Environmental Economics

What I did today: a little community-based research (warning: self-promotion ahead)

Here is an idea for your time when the hard, gemlike flame threatens to flicker (BS&G ride director happy with 2018 event): 

Blood, Sweat and Gears Ride Director Scott Nelson felt the 2018 edition of the event went as well as it could.

The event, which took place June 23, starting and ending at Valle Crucis Elementary School, hosted 966 riders split between riding the 100-mile and the 50-mile courses. ...

The event raised $103,000 for a variety of causes. Nelson said organizers gave away $50,000 to different organizations, including $20,000 to the Western Youth Network, $10,000 to the Hunger and Health Coalition, $5,000 to Healing Hunger Farms, $5,000 for Spirit Rides, $4,000 for Mountain Alliance, $500 to Watauga County Habitat for Humanity and $2,500 to WAMY.

On top of that, BS&G makes donations to volunteer fire departments and volunteer rescue squads in both Ashe and Watauga counties. Nelson said BS&G also donated to different departments at Watauga High School, including the Robotics Club, the Sustainability Club, the football team and the baseball team.

Another donation was made to the Valle Crucis eighth-grade field trip. The BS&G organization also donated $33,000 to the Winter Warmer Project, which is funded by BS&G riders.

“We’ll likely donate more money before it’s all said and done,” Nelson said. “I just don’t have a number on that yet.”

Nelson said there were 300 volunteers helping with aid stations, registering riders, working along the start-finish line, being timers, traffic control, providing any needed first aid or help with damaged bikes and feeding all of the riders when they were finished.

There were even students from Valle Crucis Elementary ringing cowbells cheering the riders when they crossed the finish line. ...

Nelson said the economics department at Appalachian State University is sending post-ride surveys to the cyclists, which will be reviewed after a few weeks when everybody has had a chance to form an opinion.

Nelson felt everybody involved with the ride did well, but they are always looking for ways to improve.

“We did very well,” Nelson said. “I think the survey results will be more about breaking down different categories maybe where we can improve. The hard part in doing this is when you score so high, how do you motivate everybody to do better?”

Nelson said the planning committee will meet when the surveys come back to see how they can achieve that.

Hey, I was one of those volunteers (but way behind the scenes)! I've done the post-ride survey for 7 out of the last 8 years (missing 2012 for some reason). We ask satisfaction and spending questions. I have students from the economics club do the economic impact analyses. And in return for this bit of free consulting I get to ask stated preference questions. Here are a couple of papers that has come out of this work (hoping there will be more): 

1. Whitehead, John C., and Pamela Wicker. "Estimating willingness to pay for a cycling event using a willingness to travel approach." Tourism Management 65 (2018): 160-169. https://www.sciencedirect.com/science/article/pii/S0261517717302182
2. Whitehead, John C., and Pamela Wicker. Valuing Non-Market Benefits of Participatory Sport Events Using Willingness to Travel: Payment Card vs Random Selection with Mitigation of Hypothetical Bias. Department of Economics Working Paper No. 18-06. 2018. https://ideas.repec.org/p/apl/wpaper/18-06.html

Alas, all good things must come to an end. Scott Nelson is retiring as ride director and I think I'll be scaling down my post-event surveys (I did 5 in 2017, gasp for air). But one survey a year should be enough spark to keep the community-based research flame burning. 

P.S. I re-read the McCloskey piece for the n+1^st time (you should read it at least once) and found this: 

Everyone with gifts that way should be chair of the department for a while, crummy though the job is (it is like being a foreman in a factory - neither labor nor management, chewed up by both). The work has to be done.

Yes.

Thank you EU, I guess this means more cheap whiskey for me...oh, and there's an economic lesson in here too.

Don't take this as support for tariffs, my inner economist is strongly opposed to tariffs on economic efficiency grounds, but my inner hillbilly is slightly happy that an EU tariff on American whiskey is likely to lower U.S. whiskey prices (at least in the short run).  Life can't be all beer...

Jack Daniel’s Tennessee Whiskey prices will rise in the European Union (EU) due to the member countries’ new 25 percent tariff on imported U.S. whiskey.

