Environmental Economics

A question for Mike Tirico

Was that 25 yard run really that "unbelievable"? I mean, he didn't sprout wings and fly over the defense or anything.

Oh Sandy the aurora is rising behind us*

The ugly reality of Coasian bargaining:

With the anniversary of superstorm Sandy just a month away and the still-battered remains of homes visible on the beachfront, Gov. Chris Christie ordered the state to start legal action against holdout homeowners to get the dunes built.

Help is on the way for oceanfront municipalities in their ongoing battle with easement holdouts for the federally funded beach replenishment project.

On Wednesday, Christie signed an executive order that, among other things, directs the attorney general’s office to “coordinate legal action to acquire the necessary easements to build dunes” and creates a flood risk office to take steps toward acquiring property to build dunes along the coastline.

In addition to the order, the protracted legal battle between a Harvey Cedars couple and the borough over the rights to build a 22-foot dune on their beachfront property has been settled for less than a cup of coffee. The couple, Harvey and Phyllis Karan, will be compensated $1 in a property rights dispute that lasted over three years, two storms and one public rebuke by the governor. At one point, they had been awarded $375,000 for losing their ocean view to new protective dunes.

“As we rebuild from superstorm Sandy, we need to make sure we are stronger, more resilient and prepared for future storms, and dunes are a major component of this process,” Christie said in a statement. “We can no longer be held back from completing these critical projects by a small number of owners who are selfishly concerned about their view while putting large swaths of homes and businesses around them at risk.”

*I have no idea what the title has to do with this post other than anytime I see a story about Sandy and New Jersey I think of 4th of July, Asbury Park. One of my favorites.

Friday Beer Post: We may suck, but at least we're drunk

The winless Jacksonville Jaguars have released their own strategy to increase ticket attendance to this week’s game and prevent a blackout: free beer.

The NFL club is entering its fourth week against the Indianapolis Colts, and in an effort to draw fans to EverBank field they have taken to Twitter to announce: “2 free drinks for next 2 hrs” with a ticket to this Sunday’s game.

via tampa.cbslocal.com

Economic lesson for the day: there's no such thing as a free beer. The only fans affected by this promotion are the marginal fans (marginal in the economic sense) who were less than two stadium beers away from attending the game in the first place.

And doesn't beer cause blackouts? Not prevent them?

More on the "Gulf Headboat Cooperative's exempted fishing permit"

Last week I quickly posted the NMFS's announcement of this policy experiment without much explanation and then ran off to Kentucky to visit friends and family. Several months earlier I had signed a letter of support [pdf], along with a number of economists, that provides a bit of explanation (I was sure that I had posted this letter back then but searching the archives has suggested otherwise):

As economists working in the field of environmental and natural resource economics, we are writing to offer our support for the Gulf Headboat Cooperative' s application for an exempted fishing permit ( EFP) to test a new approach to managing recreational for -hire fishing. We would like to offer our support from both the perspective of its merit in contributing to the state of knowledge in fisheries economics and in improving the quality of information for fisheries management in the Gulf of Mexico and beyond.

The objective of this pilot is to analyze how headboats adapt in a regime where, instead of being constrained by uncertainty about season closure, their catch allocation is secure, they have flexibility to book trips through the year, and they can plan, market, and fish accordingly. The pilot has substantial potential to improve the state of knowledge in both the academic and management communities of the effects of changes in management on the for-hire sector. Such knowledge is increasingly needed in mixed -use fisheries with a large recreational component. While there is a small amount of conceptual modeling in this area and some existing data outlining the current economic and social context of for -hire fisheries, there remains precious little policy experience to guide decision making. Experience in commercial fisheries demonstrates that fishing cooperatives can successfully meet the economic and biological objectives of fisheries management. However, extrapolation from commercial fisheries is of limited applicability given the unique economic structure and incentives reflected in this mixed commercial /recreational fishery and the headboat sector' s unique role in coastal economies. The state of knowledge would be greatly enhanced by purposeful, targeted data collection and evaluation in anticipation of important management changes.

