Environmental Economics

Let sleeping dogs lie

From the Comics Curmudgeon:

Mark Trail, 6/23/12

It actually makes me feel kind of bad for Mark Trail, because on most days his “Hmm, I’m being pursued by armed killers, let’s wake up this hibernating grizzly bear, that can only result in positive outcomes” plan would be the most deranged and hilarious thing on the comics page. But not today, my friend. Not today.

The comment doesn't totally make sense as it is out of context, the curmudgeon finds other strips more ridiculous. But this strip makes me almost want to start reading Mark Trail on a daily basis.

For those of you who might wail that this post is off-topic ... check out this classic grizzly bear economics article:

• DS Brookshire, LS Eubanks and A Randall, "Estimating option prices and existence values for wildlife resources," Land Economics, 1983 [JSTOR]

I read that paper n+1 times while working on my dissertation. Google Scholar finds 297 citations.

 

The economics of blockade running

Compensating differentials:

The pay that allowed all that high living sounds like modern drug-running. Midway through the war, a captain could make the equivalent of $100,000 today for a single voyage, [Stephen Wise, a historian, director of the Parris Island Museum and author of “Lifeline of the Confederacy: Blockade Running During the Civil War"] said. A first officer might make the modern equivalent of $20,000 to $25,000 and a simple crewman $5,000. A handful of crews were Confederate military and paid much less. A Confederate Army private was making the equivalent of about $254 a month.

The sky-high war prices on the goods brought in, and the valuable commodities such as cotton that were shipped out, made for huge profits when a voyage succeeded. Cotton bought here for pennies a pound could be sold in Britain for as much as a dollar. The companies that owned the ships, many of them British ventures, could reap as much as a 100 percent return on the investment with a single run. ...

The chance of getting through on any given run was about 75 percent, Wise said.

via www.newsobserver.com

I went to the farmers' market today

Watauga County Farmers' Market:

Come join us each Saturday morning at Watauga County Farmers' Market!

The market has so many things to love: fresh and nutritious local foods, beautiful handmade crafts, face-to-face interactions with the farmers who grow your food, scrumptious breads, jams, jellies, and cheeses made by community members, meat and eggs from local farmers, and of course the friendly social atmosphere of "Boone's Town Square."

I wanted a lower-impact meat option because I am concerned about the environmental and health consequences of a meaty diet, but I can't give up meat. At the downhill end of the L-shaped market were three vendors with the following prices per pound for grass-fed ground beef:

• $5.00
• $5.25
• $5.50

I had purchased steaks from the $5 vendor a month ago and they were good, but I wondered if there was a quality premium reflected in the price since there were no locational or much in the way of transportation differences. I decided to ask someone who ought to know who I should purchase from and s/he said to get the $5/lb pound. Perfect!

At the other end of the L was another vendor whose grass-fed ground beef was priced at $6.75/lb. I'll be checking for convergence the next time I go.

Costs and benefits of kids

The WSJ's "Numbers Guy":

Parents and would-be parents might be relieved to hear that last week's widely reported government figure estimating the cost of raising a child—around $300,000 over the first 17 years for middle-income, two-parent families—is, according to several economists, wide of the mark.

The bad news is it may be a severe underestimate. The U.S. Department of Agriculture's report leaves two things out of account. For a start, it doesn't reflect unpaid time spent on parenting, including income forgone by parents who cut back on work hours to care for their children.

Plus, the hit to parents' wallets doesn't end when the child turns 18, as the parents often still provide housing and food as well as pay for college. These could add up to hundreds of thousands of dollars in additional costs.

"The real costs of raising a child for a moderate-income family"—including forgone income, college for those who attend, and the so-called opportunity cost of not investing the money—"would be closer to $900,000 to age 22 than the reported $300,000 expenditures to age 18," says John Ward, an economist and the president of John Ward Economics, based in Prairie Village, Kan., which consults on legal disputes for plaintiffs and defendants.

(The $300,000 estimate takes into account expected inflation. In 2011 dollars, the price tag for a middle income family is $234,900.)

The rest of the article describes a bit about where the numbers come from (It is odd that they include expected inflation. It is best practice in benefit-cost analysis not to include inflation for future streams of money).

