Environmental Economics

An economist reviews Dan Brown's 'Inferno'

Warning: Spoiler Alert below the jump.  If you haven't read 'Inferno' yet, don;t read below the jump, I'm going to give away the plot and ending.

I recently finished reading Dan Brown's (author of The Da Vinci Code) newest book 'Inferno.' As a casual reader of the book, I found it entertaining.  Brown does his typical job of keeping the action moving, mixing in some interesting conspiracy theories, making me want to visit some cities I've never been to, and making it seem like being a college professor might be cool (although I have my doubts).  I didn't enjoy it as much as The Da Vinci Code, which I didn't enjoy as much Angels and Demons, but still a good read (and I refuse to accept that The Lost Symbol was written). 

But, as an economist, I found the book to be complete nonsense. 

Why?  Read below the jump (SPOILER ALERT AGAIN).

Things I've learned about travel and England

I know many of you are wondering to yourself 'Where is Tim and why hasn't he posted in a few days.  I enjoy Tim's posts so much more than John's."  Well, I'm in England (Plymouth to be precise) for a three day workshop on trends in U.S. and U.K. appraches to ecosystem valuation--I'm representing the U.S. perspective in case you were wondering.  Anyway, I will have more on the workshop later, but for now I wanted to give you things I've learned about traveling to England.  Please keep in mind, as if you needed reminding, I am a stupid American.  

Thoughts (In chronological order):

• Getting up at 3:30AM to catch a flight sucks.
• Getting up at 3:30AM to catch a flight after staying up until 12:00AM the previous night sucks more.
• Getting up at 3:30AM to catch a flight after staying up until 12:00AM the previous night on the night when the the U.S. decides to still observe daylight savings time (or goes off daylight savings time, I can never keep that straight) sucks worse.
• Getting up at 3:30AM to catch a flight after staying up until 12:00AM the previous night on the night when the the U.S. decides to still observe daylight savings time (or goes off daylight savings time, I can never keep that straight) only to learn upon landing at Dulles airport that your flight to London has been cancelled...well you can fill the rest in.
• Twelve hours in an airport is boring.
• I can actually sleep on a plane.
• But I chose to first watch a movie (The Life of Pi), because 1) it was free and 2) I'm stupid.
• At Heathrow airport they make you walk approximately 5K (3.1 miles American--see how I slipped in the European metric there?) to get to customs.  That's a long way after sleeping only 5 hours total in the previous 48.
• Paddington Station does look like the kind of place a cuddly bear in a blue raincoat would really want to hang out.
• People in Paddington Station seem as though they are all in a hurry.
• Everything around Paddington Station looks the same.  It is hard to tell the houses from the hotels from the dentist office.
• Light switches--down is on, up is off? Can we get a little uniformity please?
• You have to turn on the outlets or your computer, cell phone and ipad won't charge.  Just sayin'.
• You have to turn on the outlets?
• Again, Down is on, up is off.
• Even if a shower has a faucet on the wall, and even if you stand to the side, it doesn't mean that if you turn on the water you won't get an unexpected freezing shower from the other facucet on the ceiling.
• The open bus tour is a great way to see London if you only have a few hours.
• Correct that.  The open bus is a great way to see London if you only have a few hours and it is above 0 degrees Celsius (That's 32F for you Americans).  Otherwise, it's freaking cold up there.
• A lot of buildings in London are very old and remind me of that movie Mary Poppins or those books by that Charles Dickens guy.
• Fish and Chips is really just fried fish and French Fries.  I think they named it something fancy to trick us stupid Americans.
• Riding trains is fun.  Especially if you have a backwards seat.
• Sheep.  A lot of them. Just an observation from the window of the train.
• Not sure why England has a reputation for dreary weather with sunsets like this...