Brown-Forman Corp. spokesman Phil Lynch told The Associated Press that the price of Jack Daniel’s in the EU will likely rise by about 10 percent, a change which will go into effect over the next couple of months.

For those not familiar with the economics of tariffs, when a tariff is placed on an imported good, the price of that good rises in the importing country.  So let's say for some odd reason, the President of the United States decides to place a tariff on all imported, oh, I don't know, let's say steel imported into the U.S.  (I know, that's far fetched, but go with me here).  The result of the price increase on imported steel is an increase in the price of ALL steel in the U.S.--steel we import, and steel we produce domestically.  The impact on the rest of the world is an increase in the supply of steel on the world market, causing prices for the rest of the world to fall. 

Who benefits?  Domestic steel manufacturers benefit from the tariff on imported steel, because they can now sell their U.S. produced steel at higher prices.  But that comes at an expense--U.S. consumers of steel lose because they have to pay more for steel.  But here's the kicker--the losses to U.S. consumers are GREATER than the gains to U.S. producers.

All of this of course ignores the effects on the rest of the world.  What happens there?  

The manufacturers in the tariffed country (the country producing the good being imported) will lose because they are forced to lower their prices to sell all of the stuff they used to export to the tariffing country.  So when the U.S. puts a tariff on imported steel, manufacturers of steel in the rest of the world are penalized...but consumers of steel in the rest of the world gain from lower priced steel.  But here's the second part of the kicker--the losses to steel manufacturers in the rest of the world are GREATER than the gains to consumers in the rest of the world.

That means that a 'hypothetical' tariff on an imported steel in the U.S. will benefit U.S. steel producers, and steel consumers in the rest of the world.   U.S. steel consumers and steel manufacturers in the rest of the world will take a loss.  And the total losses will ALWAYS be greater than the total gains.  

So I guess you could say that if the U.S. were to impose a tariff on imported steel, it would be a signal that the U.S. likes foreign consumers more than domestic consumers, likes domestic manufacturers more than foreign manufacturers, and likes creating economic losses.

But that's just hypothetical of course.  Let's get back to the more import issue at hand--whiskey.  

An EU tariff on imported U.S. whiskeys will raise whiskey prices to EU whiskey consumers, create an economic gain for EU whiskey producers, create an economic loss for U.S. whiskey producers (probably the whole point), and create an economic gain for U.S. whiskey consumers.

And the total losses will be GREATER than the total gains.

But who cares?

I get cheaper whiskey.

And that's all that matters.

Right?

     

Quote of the day

Tim Haab on "[EPA's] rejiggered science advisory board stocked with industry types just killed three committees it has traditionally relied on":

“The message was a surprise,” Timothy Haab, an environmental economist at Ohio State University who was on the economics committee, told Earther. “I fear that losing the advisory committees could jeopardize the objectivity of the science used in making economically sound environmental decisions.”

Source: The EPA Just Killed Three Expert Advisory Committees

Background: There is no longer an Environmental Economics Advisory Committee at the EPA

Lobster tariffs

Put this one in our new "easy to win a trade war" category:

Next month, China is expected to impose an additional 25 percent tariff on American lobster as the sparring over trade continues and Mr. Trump threatens to impose tariffs on as much as $450 billion worth of Chinese goods.

Annie Tselikis, executive director of the Maine Lobster Dealers’ Association, said that Mr. Trump’s policy was having the unintended effect of further helping Canada’s lobster market, which doesn’t face the same duties when selling to China. And Canadian sellers were already benefiting from a new trade agreement with the European Union that slashed tariffs for them.

China buys about a fifth of American lobster exports, Ms. Tselikis said, and the value of those exports has nearly tripled in the last two years to $137 million.

“I’d love see these tariffs not go through for the sake of our industry and the Maine economy,” Ms. Tselikis said. “At this point it’s really about American jobs.”

Kristan Porter, the president of the Maine Lobstermen’s Association, said that he supported Mr. Trump’s efforts to renegotiate trade agreements to help American industry but hoped his was not harmed in the process.

“I’m sure everybody is playing their hands and we’re caught in the middle of it,” he said. “We’re hoping cooler heads prevail.”