The end of the article speculates about the difficulties of measuring the benefits of kids. Another approach is measure benefits with revealed preference and some simple assumptions. Since we observe people having kids then the expected benefits must exceed the expected costs (my line is always that the costs of kids is high and the benefits are just a little bit higher :). Assuming that the benefits of additional kids are diminishing then the marginal benefit of the 2nd (or whatever the average currently is) kid is zero. If you assume a demand elasticity of 1 and linear demand then the consumer surplus benefit of two kids is equal to $234,900.

I'm sure I've destroyed some tenets of the most basic economics of the family. So, refinements/corrections to this number are most welcome!

The N&O explains contrasting numbers in NC sea-level rise follies

Here is the intro but you should read the whole thing if you are interested in a brief explanation of sea-level rise science:

The debate in the legislature over the expected sea-level rise along the North Carolina coast over the next century has been presented as a choice between two numbers: eight and 39.

The number would guide local governments as they decide where to permit development in coming decades. If the number is too small, more coastal property could be damaged due to erosion and storm surges. If it’s too large, economic development could be unnecessarily stifled, and insurance rates might soar.

But like so much having to do with climate change, the two numbers aren’t as simple as they seem.

The article goes on to describe the contrasting approaches. On the one hand we have scientists who began with a high historical number for sea level rise (17 inches on the northern coast), used "science" to predict a range of plausible numbers and then took the midpoint for 39 inches (one meter). On the other hand we have politicians and developers who began with a low historical number for sea level rise (southern coast) and assumed that the future will look like the past for 8 inches. The politicians revised their numbers to reflect a range of 8 to 17 inches.

It is a shame that the scientists ended up with a single number since the North Carolina coast differs greatly from North to South. There seem to be two reasons for one number. First, they preferred the northern coast baseline since the data were of higher quality and less affected by human disturbance (my opinion is that this likely overstates southern coast sea-level rise). Second, state government preferred a single number instead of a range that reflects scientific uncertainty.

Let's hope the legislature decides to go with the scientific approach, or, at least rejects the political approach. Andy Keeler makes the point that embracing science doesn't necessarily require strict coastal zoning.

 

An economist on NC sea-level rise follies

Andy Keeler (program head of public policy and coastal sustainability at the UNC Coastal Studies Institute in Manteo and professor of economics at East Carolina University):

North Carolina has made itself the target of mockery by scientists, environmental activists and even a satirical feature by comedian Stephen Colbert. A local political lobbying effort in Eastern North Carolina to discredit mainstream climate science has now become the basis of legislation making its way through the state legislature to codify specific (and very low) predictions about sea level rise as a basis for state and regional policy affecting the coast. ...

The interests that have been behind a legislative definition of sea level rise are concerned about local self-determination and the value of their existing businesses and assets. They view the science and the resulting policy prescriptions as one and the same, and have chosen a political attack on science as the best strategy for protecting their autonomy and financial interests.

The real issue here is how individuals and communities adapt to climate change – what combination of top-down planning, market forces and individual decisions guide outcomes on the coast. There are strong reasons why government needs to take account of the best available science in its decision-making – avoiding subsidies to maladaptive behavior, minimizing public spending on disaster relief and guiding public investment all require the best available knowledge about future risks. Good information based on sound science also gives the widest possible scope for individuals and local communities to make their own best decisions.

Finding the right balance between public and private decision-making on coastal investment and land use will be difficult. It will require experimentation and learning. It will also take place over an extended period of time, and will change as more is learned about climate change and ways that human actions can avoid the worst consequences of increased risks at the coast.

Neither public policy nor private decisions will be helped by denying reality. The issue in North Carolina is public policy, not science, and competing interests should battle directly in that arena. The groups behind this attack on science have good reason to advocate for balanced policies, but their attempts to override the scientific process through legislation will not help anyone as coastal communities figure out how to adapt to a changing and highly uncertain climate.

North Carolina should not need Stephen Colbert to remind us of that truth.

via www.newsobserver.com

Well said.

Hat tip: Kate Cell's comment on this post.

"Sustainability Paranoia"

Jim Boyd at Common Resources:

A raft of  so-called “anti-sustainability” bills have been introduced in various state legislatures. These bills tie sustainability to a moss-covered, 20-year old United Nations document called Agenda 21.  Agenda 21 is one of those aspirational, entirely voluntary initiatives that global institutions like the UN are known for. It calls for international action and cooperation to achieve poverty reduction and environmental protection. It also suggests the developed world’s resource consumption can cause environmental degradation in the developing world. All of which is beside the point. The point of the bills is to suggest that the sustainability agenda is a creation of the UN designed to undermine individual freedoms.

