Environmental Economics

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.

All we can realistically hope for is that our book will be reviewed in an academic journal?

Rachel Toor in the Chronicle:

What really happens when a scholarly book is published?

The author is sent 10 copies, which he gives to close friends. Sometimes her family will take her out for dinner. Maybe a generous colleague will host a potluck. Rarely, a bookstore where the author is a loyal customer will let him read to a handful of students who would like, but can't afford, to buy copies. And then? Nothing.

All you can realistically hope for—but not count on—is that the book will eventually—and this could take months or years—be reviewed in an academic journal. Book reviews are, therefore, important to authors. But who else should care about those reviews? And why should any faculty members, buried under their own work, bother to write one?

It's not for the money. As with other aspects of our peculiar profession, the remuneration for this kind of intellectual labor will not buy you a cup of coffee.

It's not for the recognition. Only those with a specific interest in the field are likely to see the review; you can't impress the other parents in your kid's playgroup, or expect your mother to happen on it by chance.

And it's not for the sake of beefing up your CV. While many people do use reviews as padding, they don't "count" for much in the hiring, tenure, and promotion process.

So why bother to write one?

Because we are expected to do service to the profession. Because we are invested in our fields and want to be involved in a conversation about where they should go. Because it's nice to get a free copy of a book that you are going to want to read anyway, and then be forced to think hard about it.

...

However:

If the current climate in publishing and academe requires that scholars be ambitious and accessible, that they write clearly (if not simply) for more than the 15 people in a sub-sub-subfield, then professors will have an opportunity to become engaged in American cultural, social, and political life in meaningful ways. The monograph and book-review sausage factories are not, I think, the best use of our collective cerebral resources. It's better to write one good article than to review 20 books, and even better to write one good book.

It seems like there is a disconnect in that paragraph, at least in economics. I don't think that writing clearly (if not simply) for more than the 15 people leads one to writing a journal article. That sounds more like blogging. And, in what academic field is the marginal rate of technical substitution 1 good journal article for 20 book reviews? Or, by transitivity, 1 good journal article for 1 book?

Economics of the Environment (new edition)

Rob Stavins:

The Sixth Edition of Economics of the Environment: Selected Readings has just been published by W. W. Norton & Company of New York and London.  Through five previous editions, Economics of the Environment has served as a valuable supplement to environmental economics texts and as a stand-alone book of original readings in the field of environmental economics.  Nearly seven years have passed since the previous edition of this volume was published, and it is now more than three decades since the first edition appeared, edited by Robert and Nancy Dorfman.  The Sixth Edition continues this tradition.

Environmental economics continues to evolve from its origins as an obscure application of welfare economics to a prominent field in its own right, which combines elements from public finance, industrial organization, microeconomic theory, and many other areas of economics.  The number of articles on the environment appearing in mainstream economics periodicals continues to increase, and more and more economics journals are dedicated exclusively to environmental and resource topics.

There has also been a proliferation of environmental economics textbooks for college courses.  Many are excellent, but none can be expected to provide direct access to timely and original contributions by the field’s leading scholars.  As most teachers of economics recognize, it is valuable to supplement the structure and rigor of a text with original readings from the literature. ...

The articles are timely, with more than 90 percent published since 1990, and half since 2005.  There are two completely new sections of the book, “Economics of Natural Resources” and “Corporate Social Responsibility,” and all of the chapters in the section on global climate change are new to the sixth edition.

In order to make the readings in Economics of the Environment accessible to students at all levels, one criterion I use in the selection process is that articles should not only be original and well written — and meet the highest standards of economic scholarship — but also be non-technical in their presentations.  Hence, readers will find virtually no formal mathematics in any of the book’s 34 chapters throughout its 733 pages.

via www.robertstavinsblog.org

I have the 5th (I think) edition. It is a great book to add for your graduate students in a dual-listed course to satisfy SACS 3b (or 3a).

I finished the ESPN book last night and am even more of a fan of Deadspin than before I started

Deadspin:

On the same day payments to victims of the BP Gulf oil spill were cut off, celebrity chef Emeril Lagasse appeared on SportsCenter to promote the Gulf Coast Seafood Tourism Bash (brought to you by BP).