The EFP reflects collaboration between fishermen and academic partners to establish exactly such a protocol. The impacts are of clear importance to owners, crew and clients of the for -hire sector and fisheries managers as well. An especially important aspect of the EFP is the fact that it leads to samples from the headboat fleet that are inside and outside of the pilot Cooperative. After control for selection effects, this allows those vessels that do not participate to serve as a control group for those that do. This creates the potential for researchers to compare the change in important performance metrics before and after the EFP for both groups of vessels.

Such a scenario is fairly rare in fisheries management and offers the potential for a far more robust contribution to knowledge than studies that focus on before /after impacts alone. In summary, the Gulf Headboat Cooperative pilot program presents a significant opportunity to expand the scientific foundations for sound management of the for -hire sector through thoughtful data collection and analysis. The data and research protocol presented within the EFP represent a framework to maximize the useful information from such a policy experiment while fostering collaboration between the for -hire sector and researchers. These features will enhance the credibility of the associated data and research in the academic community while facilitating the ongoing adaptive management of for -hire recreational fisheries in the Gulf of Mexico and beyond.

We urge you to approve the Gulf Headboat Cooperative EFP.

Here is a statement in opposition from the Coastal Conservation Association: 

On behalf of the Coastal Conservation Association (CCA) and our 75,000 members in the Gulf of Mexico states, this letter conveys our unequivocal opposition to the proposed Exempted Fishing Permit (RIN 0648-XC528) that would allow a pre-selected subset of less than a dozen Gulf headboat operators to be gifted recreational quota to use for their individual harvest of red snapper and grouper for two years. Touted as an experiment to provide accurate and timely landings data, we believe that the primary goal of this EFP is to pave the way for allowing separate allocations of common property resources to the for-hire and private boat recreational fishing sectors and the ultimate creation of a catch shares program in the recreational sector. The application for this EFP has been careful to avoid the use of the terms “catch share” or “sector separation,” but it is clear that it tests a catch share that would depend on sector separation.

This EFP simply will not produce conservation gains nor will it enhance efficiency. Any “academic study” designed to quantify the stated goals of this EFP would be seriously affected by the non-random selection of the subject vessels. ...

Not only is this EFP flawed from a purely technical perspective, it is difficult to comprehend that such a program would be given serious consideration given the very high levels of political and popular opposition to sector separation and catch shares. ...

If memory serves, the Socioeconomic Panel of the SAFMC SSC has gone on record several times in favor of catch shares (i.e., what they used to call individual transferable quotas) in most any way, shape or form. Here is the most recent example [pdf] from the October 2012 meeting:

In the broadest terms, the SEP has significant concerns about the use of arbitrary rules to determine allocation between sectors. It would prefer to see transferability between sectors, in which one sector could purchase parts of the other's allocations.

Fighting Lazy Hausman Cites

As John has pointed out (for example see here and here), despite plenty of evidence to the contrary, researchers have taken to lazily citing economist Jerry Hausman's ill-founded, and wrong, repeat attack on contingent valuation* as face value evidence that stated preference surveys are worthless in the public policy arena.  In fact, a quick Google Scholar search on 'Hopeless Hausman' finds that no less than 30 researchers have already cited Hausman's 'Dubious' work, despite the compelling, fair and balanced counter claims provided by Kling, Phaneuf and Zhao and Richard Carson in the same issue of the Journal of Economic Persepctive in which Hausman's opinion was published.  

Because of the coincidental nature of the three paper symposium in the JEP, the opportunity for direct discussion of Hausman's poorly researched criticism was not afforded.  Fortunately, the journal Applied Economics and Policy Perspectives has afforded me, Matt Interis, Dan Petrolia and John the opportunity to publish our reaction to Hausman's 'Hopeless' attack. 

From the inbox:

I am pleased to inform you that I have decided to accept your submission...entitled "From Hopeless to Curious? Thoughts on Hausman’s “Dubious to Hopeless” Critique of Contingent Valuation" for publication in AEPP. Next, we have to move your article to production with the publisher for content editing and typesetting.