Using the Tragedy of the Commons to the benefit of society

In a different context (Asian Carp), I have advocated for taking advantage of the Tragedy of the Commons to eliminate invasive species.  The principle is simple:  Given the proper incentives and open access, anglers/hunters/gatherers will overfish/overhunt/strip a common property resource into non-existence.  Looks like the State of Florida may be figuring this out:

Nearly 800 people signed up for the month-long “Python Challenge” that started Saturday afternoon. The vast majority — 749 — are members of the general public who lack the permits usually required to harvest pythons on public lands.

“We feel like anybody can get out in the Everglades and figure out how to try and find these things,” said Nick Wiley, executive director of the Florida Fish and Wildlife Conservation Commission. “It’s very safe, getting out in the Everglades. People do it all the time.”

Twenty-eight python permit holders also joined the hunt at several locations in the Everglades. The state is offering cash prizes to whoever brings in the longest python and whoever bags the most pythons by the time the competition ends at midnight Feb. 10.

via www.washingtonpost.com

This is awesome.  Using the power of incentives and the willingness to the many to take advantage of what would regularly be viewed as a market failure may in fact solve a different inefficient allocation of ecological resources.  An odd case of the theory of second best?

That's $160,784 worth of trees*

Sheesh, why do I have to learn about a national environmental travesty from the Brits**?

It was billed as a triumphant parade for a big chunk of history, but the space shuttle Endeavour's procession through Los Angeles has come with a catch: the city must chop down 400 trees.

Authorities have started felling some much-loved trees to let Nasa's pride and joy rumble from LAX through streets and boulevards to its final home at the California Science Center.

Some residents have protested against the sacrifice of pines, myrtles and magnolias and other species lining the 12-mile route, saying it's a high price for a two-day parade dubbed "mission 26", following the shuttle's 25 missions orbiting Earth.

...

"The move of the shuttle allows the city to be a part of this national endeavor," Sabrina Barnes, Inglewood's director of parks, recreations and library services, told the LA Times. "And gives the chance to address problematic trees that have eroded the landscape."

I have a feeling "problematic" means "ugly, in my snooty suburban elitist opinion."

*I'm extrapolating.

**Note, I have nothing against the English, I just get perverse pleasure from referring to the esteemed English gentleman with whom I work and who pointed me toward this story in The Guardian, a Brit, and then watching him bristle in his fine English way.

A 38.3" diameter Northern Red Oak on a midwest college campus is worth exactly $401.96 per year

I was recently made aware of signs going up on OSU's campus listing the annual Ecological Benefits of trees on campus (apparently this has been going on for a while, but I rarely venture outside my building, unless I'm getting in my car).  Here is a sign for a Northern Red Oak near my building:

Unfortunately the sign has no information on how the benefits are calculated other than a reference to the website treebenefits.com/calculator which at press-time isn't working.  Nevertheless, this seems like a great project--or at least a discussion example--for a cost/benefit class.  Some questions come to mind:

• What are the appropriate methods for valuing the multiple ecological benefits of campus trees?
• Are benefits additive across services?
• Are benefits additive across trees (that is, is the Northern Red Oak next to the one in this picture worth $402 also? and If so, are the two together worth $804?)
• What is the present value of the annualized stream of benefits (quick estimate--assuming an infinite life for the tree and a 5% dicount rate, the annual benefits of $402 per year in perpetuity are worth $8,040 today)?
• What is the variation in the estimate?
• Why was I not asked to help make these signs?

Feel free to add your questions in the comment section. 

 

The Lorax: An env-econ economist's review

So we took the family to see The Lorax yesterday.  First, as an entertainment experience I would say it was fine.  Visually impressive, mildly amusing and all three kids (from age 10-15) seemed to enjoy it.  And as long as the kids were happy, I guess it was worth the money.

With that, I have a bone to pick with the economics of Dr. Seuss.

Warning: Spoiler alert for those of you who have never read or seen The Lorax.