A tourism festival with a marginal link to sports being promoted on ESPN is weird enough, but then Emeril started making some kind of cannibalistic gumbo using NFL players. (Presumably, he's cooking with oil.) The 2pm Eastern SportsCenter is quickly becoming a venue for the surreal.

By the way, I'm watching the Dan Patrick show right now (as I "work from home" ... catching up on email from, crap, Fall 2011 semester). I hope to enjoy my first 3rd hour all week.

Some of my favorite things in the ESPN book:

• The alcoholic beginnings of the network. Yikes, one of the key movers behind the network drank hard from morning to night.
• Jim Gray's defense of his work on "The Decision": You're just jealous!
• Tirico doesn't provide much defense in his silent treatment of Kornheiser on MNF. Apparently, he wants to be the only media guy in the booth ... he only knows how to interact with ex-players and ex-coaches. Weird.
• Boomer's quotes are all only a few sentences long, much shorter than is standard in this 700+ page book of quotes. How can he talk so much on air and then be so terse in the book? Here is a sample that I generally agree with (warning: profanity and some other objectionable stuff from Deadspin). One of the tensions on ESPN is trying to objectively cover sports that they have contracts with. Boomer fails.
• I always wondered why DP left the "mothership" and it turns out it was because they wouldn't cut back on his workload. He wanted to spend more time with his kids.
• I've been introduced to Awfulannouncing.com.

What other highlights have I missed?

More spam from Gernot's publicist

From the inbox:

Dear John,

A Harvard-trained young economist at the Environmental Defense Fund is advocating the use of plastic bags and gas-guzzling SUVs - sort of. In his recent book, But Will the Planet Notice? How Smart Economics Can Save the World, Gernot Wagner argues that individual action is futile - carrying your reusable grocery bags and driving a Prius have basically no effect on the environment. Changes in economic policy and incentive are the only solution. In effect, Gernot is the rare business-friendly environmentalist because of his economic training.

Gernot goes so far as to say that the "No-Impact Man," Colin Beavan, is truly having no impact - but not in the way Beavan thought.

I've pasted Gernot's recent New York Times op-ed below, as well as a copy of his book release. Additional key topics on which he could speak include the following:

- The EPA's Air Toxics Standards for Utilities that recently came out.

- What are the next steps after cap and trade, and why should Obama care about it? Who in the political realm is dealing with this issue effectively?

- There are parallels between the financial and planetary crises: misaligned incentives, misguided belief in economic models, and socializing costs and risks while privatizing benefits are culprits in both.

Please let me know if you'd like more information.

Thank you - all my contact information is below. I look forward to speaking with you.

Please make it stop.

Update: Also note that, while surely impressive, anything that begins with "Harvard-trained economist" is a turn off for the rest of us rabble.

Reopening an old wound

Freakonomics gloats "Worldwide Carbon Emissions No Longer Dropping — Is Anyone Surprised?":

In our SuperFreakonomics chapter about global warming, a central argument was that greenhouse-gas emissions (and pollution in general) are an externality, and it is inherently difficult to control and/or price externalities. So, while it might seem sensible to encourage fewer emissions by taxation or price controls — or international agreements — the reality is complicated:

Besides the obvious obstacles — like determining the right size of the tax and getting someone to collect it — there’s the fact that greenhouse gases do not adhere to national boundaries. The earth’s atmosphere is in constant, complex motion, which means that your emissions become mine and mine yours. Thus, global warming.

If, say, Australia decided overnight to eliminate its carbon emissions, that fine nation wouldn’t enjoy the benefits of its costly and painful behavior unless everyone else joined in. Nor does one nation have the right to tell another what to do. The United States has in recent years sporadically attempted to lower its emissions. But when it leans on China or India to do the same, those countries can hardly be blamed for saying, Hey, you got to free-ride your way to industrial superpowerdom, so why shouldn’t we?

Look, there is nothing freaky about pointing out the negative externality and public goods problem. Millions of undergraduates are introduced to this every semester. An increase in emissions is not surprising either, but, the logical conclusion to this observation is not that climate policy is nonsensible.

