Environmental Economics

The genesis of ecosystem services

The Chronicle of Higher Education profiles Gretchen Daily and the Natural Capital Project:

No one knew exactly how the science of ecosystem services would work, beyond the idea that it would combine ecology with economics. In paper after paper, it was ironed out. Cash would be the science's lingua franca; if a service could be valued in dollars, like timber production or irrigation water, it would be. (Others would be trickier. How do you find the real value of clean water?) It would be interdisciplinary in a way that conservation biology had never quite been, pulling in hydrology, geology, genetics—whatever was needed. People, by definition, would be at its core: An ecosystem can function without humans, but it can provide a service only if we use it.

It is a long read, but worth it. This might be the first paper one should read if one hasn't read one yet (i.e., I just printed it out):

Ruckelshaus, Mary, Emily McKenzie, Heather Tallis, Anne Guerry, Gretchen Daily, Peter Kareiva, Stephen Polasky et al. "Notes from the field: Lessons learned from using ecosystem service approaches to inform real-world decisions." Ecological Economics forthcoming 2013. http://www.sciencedirect.com/science/article/pii/S0921800913002498

 

The rise and fall of contingent valuation

Source: https://books.google.com/ngrams/ (via Jill Caviglia-Harris)

Notes:

1. Travel cost rises and falls too.
2. The pattern is the same with method attached to all of these, except there is no such thing as averting behavior method in Google books.
3. Interestingly, my dissertation year coincides with CVM overtaking TCM.

 

 

Daily Demand and Supply

Lynne Kiesling:

Alexis Madrigal at the Atlantic wonders why gas prices are falling in the US. He notes that the national average is the lowest it’s been in almost three years.

He identifies a few factors that influence gas prices, most notably world oil prices. These prices have fallen, due both to demand and supply factors, and most importantly how higher gas prices induced consumers to change their behavior:

But they [gas prices post-Arab spring] couldn’t go too high because, at least here in the U.S., demand has softened. Americans are buying (slightly) more fuel-efficient cars, on average. And younger people are driving less.

Which is all a pretty rational response to the big run up in gas prices during the mid-2000s.

He then points out (courtesy of Brad Plumer) something that shows just how complex the dynamics are in gasoline markets — gasoline and diesel are joint products, so to produce more diesel you get more gasoline. Diesel is in high demand in Europe, thanks in part to the economical and energy-efficient, yet also sassy and full of fun, TDI diesel engines from Volkswagen and Audi (and it’s an interesting question to ask why US regulations still provide such barriers to TDI diesel, but I’ll leave that as an exercise for the reader ;-0 ). If you are refining diesel in the US to export to Europe, you will increase the supply of domestic gasoline, shifting the supply curve out. In the face of that softened demand, that’s going to mean lower prices.

via knowledgeproblem.com

You missed it!

The Benefits of Clean Air:  How EPA Values Reductions in Air Pollution

Dr. Bryan Hubbell, U. S. Environmental Protection Agency

Friday, November 8, 2:30 p.m.

Belk Library and Information Commons Lecture Hall 114

The U.S. EPA has been regulating air pollution for over four decades, and uses cost-benefit analysis to evaluate major regulations, those expected to result in more than $100 million in costs and benefits.  EPA analysts conduct detailed benefits analyses which include estimating avoided health effects such as hospitalizations and reductions in risk of premature death, as well as environmental effects such as improved visibility in national parks and increased commercial timber yields.  In recent years, EPA has moved towards an ecosystem services framework for estimating the benefits of improvements in ecological effects such as reduced acid deposition and decreased ozone impacts on forest ecosystems.  This talk provides an overview of the ways in which EPA conducts benefits analyses for air pollution regulations, including how scientific evidence is incorporated in estimating health and environmental impacts,  how we use sophisticated air quality and risk models, and how economic values are assigned to reductions in air pollution related health and environmental impacts.

via rieee.appstate.edu

One-third the wage rate?

Fezzi, Batemen and Ferrini in JEEM:

The opportunity Value of Travel Time (VTT) is one of the most important elements of the total cost of recreation day-trips and arguably the most difficult to estimate. Most studies build upon the theoretical framework proposed by Becker's (1965) by using a combination of revealed and stated preference data to estimate a value of time which is uniform in all activities and under all circumstances. This restriction is relaxed by DeSerpa's (1971) model which allows the value of saving time to be activity-specific. We present the first analysis which uses actual driving choices between open access and toll roads to estimate a VTT specific for recreation trips, thereby providing a value which conforms to both Becker's and DeSerpa's theoretical models. Using these findings we conduct a Monte Carlo simulation to identify generalizable results for subsequent valuation studies. Our results indicate that 3/4 of the wage rate provides a reasonable approximation of the average VTT for recreation trips, while the commonly implemented assumption of 1/3 of the wage rate generates downward biased results.

Using MRFSS data Haab, Hicks, Shnier and Whitehead found significant heterogeneity in the travel cost coefficient. I was clueless about why but then one of my co-authors patiently explained that the travel cost variable was measured with considerable error.

Oh. I knew that.

