's in a better place now where she'll always be able to fly."

via www.goblueridge.net

Sticks and stones

Krugman:

But if they don’t realize that, they’re idiots. And I say that with all due respect.

via krugman.blogs.nytimes.com

From Wikipedia: "An idiot, dolt, or dullard is a mentally deficient person, or someone who acts in a self-defeating or significantly counterproductive way. More humorous synonyms of the term include addlehead, blockhead, bonehead, deadhead, dimwit, dodo, dope, dummy, dunderhead, nincompoop, ninny, nitwit, numbskull, stupidhead, thickhead, and twit, among many others. Archaically the word mome has also been used. The synonymous terms moron, imbecile, and cretin have all gained specialized meanings in modern times. An idiot is said to be idiotic, and to suffer from idiocy. A dunce is an idiot who is specifically incapable of learning. An idiot differs from a fool (who is unwise) and an ignoramus (who is uneducated/ an ignorant), neither of which refer to someone with low intelligence."

"Today’s college degree is more valuable than one earned 30 years ago"

From the Walker College of Business blog:

Earlier this month the UNC System announced a series of tuition increases system-wide. At Appalachian State, tuition will increase by $467.74. The news prompted a graduate of NC State to write a letter to the Charlotte Observer. Bill Wood argued that college today, in relation to starting salary, may not be worth the cost.

I graduated from N.C. State University in 1978; tuition was $232/semester. Starting salary for an engineer was about $16,000 a year. Now, tuition for my sophomore son at NCSU has exploded to around $3,400 per semester. He can expect about a $60,000 starting engineering salary - about a four-fold change. Yet tuition has gone up by 15 times! Good luck finding an equally inflated salary of $240K.

This letter prompted a response by Walker College economics professor Dr. Timothy Perri, which was published today. In short, he argues

Using the numbers provided by the critic, along with data on the college earnings premium, the discounted value of the inflation-adjusted dollar return to an engineering student (his example) is 2.5 to 3 times as large as it was in 1978. Thus, the degree is a better buy today than it was in 1978.

Perri supplies a link to a more detailed response [PDF]. It involves mathematical formulas to arrive at a conclusion. His calculations show the estimated PV (present value) net return on a 2010 engineering degree is $285,100. The PV net return of an engineering degree in 1978 is between $89,000 and $116,300 (based on inflation rate between 2.58 and 3.37).

via www.business.appstate.edu

Economix Blog disses technological solutions to climate change

Re: The Ehrlich-Simon bet:

The analogy to global warming is obvious. Just as ingenuity came to the rescue in the past, allowing people to use resources more efficiently than they ever had before, it could do so again — providing us with ways to emit far less carbon for every dollar of gross domestic product.

And I — like many others, I imagine — would be thrilled if that were what the future held. But I think there are two big reasons to doubt that we’re on another Ehrlich-Simon path when it comes to global warming.

The first is basic economics. When the problem is resource scarcity, companies and individuals have a powerful incentive to become more efficient. It keeps their costs down. Mr. Simon understood this, and it’s the fundamental reason he won the bet.

But global warming is different. The fact that carbon emissions are warming the planet doesn’t make it more expensive to produce those emissions. So companies do not have an ever-increasing incentive to emit less — the way they would if the problem were, say, a lack of oil. Global warming doesn’t solve itself the way that resource scarcity does.

via economix.blogs.nytimes.com

Houston, we have a public goods problem.

July 23, 2010 Urban Word of the Day

Congreenient

The practice of recycling, or being green, only when convenient. A person who only recycles when it is convenient to do so.

I would have recycled my Fiji water bottle, but my plastic bin was full. I guess I'm just congreenient.

Not funny: unit pricing for trash would overcome the congreenient problem.

Guest post: Nobel Laureate Chimes in on Enviro Econ

Sometimes I disagree with Krugman, sometimes I find him more or less brilliant, but today's column on environmental economics is on the "more brilliant" side. John Whitehead found it quotable.  We may all find it useful because, in a way we might want to share with our students, he encapsulates wise answers to arguments that rationalize unsustainable lifestyles. Having spent the spring term in Mexico (see monkey at wildlife refuge in photo) and other countries that sensitized me to our own excesses, I say, kudos to Krugman.