This what I said* when I read the climate change chapter in SuperFreakonomics:

What bothers me most is the omission of a discussion of government policy that might be effective in reducing CO2. The strawman policy that is considered is voluntary behavior, encouraged by Al Gore's moral suasion. They argue that it won't work because physicians don't wash their hands often enough even though they know that it is in the best interests of patients. Environmental economists have long known that moral suasion is not effective in achieving the optimal amount of pollution reductions. So, while demonizing physicians makes for a nice story, I don't think it helps us understand climate policy.

Where do Levitt and Dubner stand on carbon taxes vs cap-and-trade? We don't know because those words are not mentioned. Where do they stand on Waxman-Markey? We don't know. Where do they stand on command-and-control vs economic incentives? We don't know.

The SuperFreakonomics solution to climate change was geoengineering, without the empirical evidence of the positive economics that most of Freakonomics is based on, ... and, implicitly, throw-your-hands-in-the-air adaptation.

Just as a reminder: I gave SuperFreakonomics a mostly positive review.

*Note: The Stand-Up Economist didn't like the climate change chapter either.

 

Recommended Reading: Risk and Precaution

From Alan Randall, retired chair of Agricultural, Environmental and Development Economics at Ohio State (my current position) and current professor at the University of Sydney comes, Risk and Precaution*, "a sophisticated, in-depth treatment of risk management in all of its complexities and complications." 

From the back cover:

The rational approach to decision making fails to protect us from extraordinary risks, while inflexible application of the precautionary principle could inhibit innovation. How then are we to manage the risks, uncertainties, and “unknown unknowns” of the real world? In this book, Alan Randall unravels the key controversies surrounding the precautionary principle and develops a new framework that can be taken seriously in policy and management circles. Respecting the complexity of the real world, he defines a justifiable role for the precautionary principle in a risk management framework that integrates precaution with elements of the standard risk management model. This is explained using examples from medicine, pharmacy, synthetic chemicals, nanotechnology, the environment, and natural resources conservation. This carefully reasoned but highly accessible book will appeal to readers from a broad range of disciplines, including risk management and policy applied to health, technology, and the environment.

*priced affordably--as opposed to other forthcoming books.

Just in time for the holiday season: My review of Climatopolis

Climatopolis by Matthew E. Kahn

The quick summary is that this is a great book for the general public  and should be required reading for environmentalists (but only a good book for economists -- see the next two paragraphs) . Matt accepts the mainstream forecasts of climate change, assumes that governments won't get around to dealing with it (no carbon tax) and raises the "what's next?" question. Matt then uses economic analysis to speculate about how people might adapt to climate change, which would mitigate some of the scary outcomes you hear from the scaremongers. Of course, people will adapt. People have always adapted. But ...

As I was reading as an economist, however, I couldn't get over a couple of concerns. First, Matt loves living in cities and sometimes the book degenerates into a bit of cheerleading. The impression I get is that the smart people who live in cities (I guess dumb people live out in rural areas) will adopt the magic technology and figure out the best thing to do when the world heats. For example, when describing the problems of the rural poor in developing countries, the solution to the exacerbation of those problems by climate change is that the rural poor should simply move to cities. I'm not exactly sure how that would help when there is already an urban poor problem.

Another concern is that the book mostly ignores what could be the enormous costs of adaptation (e.g., coastal cities will adapt by building seawalls), the increased costs of living in cities (i.e., traffic, poor air quality) and other costs (i.e., Matt applies a simple labor migration model to cross border migration and assume costs of migration are zero -- while firms like the lower wage workforce, when have countries welcomed immigrants with open arms?). I'm sure that this was not the intention, and the costs are mentioned, but some readers (i.e., climate change skeptics) need to hear that adaptation won't be painless.

As an economist, I'm looking forward to the second volume/edition of Climatopolis where the magic of cities is explained to non-urban economists and some of the costs are highlighted (making a better argument for a carbon tax or cap-and-trade).