Here's the abstract:

Hausman (2012) “selectively” reviews the contingent valuation method (CVM) literature and fails to find progress over the 18 years since Diamond and Hausman (1994) argued that unquantified benefits and costs are preferred to those quantified by CVM. In this reflection, we provide counter-arguments to Hausman’s claims, not with the intent to convince the reader that the debate over CVM is settled in favor of the method, but to argue that the intellectual debate over CVM is ongoing, that dismissal of CVM is unwarranted, and that plenty of work remains to be done for the truly curious researcher.

Oh, SNAP. It's on like Donkey Kong.

Our paper has been moved into the production process and is scheduled to appear in the January, 2014 issue of AEPP (online prior to that).  We will let you know when it's available, but for those who can't wait, and really want something to cite (and really this should be cited every time Hausman's work is cited--even if you read neither) here's a link to an earlier working paper version of the paper.

But you should note that we've saved some new surprises for the full version to appear in AEPP.

As they say, always leave them wanting more.

*  Hausman, Jerry. "Contingent valuation: from dubious to hopeless." The Journal of Economic Perspectives 26.4 (2012): 43-56.

A question for the SAS users (if there are any left)

I just sent this in an email:

The data files have the *.ssd extension. My version of SAS is saying that this is not a SAS data set but I think it is from an older version. Can you give me any help in opening this?

Any help out there?

Job Announcement: sustainable economics and community development at Appstate

I don't have any involvement with this search but was asked to distribute it to economists that might be interested:

The Goodnight Family Sustainable Development Department at Appalachian State University invites applications for a tenure-track, nine-month faculty position at the rank of Assistant Professor, beginning August 2014. A PhD in an area related to sustainable economics and community development is required. The field of specialization is open. Candidates must have a PhD by the beginning of the appointment.

The successful candidate will have the ability to teach courses in sustainable economics and alternative development and an active research agenda related to sustainable development.

We seek broadly trained applicants from a range of disciplines, including but not limited to anthropology, economics, cultural studies, geography, global studies, political science, and sociology. Preferred candidates will have evidence of potential for effective scholarship, teaching excellence and commitment to teaching, and the ability to develop strong research and teaching programs. Applicants should have a strong desire to contribute to a vibrant, growing department.

The teaching load is three courses per semester for faculty with an active research agenda. Faculty must be able to maintain a productive level of scholarship and participate regularly in curriculum development, student advisement, and service activities.
Applications should include: 1) a letter of interest that includes discussion of relevant scholarly research, teaching experience, and community development work; 2) a curriculum vitae, including contact information for at least three references; and 3) a statement articulating your approach to the interface of sustainable development and economics.

Review of applications will begin October 25, 2013, and continue until the position is filled. All application materials should be submitted electronically to <[email protected]>.

Any questions regarding the position may be addressed to the search committee chair, Dr. Jennifer Westerman, at <[email protected]>.

Appalachian State University is a member institution of the sixteen-campus University of North Carolina system. Located in Boone, North Carolina, the University has approximately 17,000 students, primarily in bachelors and masters programs in both liberal arts and applied fields. Appalachian has both a traditional residential campus and a variety of distance education programs. Additional information about the Sustainable Development Department, the University, and the surrounding area is located at <www.sd.appstate.edu>.

Appalachian State is an Affirmative Action/Equal Opportunity Employer. The university has a strong commitment to the principles of diversity and inclusion and to maintaining working and learning environments that are free of all forms of discrimination. Appalachian State University strongly encourages applications from women, minorities, veterans, individuals with disabilities, and members of other underrepresented groups.

Individuals with disabilities may request accommodations in the application process by contacting Dr. Jennifer Westerman at <[email protected]>. Any offer of employment to a successful candidate will be conditioned upon the University’s receipt of a satisfactory criminal background report. Documentation of identity and employability of the applicant will be required before the hiring process can be finalized.

For whatever it is worth, it would be great to have an economist in this position.