But, 3/4 the wage rate is much higher than 1/3. I've gone from being dubious to hopeless about the travel cost method. :)

Low ($1.80/tC) Global Carbon Tax

From the inbox:

Dear John,

 

Global Problems Smart Solutions

Many thanks for your contribution to Global Problems Smart Solutions. The book has been recently published and the hard copy will be sent to you soon. In the meantime, I am happy to enclose the pdf version of your individual chapter on Ecosystems and Biodiversity as well as terms and conditions from the publisher. 

 

How to cite a chapter in this book 

Rose-Ackerman, S. and Truex, R., 2013: Corruption and Policy Reform, in B. Lomborg (ed.), Global Problems, Smart Solutions: Costs and Benefits, Cambridge University Press, 632-672 

 

Online prioritization tool - www.ranksmartsolutions.com

We have used the research from Copenhagen Consensus 2012 to create a new online tool for prioritization. Please feel free to use it for your classes and seminars!

 

The Authors' Consensus

We asked authors of the book to rank the interventions, some of you got back and here are the informal results:

 

1. Reduce Chronic Undernutrition in Pre-Schoolers

2. Expanded Childhood Immunization Coverage

3. Increase Availability of Family Planning

4. Subsidy for Malaria Combination Treatment

5. Community Led Total Sanitation

6. Low ($1.80/tC) Global Carbon Tax

7. Adaptation Planning

8. Expanding Tuberculosis Treatment

9. Deworming of Schoolchildren

10. R&D to Increase Yield Enhancements

 

I read the terms and conditions and think I might be able to post the chapter (I'm asking permission from Cambridge Press right now). In the meantime, here is an image of the first page (click the image for full-size):

 

I'm just an average man, with an average life*

Every once in a while (once a month hour?) I click on our Stat Counter (on the right) to make sure people are still paying attention.  I usually also click on the 'Came From' tab to see what sites are leading to Env-Econ.  Usually, the list is populated with Google Searches and references from other blogs.  Occasionally if a mainstream news site pics up one of our inane posts, we will get a visit spike from that site.  But this morning when i clicked on the Stat Counter, I saw the list below.

Should I be paranoid?

* The title makes sense if you click here.  

“What’s to Know About the Credibility of Empirical Economics”

T.D. Stanley in the Journal of Economic Surveys:

Thirty years ago, Edward Leamer (1983) offered his trenchant critique of empirical economics “Let’s take the con out of econometrics.” To bolster the credibility of econometrics, Leamer argued for more rigorous sensitivity analyses (Leamer, 1985), and robustness checking has since become conventional practice.

In recent decades, progress has been made. The reduced cost of data analysis has brought about a flood of empirical economic research. Methods have also advanced. In a symposium that reassesses Leamer’s critique, Angrist and Pischke (2010) argue that the recent acceptance of experimental and quasi-experimental research designs has done much to increase the credibility of empirical economics. Yet, disciplines with long traditions of strong experimental designs have their own crisis of credibility.

In a series of papers published in leading medical and science journals, John Ioannidis questions the validity and credibility of some of the most rigorously designed clinical trials and influential papers in medical research (Ioannidis, 2005, 2011, 2013). In the following “What’s to Know About the Credibility of Empirical Economics,” John Ioannidis and Chris Doucouliagos investigate the scientific integrity of empirical economics from a both a broad interdisciplinary perspective and the experience that dozens of meta-analyses of economics research brings. ...

I'm covering the Ioannidis and Doucouliagos paper in my senior seminar class tomorrow. Here is the abstract of the paper:

The scientific credibility of economics is itself a scientific question that can be addressed with both theoretical speculations and empirical data. In this review, we examine the major parameters that are expected to affect the credibility of empirical economics: sample size, magnitude of pursued effects, number and pre-selection of tested relationships, flexibility and lack of standardization in designs, definitions, outcomes and analyses, financial and other interests and prejudices, and the multiplicity and fragmentation of efforts. We summarize and discuss the empirical evidence on the lack of a robust reproducibility culture in economics and business research, the prevalence of potential publication and other selective reporting biases, and other failures and biases in the market of scientific information. Overall, the credibility of the economics literature is likely to be modest or even low.

Here is my presentation: Scientific credibility of economics. 

 

Encyclopedia self-promotion entry #145

The book description recently appeared at Amazon:

Given the number and scope of environmental problems we face today, everyone from high school students to policy makers to concerned citizens should understand how the economy works and grasp how meltdowns—both economic and environmental in nature—can be avoided. Economics and Natural Resource Economics: An Encyclopedia offers the critical information needed to comprehend these complex issues.

The entries covers topics in a manner parallel to how environmental economics is commonly taught, covering basic concepts, environmental policy, natural resource economics, market failure, exhaustible and renewable resources, benefit-cost analysis, and applied welfare economics. Additionally, the book includes entries on key concepts of economics, movements, events, organizations, important individuals, and research areas relevant to the study of environmental and resource economics. This work stands alone as the only title currently offering such a breadth of coverage and level of detail written specifically for readers without specialized knowledge of environmental economics.

Friday Beer Post Quote of the Day

"A master brewer is to yeast what a dog breeder is to a champion purebred."

Master brewers are pompous elitists set on maintaining breed specific superiority?