Finally, to dispell some of the criticisms of the book made by folks who aren't reading closely* or read closely but don't like the message and therefore distort (I'd look for the links if I wasn't supposed to be wrapping gifts):

1. No, Matt is not arguing against rational climate policy, there are numerous passages where a hefty carbon tax is advocated.
2. No, Matt is not making forecasts (the Moscow heat wave criticism), he is speculating using microeconomic theory, probabilities and expected values (just like economists are supposed to do).
3. No, Matt is not saying climate change won't turn out really bad, he is saying that adaptation will make it less bad if it is not catastrophic (i.e., don't get distracted if Matt doesn't get climate science 100% correct, no economist will because ... we're economists! as long as we get the basics correct, our models still apply).
4. No, Matt doesn't totally overuse the word nerd,..., OK, maybe it is overused a bit!

*There is a good chance that I didn't read closely enough. The comments section is where you can tell me where I got the review wrong. Page numbers please!

I've been reading Climatopolis

Samuel Staley's review (hat tip: Matt Kahn) makes me want to preview mine:

What Kahn emphasizes in Climatopolis is that climate change policy (and sustainability for that matter) may not about universal or global policy strategies (although he favors adding a dollar or two to the gas tax). Too many cities are focused on general goals such as reducing overall carbon emissions and not enough on coping strategies, investments in adaptation, and planning (including zoning) that will be essential for their survival.

via www.planetizen.com

I finished chapter 3 last night and so far so good. The book provides a lot of insights into how folks might behave with gradually changing temperatures, more rain, more natural hazards, etc.

What has struck me so far is the assumption that the trashing of legitimate climate policy is a done deal. I think not and therefore it is still important to consider the benefits and costs of cap and trade or a carbon tax and compare that to the alternative of adaptation. Adaptation is not costless, young people will move to Fargo, sure, but we'll also build seawalls that might cause more problems than they solve.

The review excerpt above suggests that Matt will get around to discussion of a carbon tax and I'm itching to read about it.

Book Review: SuperFreakonomics

I finished SuperFreakonomics the other night and give four-fifths of it a thumbs up (chapter 5 gets a thumbs down). My guess is that if a reader picked up SuperFreak first it would give the same positive jolt to utility that Freak gave when read first. I enjoyed SuperFreak, but not as much as the first. Maybe that is due to diminishing returns? Most of the stories are good but the highlight of SuperFreak is the epilogue where we're told how monkeys learn to use fiat money, in a variety of ways. Besides the lack of economics in the climate change chapter, I can take issue with several things, including:

• Prostitutes aren't patriotic because they work on July 4th.
• The drunk walking stuff is an assertion. 
• Volcanoes don't produce positive externalities.
• The disconnect between two statements repeated more than once: "it is hard to change people's behavior" and "people respond to incentives." Huh?
• A 25% reduction in the number of "minor" injuries suffered by kids in car accidents due to car seats and relative to seat belts is shrugged off as a small reduction. It sounds like a lot fewer injuries to me. Well worth the cost of the car seat.

Yet, the strangest thing to me about the book is the unnecessary dissing of lab experiments.

I've been through this stuff before as a young researcher trying to use the contingent valuation method. After the Exxon Valdez oil spill, the stakes were raised and revealed preference types and lab experimentalists (here is how I put it recently) dumped on surveys that elicited hypothetical behavior. Researchers eventually saw revealed preference and stated preference data as complements and not substitutes. Most recently, choice experiment types are dumping on contingent valuation (er, behavior). Come on, guys, these methods aren't necessarily competing!

Anyway, who cares what I think? Here is how Falk and Heckman conclude their recent piece, which seems to be motivated by the lab vs field experiment debate, in Science (abstract):

In this context it is important to acknowledge that empirical methods and data sources are complements, not substitutes. Field data, survey data, and experiments, both lab and field, as well as standard econometric methods can all improve the state of knowledge in the social sciences. There is no hierarchy among these methods and the issue of generalizability of results is universal to all of them.

Hard to argue with that.

Now that I'm finished I can get back to Dan Brown and my bag of cheetos.

Update: Add this to the things I can take issue with:

• "Eyeballing" a too-short length of the global temp time series data and concluding cooling should not have led to a global cooling subtitle.

Here is a fairly comprehensive post detailing the negative reviews of the climate change chapter (including one of mine). And, yikes, apparently a link to it was deleted from the Freakonomics blog comments section.