Environmental Economics

Sometimes trust isn't enough to overcome perceptions

As University budgets have tightened over the past decade, researchers have increasingly turned to 'nontraditional' sources for funding.  Ufortunately, despite the best intentions of the researcher, it is often difficult to separate the funding source from the objectivity of the research itself. 

As I report in The Times, a central question in the controversy over a new fracking study from the State University of New York at Buffalo is where the money came from to finance the report and the new institute on gas drilling that released it. The university says the money came from discretionary funds in the budget of the College of Arts and Sciences but that the new institute is seeking funds from the natural gas industry and other sources.

Industry grants for academic research are simply a fact of life, many universities say. Alexander Cartwright, vice president for research at SUNY Buffalo, said that ultimately universities have to trust their researchers. “We value our faculty and we trust that they’re going to do the right thing,” he said. “It’s the essence of academic freedom.”

...

“Our mission as a public institution is to protect the public interest,” said Martha McCluskey, a law professor and member of the faculty senate executive committee. “We should make sure that our research efforts don’t look like industry public relations efforts.”

Nancy L. Zimpher, the chancellor of the SUNY system, has asked the university to respond to the criticisms of the study, which a public accountability group says includes skewed data and the reuse of previously published material without proper attribution.

In the meantime, the SUNY Buffalo study is already being cited as an authoritative source in some quarters. Testifying on May 31 before a subcommittee of the House Oversight and Government Reform Committee in Washington, Michael Krancer, secretary of the Pennsylvania Department of Environmental Protection, cited the report to make his case that regulation of fracking was working.

“Just the other day, the State University of New York at Buffalo released a report which found that Pennsylvania regulations have been quite effective at reducing the impacts per well drilled and that there is a compelling case that Pennsylvania state oversight of oil and gas regulation has been effective,” he said.

via green.blogs.nytimes.com

A new journal for AERE?

In case you have missed it, AERE has jumped into the deep end of the struggle with Elsevier. From the RESECON listserv:

The Association of Environmental and Resource Economists (AERE) is in the process of evaluating its portfolio of journals and its association with Elsevier, the publisher of the Journal of Environmental Economics and Management (JEEM), which is currently identified on its cover as “the official journal of the Association of Environmental and Resource Economists”. This email is being sent to apprise you of the process the AERE Board is pursuing and to invite your input. To that end, we have created a discussion board at http://www.quicktopic.com/47/H/g8LWC84FeZX.

The discussion board page contains links to relevant and important background documents. This website will be updated with additional documents as they are prepared (e.g., draft and final statements that the AERE Board is preparing concerning goals for AERE’s flagship research journal).  All environmental and resource economists are welcome and encouraged to submit comments and questions about this issue. You can sign in with a nondescript user name to maintain anonymity if you prefer not to identify yourself.

The Board has created a subcommittee, chaired by incoming president Alan Krupnick, to develop a draft statement of goals for AERE’s flagship research journal. Once this has been vetted by the full board, it will be posted on the discussion board for additional discussion (June 22 is the target date for posting).  As part of the charge to the subcommittee, Alan will communicate AERE’s concerns to Elsevier.

On July 20th we plan to close the discussion board and the AERE Board will meet via conference call sometime during the last week of July or the first week of August.  At that meeting the Board will decide upon a course of action which will depend on the input we received from the discussion board and any additional information from Elsevier.  The possible options include, but may not be limited to: 1) making no fundamental changes in our journal portfolio and continuing our longstanding association with JEEM and Elsevier, 2) issuing an RFP for an editorial team for a new journal, 3) issuing an RFP from publishers to publish a new journal, and/or 4) formally ending AERE’s affiliation with JEEM effective no earlier than the last day of the current editor’s term (February 2014).

Please contribute to this important discussion.

Best,

Cathy Kling, AERE President and Alan Krupnick, AERE President-Elect

A valuation book I won't buy

From the Edward Elgar email (Amazon link to the book):

Valuing Environment And Natural Resources    

Kenneth G. Willis, Guy Garrod

Edited by Kenneth G. Willis, Emeritus Professor of Environmental Economics, University of Newcastle upon Tyne, UK and Guy Garrod, Reader in Environmental Economics, University of Newcastle upon Tyne, UK

May 2012 1,440 pp Hardback

Series: Elgar Mini Series

Description
Over-exploitation of environment and natural resources is becoming increasingly widespread in the modern world. To combat this, environmental economists have attempted to value such resources in order to ensure that they are given due recognition in any ex ante appraisal, or ex post evaluation of projects or policies; and also to ensure that optimal levels of consumption are determined for the resource. This authoritative collection, along with an original introduction by the editors, brings together seminal papers published in the last three decades which demonstrate the application of a number of techniques employed to value a range of environmental and natural resources. It will be of immense value to students, scholars and practitioners with an interest in environmental affairs and natural resources.