When extortion is your only option

When debating the merits of a public policy is just so boring, and less likely to achieve the desired result, use extortion:

As a possible government shutdown looms, environmental activists who oppose construction of the Keystone XL pipeline say they are increasingly alarmed that the project might become a bargaining chip in last-minute negotiations between Republicans and President Obama to avert a fiscal crisis.

If built, the 1,700-mile pipeline would carry millions of gallons of crude oil from Alberta in Canada to American refineries on the Gulf Coast. Because it crosses an international border, the pipeline requires approval by Mr. Obama’s administration after a review by the State Department. Mr. Obama has repeatedly said he would not make a decision until that process was complete.

But Republicans who support the pipeline have already signaled that they intend to demand approval of a permit for its construction in exchange for their willingness to support Mr. Obama and raise the nation’s debt ceiling next month.

“We feel like this is our only option,” said Representative Lee Terry, a Nebraska Republican who is one of the leading pipeline supporters. 

via www.nytimes.com

Wikipedia says this:

Extortion ... involves the verbal or written instillation of fear that something will happen to the victim if he or she does not comply with the extortionist's will. 

As I understand it, a government default would be bad.

But if you measure it with CVM, there must be a problem with CVM

Jodi Beggs:

As I’ve mentioned before, I am teaching behavioral economics this semester. So far, I’ve introduced the concept of prospect theory and loss aversion- specifically, how people how people are made more unhappy by a loss than they are made happy by what they see as an equivalent gain- and we discussed how loss aversion can lead to anomalies in behavior in financial markets such as the disposition effect, i.e. the tendency fro investors to be more willing to sell securities that have gained in value since they were purchased than to sell securities that have lost in value.

via www.economistsdoitwithmodels.com

Read the rest of the post for a nice teaching example.

A well-known paper in nonmarket valuation became known as "Randall's Difficulty." I wonder if another well-known paper can become known as "Hopeless Hausman." 

And note that the lazy NBER cites continue:

Achieving socially efficient outcomes when there are production externalities requires
reliable empirical estimates of these external costs. Given the challenges associated with using stated-preferences techniques to value non-market amenities (see e.g. Hausman 2012), a substantial fraction of existing work in valuation relies on hedonic analysis of housing markets. (p. 25)

Source: Currie, J., Davis, L., Greenstone, M., & Walker, R. (2013). Do Housing Prices Reflect Environmental Health Risks? Evidence from More than 1600 Toxic Plant Openings and Closings (No. w18700). National Bureau of Economic Research. 
http://www.nber.org/papers/w18700

In other words, "CVM sucks (Hausman 2012), so [insert author's preferred method] is awesome." Q.E.D.

This approach is unfortunate since, as a number of people have recognized, revealed preference and stated preference approaches are complements and not substitutes. Here is a recent example:

Combining Revealed and Stated Preference Data to Estimate Preferences for Residential Amenities: A GMM Approach

Daniel J. Phaneuf, Laura O. Taylor, and John B. Braden

Abstract

We show how stated preference information obtained from a choice experiment, and revealed preference information based on housing market transactions, can be combined via generalized method of moments (GMM) estimation. Specifically, we use a moment condition matching the predicted marginal willingness to pay (WTP) from a first-stage hedonic model to the marginal WTP formula implied by the choice experiment utility function. This is coupled with other moments from the choice experiment to produce GMM-based estimates of parameters that reflect the strengths of each data source. Our application values remediation of a contaminated site in Buffalo, New York, and we find evidence in support of estimates arising from our approach. (JEL Q51, Q53)

Land Economics, February 1, 2013 vol. 89 no. 1 30-52

http://le.uwpress.org/content/89/1/30.short

Q.E.D.

Picture of the day: Praying Colonels vs. Generals

The final score was 37-28, Colonels (in yellow). I won a beer.

Photo Credit: John Whitehead

Here is an official picture from the website:

I like this one because if you look really closely you can see me in the stands with my boys. Henry '85 is to my right and Jerry '84 and Joe '83 are to my left. A fine time was had by all.