Urban Dictionary puts it this way:

"[Hope] in one hand, [poop] in the other. See which one gets filled first." When a person wants the impossible.

Daily Demand and Supply: Unintended Consequences

 A tariff on steel imports causes the price of imported steel to increase.  One direct effect is:

The Mid-Continent Nail plant in Poplar Bluff, Missouri, laid off 60 of its 500 workers last week because of increased steel costs. The company blames the 25% tariff on imported steel. Orders for nails plunged 50% after the company raised its prices to deal with higher steel costs.

Maybe not intended, but perhaps predictable.  But following the bouncing ball of unintended consequences leads you to:

 

via GIPHY

UPDATE: I'm adding this to our new "It's easy to win a trade war' category, as soon a John gets around to updating our category list. 

The benefits of environmental regulations cannot be simply willed away (and why I'm too slow to be an Ivy-Leaguer)

A couple of weeks ago, soon after EPA Administrator Pruitt's announcement to introduce a rule changing the role of cost-benefit analysis in design of environmental regulations, I wrote an op-ed and submitted it to the NYTimes for consideration.  They politely declined (by ignoring the submission) so I submitted it to the Washington Post.  They too, politely declined (by ignoring the submission).  Finally I sent it to The Conversation and they politely declined (for real this time), basically saying I was too slow and Joe Aldy beat me to it. 

D'Oh--damn Ivy-Leaguers.

So although this repeats a lot of what Joe said in his piece for The Conversation, here's my take on why reducing the role of cost-benefit analysis at the EPA is dangerous. 

In 1981, President Reagan signed Executive Order 12291 requiring both the costs and benefits of any new major regulation be considered prior to federal implementation.  For the decade prior to Executive Order 12291, federal and state environmental regulators struggled to find cost effective ways to implement environmental regulations imposed by the Clean Air and Clean Water Acts of the early 1970’s.  Unfunded mandates imposed on states resulted in inertia that saw few environmental improvements during the decade after the Clean Air and Clean Water Acts were passed, and regulatory stalemates were a regular occurrence due to the perceived high cost of implementation.  By requiring cost-benefit analysis, Reagan’s Executive Order promised to reduce the cost of regulation by selecting only those regulations that promised to provide benefits in excess of costs, thus promoting environmental improvements without over-burdening economic growth after the lean economic times of the 1970’s.

Those in favor of less costly regulation applauded the use of cost-benefit analysis for regulatory decisions.  As a 1981 story in the New York Times put it:

“Administration and business officials and others who applaud the President's decision say that the uniform application of cost-benefit analysis...will stem the tide of unnecessary regulation that they say have been a severe and growing burden to the nation’s economy. “

Opponents of Executive Order 12291 countered that the use of cost-benefit analysis was simply an end-around for those opposing environmental regulation, that putting ‘prices’ on environmental goods diminished the contribution of environmental goods to the collective good, and that comparisons based solely on dollars can be easily manipulated.  

Despite the objections, Executive Order 12291 was issued and cost-benefit analysis has become a standard tool for environmental policy analysis.  In fact, cost-benefit analysis has been so successful as a tool for policy analysis that every administration since Reagan has endorsed its use. 

Until now.

On June 7, EPA Administrator Scott Pruitt, announced the intent to introduce a new EPA rule for public comment addressing cost-benefit analysis that effectively suggests removing the measurement of many co-benefits in consideration of environmental regulations.  In a surprising bit of irony, Administrator Pruitt argues that the measurement of benefits in consideration of environmental regulations has resulted in the implementation of too many costly regulations that harm business and has hampered economic growth—the exact argument that Reagan-era administration and business officials used in favor of cost-benefit analysis in 1981. 

What has changed since 1981? The simplest answer is that economists who specialize in the measurement of the benefits of environmental improvements have clearly demonstrated that there are large and measurable benefits to society of improving environmental quality thus providing justification for economically defensible environmental regulations.