Nothing against the editors (who have done a lot of work putting together a very comprehensive reading list), or the authors of the papers, they are all fine papers (although I have some quibbles -- many are not "seminal" -- and there is no random utility model in the travel cost section), but the price? $693. 78 reprinted journal articles from 1986 to 2011, 1440 pages, for $693. That is way above my choke price (the table of contents is below the jump).

There was a time when these EE collections were valuable. No one wants to schlep over to the library, purchase a copy card, search for hardbound copies of journals and stand in front of the copy machine for hours? When the ECU Library didn't have a journal, sometimes I would drive the Raleigh and find it at NCSU (and don't even ask me about when that journal issue couldn't be found or was checked out). But these days, you can spend a few hours and get all of the PDFs you'd like nestled snugly in your cloud folder so you can read it at work or at home.

So, where is the demand?

Let's say you are new to the field and want to read 50+ papers to get a good feel for the literature. Do you buy this book? No, you use it to reduce your search costs. You can Google the title, save the PDF and read at your leisure. If it takes all afternoon (i.e., four hours) and your time costs are $50 per hour (I'm assuming you don't have a graduate assistant) then the cost is only $200.

Do libraries buy these rapackaged volumes? I can't see how Edward Elgar would have the same sort of bundling power that Elsevier has. If so, that is a shame since the material is already in the library and their purchases are seriously constrained by state and other budget makers.

The only market that I see for this sort of book is someone who is very rich. But if you are very rich, with high opportunity costs, why would you be interested in two volumes of environmental valuation literature? Since your time is constrained you'd much rather read a review paper. Or, you could afford to hire a GA to compile the book for you.

And don't call me Shirley

I had a bone spur removed from my big toe this morning and the pain meds are strong, but surely I can focus enough to comment on this:

Wading into the turbulent debate over global warming, North Carolina's state legislature is considering a bill that would require the government to ignore new reports of rising sea levels and predictions of ocean and climate scientists.

This should not come as a surprise, since government has been ignoring policy that might improve "economic efficiency" for years (e.g., a higher gas tax).

Business interests along the state's coastline pushed lawmakers to include language in a law that would require future sea level estimates to be based only on data from past years. New evidence, especially on sea level rise that could be tied to global warming, would not be factored into the state's development plans for the coast.

In my world, we'd be required to rely on "revealed preference" data instead of using revealed and "stated preference" data to better predict the future.

"We're skeptical of the rising sea level science," says Tom Thompson, chairman of NC-20, an economic development group representing the state's 20 coastal counties. "Our concern is that the economy could be tremendously impacted by a hypothetical number with nothing but computers and speculation."

In other words: "We're skeptical of any sort of science that might cost us money." And to toss away climate science as a "hypothetical number" and "speculation" is to, well, toss away the meat pattie from your hamburger sandwich.

...

The bill is still in its early stages, but the section stirring up controversy states:

"These rates shall only be determined using historical data, and these data shall be limited to the time period following the year 1900. Rates of seas-level rise may be extrapolated linearly…"

The parts about using only historical data, which shows a slow, linear sea-level rise—not the faster increases associated with global warming—have drawn the most ire from scientists.

"Clearly they don't understand science at all – (sea level rise) hasn't been linear," says Stan Riggs, a professor at East Carolina University who is an expert on the state's coastline. "To put blinders on and just say we don't accept what's happening on our coast is absolutely criminal."

I wouldn't go as far as to say that it is criminal, which suggests that these politicians should be jailed in order to reform them. But I will say this, I too would be upset if the state government tried to legislate that my demand curves could only be estimated with a linear functional form.

via www.usnews.com

Just when I'm looking for a throw away Friday Beer Post, someone writes something intriguing...no, stupid...no confusing about gas prices and I have to comment

So many factors go into oil prices that the only real way to stabilize them would be for the government to set a price floor. In other words, when prices go below a certain point, flexible federal taxes kick in to bump them back to the mean, say $4 a gallon. I like this better than a straight gas tax, which doesn't take into effect the big fluctuations in market prices.

 

Some conservatives even like the price floor idea. Charles Krauthammer of the Washington Post, for instance. He writes, “At $3 a gallon, Americans just grin and bear it, suck it up, and, while complaining profusely, keep driving like crazy."

 

"At $4," he writes, "it is a world transformed. Americans become rational creatures. Mass transit ridership is at a 50-year high. Driving is down four percent…. Hybrids and compacts are flying off the lots. SUV sales are in free fall.” In effect, the great American love affair with gas guzzlers ends abruptly.