...

The fact that you’ve (probably) never heard of Agenda 21, or that it’s 20 years old and governments aren’t exactly falling over themselves to implement its aspirations puts the “threat” in perspective.  But again, that’s not the point. The point is to promote the meme that sustainability = global socialism.

I personally welcome less frequent use of the word “sustainability”. The word is vague, too all encompassing, and screams liberal intelligentsia. It’s not totally empty, but its value is limited, and it’s easy to co-opt. Try to go a whole week without using the word at all. You can do it!  It’s better to talk about how nature is a source of wealth. The wealth comes in the form of goods and services (clean air and water, protection against disasters and disease) that benefit businesses, households, and communities. We can also talk about how nature is like a bank account: we can live off the interest – so the account grows – or we can eat into the principal and watch the account dwindle. Those are core sustainability concepts. They are also hard to argue with or re-frame.

Pro-environment voices should also squarely face deep suspicions of government and other institutions.  That starts with acknowledging institutional failures, waste, and stupidity.  The more environmentalists engage with “good government” movements, the easier it will be to build trust and undermine paranoia. After all, the sustainability agenda is hardly radical: all we’re trying to do is improve our economic and social well-being by acknowledging its dependence on ecological wealth.

Here is a link to my post on North Carolina's venture into anti-sustainability: Fiddling while NC burns.

Sustainable marketing

The Onion:

Marketing firm Green Solutions announced Wednesday that it was developing environmentally friendly alternatives to the nonrenewable sources of synergy, global positioning, and blue-sky thinking currently used to fuel the nation's corporations. "We take an eco-friendly approach to packaging and presenting what our clients have to offer," said Anthony Marino, the firm's founder and CEO. "With green, clean, responsible solutions, we believe businesses can sustain brand awareness while also treading gently upon the world's markets." Marino confirmed that while his firm's innovations had not yet been widely implemented, they were currently being tested in areas considered dangerously low in buzz.

 

Job-killing regulations?

From the inbox:

Environmental regulations are unlikely to move the needle on jobs—they won’t drive the unemployment rate up or down.  And it can be misleading to voters to make it seem otherwise. 

This week, the Senate debated and rejected EPA’s mercury exposure regulation, EPA moved forward with a new soot rule, and today, the House will considered an energy drilling bill.  

In each case, opponents voiced concern that public protections would “kill jobs.”  But rarely are the analyses that back up these claims cited.  When they are, they prove insufficient to support these kinds of statements. 

Our report, the Regulatory Red Herring, released in the spring, explains the problems underlying many jobs analyses and discusses a more useful way of weighing regulation—by putting employment into the broader context of the overall costs and benefits of the rule. 

These “job-killing” claims are not likely to stop anytime soon.  Especially as we approach an election, it is important to be clear about what effects regulations have or don’t have on jobs.

I normally delete my blog-related spam after a quick look, but this one seems to be completely consistent with the env-econ.net playbook.

Who says my students aren't engaged?

From the inbox:

Dr Whitehead

 

In your Fall 2010 Environmental Economics graduate course, [student name] and I conducted a research project regarding Carbon Credit Trading Programs. 

 

Our paper's conclusion was that large-scale carbon trading programs were at best, well-to-do but costly political vehicles promising unreliable results via unproven methods, or at worst, outright political scams in which quasi-government agencies coordinated with shadowy third parties to blatantly extort, embezzle and otherwise launder public funds (into the millions of dollars) into the hands of corrupt entities.

 

As this article

 

http://freebeacon.com/carbon-corruption/

 

illustrates, the UN's carbon trading program is a wasteful sham with bureaucratic loopholes the size of Texas which allowed nation-states like China (among others) to exploit and manipulate the world's good intentions...

 

I feel today, as I did in December 2010,  that Carbon-Trading programs (which amount to nothing more than public soul-cleansing for would-be environmentalists and political stooges) perform a gross disservice to honest environmental protection and improvement initiatives.

 

Otherwise, I hope you've been well...