Post-executive order 12291, a burgeoning line of academic inquiry emerged for the measurement of the benefits of environmental regulations.  Putting benefits on equal footing with costs required the measurement of benefits that are not ‘priced’ in typical markets.  Assigning ‘prices’ to non-market environmental outcomes, like the benefits of improved drinking water quality, or the benefits of preventing early deaths from excessive exposure to dirty air proved to be a manageable task, and highly valuable.  By measuring the costs AND benefits of proposed regulations, federal agencies, like the EPA, were quickly able to implement low cost environmental regulations that yielded societal benefits that far exceeded the costs of implementation without stifling economic growth.  For example, in a 2005 retrospective assessment of the costs and benefits of the sulfur dioxide cap-and-trade program in the EPA’s Acid Rain Program implemented under Title IV of the 1990 Clean Air Act, economists found that the costs of sulfur dioxide reductions from coal-fired electricity generation were half of what was expected, and after including the health, recreation, and aesthetic benefits of reduced sulfur dioxide emissions, the benefits of those reductions exceeded the costs of the Acid Rain Program by a factor of 40!  

Since the environmental movement of the 1960’s and 1970’s, economists have largely come down in support of the use of efficient regulation, based on cost-benefit analysis, to address environmental concerns.  A 1990 survey of members of the American Economic Association found that 60% of economists surveyed disagree with the statement “Reducing the regulatory power of the Environmental Protection Agency (EPA) would improve the economic efficiency of the U.S. economy.”  Only 12% agreed with the statement.  These numbers remained largely unchanged when the survey was repeated in 2000.  A more recent survey of members of the Association of Environmental and Resource Economists found that 96% of those surveyed disagree with the statement that “Unregulated markets provide public goods in optimal quantities.”  This was the single statement that yielded the highest level of agreement among the economists surveyed—a group notorious for being unable to agree with each other.  In short, there is a surprising degree of agreement among economists that environmental regulation is not only good for the environment, but when designed properly is defensible on economic grounds and unlikely to limit economic growth. 

Contrary to early fears, putting a ‘price’ on the environment has encouraged decision makers to recognize the scarce nature of our natural capital.  Rather than reducing “all decisions to simple-minded weighing of dollars,” the pricing of nature has forced everyone to recognize that the alternative to pricing nature is assuming it is free to exploit.  Assigning dollar values to the benefits of our natural and environmental resources allows us to use the power of markets and economics to design policies and regulations that benefit all. 

The benefits of many environmental regulations and the resulting environmental improvements are large, demonstrable, and economically defensible and cannot be simply willed away.

Vote for economists!

Just made a donation to People for Sharon https://t.co/EcTOmoeKZ0

— John C. Whitehead (@johnwhitehead81) June 23, 2018

TFW your paper appears in volume 9 issue 2 right after your colleague's & co-author's & MS student's paper

Here is the link: https://www.cambridge.org/core/journals/journal-of-benefit-cost-analysis/issue/5BBABD92F31946106B429917E9F12D5F

There is no longer an Environmental Economics Advisory Committee at the EPA

From the inbox:

Dear colleagues,

I want to inform you of recent decisions regarding standing committees under the auspices of the Science Advisory Board (SAB).   On the recommendation of the SAB Staff Office, the SAB, unanimously agreed, at our 5/31/18 administrative meeting, to retire three of our current seven standing committees.   The committees being retired are Ecological Processes and Effects Committee (EPEC), the Environmental Economics Advisory Committee (EEAC) and the Environmental Engineering Committee (EEC).  This decision was made after considering numerous management issues including projected workload and consideration for the efforts and responsibilities of getting Special Government Employees (SGEs), such as yourselves, hired by the Agency.  Things we considered included: the amount of effort it takes to hire SGEs (both on your end and at EPA), the ethics responsibilities that comes with being an SGE, and the significant public process needed to empanel these groups in accordance the Federal Advisory Committee Act.  For all these reasons, I feel it is my responsibility to ensure we have a workload to justify the process and hours of work done by the public, the SGEs and the Agency.  In the case of EPEC, EEAC, and EEC, the decision was made by the SABSO and the Board that the workload does not justify the effort.  To that end, today I have instructed my staff to post the following message on our SABSO web site announcing the decision.