 

Krauthammer’s solution: “Announce a schedule of gas tax hikes of 50 cents every six months for the next two years. And put a tax floor under $4 gasoline, so that as high gas prices transform the U.S. auto fleet, change driving habits and thus hugely reduce U.S. demand — and bring down world crude oil prices.”

via www.mnn.com

Why is uncertainty in gas prices a policy concern? Prices go up, prices go down...around a longer term trend that is well, either going up or going down depending on whether you like real or nominal prices. But uncertainty in gas prices doesn't really concern me any more than, say, uncertainty in beer prices (wanted to get that in there somehow since it's Friday). On second thought, that's probably a bad example since there is state minimum pricing on beer and liquor, but that's because many states know that the demand for beer and liquor is inelastic and a minimum price will result in a steadier stream of tax revenue with no real reductions in consumpti...WAIT A MINUTE. If demand is inealstic, minimum prices on taxed goods set above the current equilibrium price result in small reductions in quantity demanded and large (and predictably stable) increases in tax revenues. Hmmmm...

So what's my solution for the externalities caused by gas consumption (which is really the only policy consideration any economist worth his degree cares about)? How about just a gas tax of about $1 a gallon?

OK, that's not my solution--hat's a lot of people's solution. But doesn't it make more sense to price the externality efficiently and then let those ever so rational consumer decide what they want to do?

Unless the real goal is stable revenue from taxes.

Then a price floor might work.

But that's not really the goal of a price floor on gas, is it?

Anyone?

Bueller?

Benefits and costs of protecting NOLA

Protection is worthwhile if the avoided dameages are $145 billion (Vast Defenses Now Shielding New Orleans):

Nearly seven years after flood waters from Hurricane Katrina gushed over New Orleans, $14.5 billion worth of civil works designed to block such surges is now in place — a 133-mile chain of levees, flood walls, gates and pumps too vast to take in at once, except perhaps from space. ...

The new system was designed and constructed to provide what is informally known as 100-year protection, which means it was built to prevent the kind of flooding that has a 1 percent chance of occurring in any given year. That standard is used by the Federal Emergency Management Agency to determine whether homeowners and businesses must buy flood insurance to qualify for federally regulated or insured mortgages.

But New Orleans has seen storms far more damaging than the 100-year standard. Katrina is generally considered to have been a 400-year storm, and rising seas and more numerous hurricanes predicted in many climate-change models suggest harsher conditions to come. ...

Building greater than 100-year protection might not be simply a matter of building walls ever higher. It will also come from restoring the coastal environment that slows and buffers storms and their surge. It means restoring wetlands that have been rapidly disappearing, and perhaps creating barrier islands to act as speed bumps for storms.

Assuming no annual maintenance costs, if the damages are $145 billion from a 100 year storm then the expected benefit (i.e., damages avoided) is $14.5. These discounted in perpetuity at a 10% rate are $14.5 billion.

Using some more realistic numbers, if the damages from Hurricane Katrina were between $100 billion to $125 billion then the expected benefit discounted in perpetuity at 7% range from $14 billion to $18 billion. Discounted at 2% in perpetuity then the damages avoided could fall to $30 billion to make the expenditure worthwhile.

And this does not include the avoiding deaths. Saving 1000 lives at $6 million each adds $60 million in expected benefits.

Elinor Ostrom

Catherine Rampell:

Elinor Ostrom, the only woman to win the Nobel Memorial Prize in Economic Science — an achievement all the more remarkable because she was not actually an economist — died on Tuesday in Bloomington, Ind. She was 78. ...

Professor Ostrom’s prizewinning work examined how people collaborate and organize themselves to manage common resources like forests or fisheries, even when governments are not involved. The research overturned the conventional wisdom about the need for government regulation of public resources. ...

Traditionally, economics taught that common ownership of resources results in excessive exploitation, as when fishermen overfish a common pond. This is the so-called tragedy of the commons, and it suggests that common resources must be managed either through privatization or government regulation, in the form of taxes, say, or limits on use.

Professor Ostrom studied cases around the world in which communities successfully regulated resource use through cooperation. Her work has important applications for climate change policy today.

 

via www.nytimes.com

As close as I've ever been to Tim's house

Connected by DROID on Verizon Wireless

Getting credit for poo (and this isn't about grade inflation and the current state of higher education)

It is a far cry from traditional farming techniques, but dairy farmers are being encouraged to earn carbon credits from the Federal Government by destroying cow manure.

Under the Carbon Farming Initiative, the Government says dairy producers will be able to earn carbon credits if they capture and destroy methane and other greenhouse gasses emitted by manure.

Farmers who participate in the program will cover manure ponds, then have the choice of burning and destroying the captured gas, or using it to fuel internal combustion engines to produce electricity.

Either way, they will earn carbon credits for preventing the gas from entering the atmosphere.

Pig farmers will also be able to earn credits by reducing emissions from manure.

via www.abc.net.au

Elinor Ostrom: 1933-2012

The entire Indiana University community mourns the passing today of Distinguished Professor Elinor Ostrom, who received the 2009 Nobel Prize in Economic Sciences for her groundbreaking research on the ways that people organize themselves to manage resources.

via newsinfo.iu.edu