On May 31, 2018, the Science Advisory Board unanimously voted to restructure its supporting standing committees from seven to four. The Board discussed the recent and anticipated matters to come before the Board and found the mix of expertise represented by its current members, the use of ad hoc panels, or augmenting standing committees provides a necessary, responsible, and sufficient approach to provide advice to the Administrator.  The SAB approved retiring the Ecological Processes and Effects Committee (EPEC), the Environmental Economics Advisory Committee (EEAC) and the Environmental Engineering Committee (EEC).   When issues arise in these three areas, the current make-up of the Board sufficiently represents expertise to oversee work on these subject matters and convene panels as statutorily authorized.  For any future advisory requests on ecology, economics or engineering, the SAB Staff Office plans to create ad hoc panels chosen specifically for the topic under consideration.  The SAB’s decision was designed to enhance efficiency based on anticipated workload and upcoming activities.  The four remaining standing committees are the Agricultural Science Committee (ASC), the Chemical Assessment Advisory Committee (CAAC), the Drinking Water Committee (DWC) and the Radiation Advisory Committee (RAC).

Thank you all for your willingness to serve the Agency and the Unites States in your critical role as SGEs.  The SAB can undoubtedly benefit from your expertise. I hope that we may consider you for service on future SAB committees or panels. We appreciate your time and effort, and hope that you will continue working with the SAB as new opportunities arise. The SAB Staff Office thanks you for your participation and willingness to be considered. 

If you wish to discuss this further please feel free to reach out to me.   

Tom Brennan

Acting Director, Science Advisory Board Staff Office

US Environmental Protection Agency

Desk # 202 564 6953

Mobile # 703 581 9300

For your reference, here is the list of eminent scholars unceremoniously dismissed from giving advice to the EPA on matters of Environmental Economics (just wanted to put this here before we disappear from the EPA website):

 

Boyle, Kevin		Virginia Tech	Blacksburg	VA
Brandt, Sylvia		University of Massachusetts	Amherst	MA
Carson, Richard		University of California, San Diego	La Jolla	CA
DeShazo, J.R. (George)		University of California at Los Angeles.	Los Angeles	CA
Evans, Mary		Claremont McKenna College	Claremont	CA
Gray, Wayne		Clark University	Worcester	MA
Haab, Timothy		Ohio State University	Columbus	OH
Johnson, F. Reed		Duke University	Durham	NC
Kotchen, Matthew		Yale University	New Haven	CT
Neidell, Matthew		Columbia University	New York	NY
Opaluch, James		University of Rhode Island	Kingston	RI
Phaneuf, Daniel		University of Wisconsin-Madison	Madison	WI
Plantinga, Andrew		University of California, Santa Barbara	Santa Barbara	CA
Ready, Richard		Montana State University	Bozeman	MT
Smith, V. Kerry		Arizona State University	Tempe	AZ
Swallow, Stephen K.		University of Connecticut	Storrs	CT
Van Houtven, George		RTI International	Research Triangle Park	NC
Wu, JunJie		Oregon State University	Corvallis	OR
Zhao, Jinhua		Michigan State University	East Lansing	MI

 

Marine Resource Economics has published an unpublished paper off the reading list of "Wilen’s resource economics course at UC Davis" (fn 3)

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Three of Professor Wilen's students (including current and former editors of MRE) introduce the paper like this:

Throughout his career, James E. (Jim) Wilen has had a remarkable influence on the development of resource and fisheries economics through his path-breaking research contributions, influence on fisheries policy, and outstanding legacy as a mentor. “Common Property Resources and the Dynamics of Overexploitation: The Case of the North Pacific Fur Seal” was one of Jim’s earliest research endeavors as a young assistant professor at the University of British Columbia. Yet, it reflects many of the essential themes found in so much of his subsequent work. In publishing this paper in Marine Resource Economics, we hope to not only make it more accessible to a whole new generation of resource economists, but also to examine the impact of this unpublished mimeograph on the subsequent development of resource and fisheries economics. ...

Indeed, to our knowledge, Jim’s paper was the first paper to econometrically model both the economic and resource dynamics for a single resource.

This is the second time, to my knowledge, that MRE has made an effort to publish an unpublished paper (here is the first). This is quite remarkable and deserving of a pat on the back.