At its core, The Lorax is a story of corporate greed and its affect on the environment.  An initially well-meaning entrepreneur, the Once-ler, harvests the tufts of the Truffula trees to produce a thing that everyone needs, a Thneed.  At the urging of Louis DePalma, er, The Lorax, who speaks for the tree, the Once-ler establishes a production process based on harvesting the Trufulla tufts without chopping the trees.  Ultimately, due to the high opportunity cost of harvesting the tufts while leaving the trees intact, the Once-ler succumbs to greed, abandons principle and prior agreements with Frank Reynolds, er, The Lorax, and resorts to cutting the trees before harvesting the tufts.  In the end, greed corrupts and the Once-ler ends up cutting all the Truffula trees, going bankrupt and leaving the forest bare.

A classic tragedy of the commons outcome...right?

Wrong.

Here's the problem from my inner environmental economist's, er dork, point of view.  Dr. Seuss either 1) is intent on portraying the entrepreneurial Once-ler as a horrible businessman, or, 2)  fails to understand the conditions necessary for the tragedy of the commons. 

In The Lorax, the Once-ler drives himself out of business.  In his efforts to make as much money as possible, he completely depletes a renewable resource.  Now, on the surface this seems like it might be consistent with the overexploitation of potentially depletable resources, but if a potentially depletable resource like a forest, is harvested by a monopolist, then the monopolist has every incentive to harvest the resource sustainably--that is, maximinizing the present value of the stream of future profits.  Assuming Truffula trees regrow, which they obviously do since the The Lorax ends with the planting of a single Truffula seed which eventually regenerates the forest, the Once-ler has no incentive to chop down all the trees.  That's not profit maximizing. 

You see, the tragedy of the commons occurs from competition combined with open access.  The only incentive the Once-ler would have to chop down all the trees would be to beat a competitor to the profits of the trees being left in the ground.  But nowhere in the The Lorax is there mention of any potential competitors swooping and racing for profit.  If the Once-ler felt he had exclusive rights to the forest, he would have every incentive to maintain a renewable stand of Truffula trees.  It might be a smaller stand than is socially optimal, but it wouldn't be zero. 

So, either the Once-ler was a horrible businessman, Dr. Seuss was a bad economists, or I overanalyze kids movies.

And for some reason my kids failed to find my discussion of economics and the failings of Dr. Seuss interesting on the car ride home.

"Is 'environmental economics' an oxymoron after all?"

Gernot Wagner:

Despite all the talk about environmentalists and economists needing to join forces, there’s one underlying, deeply inconvenient truth: Environmentalists and economists often see the world from two entirely different points of view.

via www.gwagner.com

I'd add a link to my take on the oxymoron question but The Energy Collective deleted all of my "exclusive" posts.

Not that there is anything wrong with that.

Rock snot*

As an algae with a gross nickname invades pristine trout streams across the U.S., Maryland is about to become the first state to enforce a ban on a type of footgear the organism uses to hitchhike from stream to stream: felt-soled fishing boots.

The state Department of Natural Resources plans to prohibit wading with felt soles starting March 21 to curb the spread of invasive organisms that can get trapped in the damp fibers and carried from one body of water to another.

Similar bans will take effect April 1 in Vermont and next year in Alaska, aimed especially at didymo, a type of algae that coats riverbeds with thick mats of yellow-brown vegetation commonly called "rock snot."

Maryland fishery regulators say didymo, short for Didymosphenia geminata, can smother aquatic insect larvae such as mayflies, stoneflies and caddis flies that are favored food for trout.

via washingtonexaminer.com

*Not a lot of economics content here--beyond the obvious externality created by invasive species--I just wanted an excuse to post the name 'Rock snot.'

The Smart Money's on me

"Even in tight-wallet times, a surprising number of consumers have shown they're willing to pay a premium for environmentally friendly products. Hybrid cars have more than doubled their market share in the U.S. since 2005. And spending on energy-related home-remodeling projects has been resilient, despite the housing downturn; it totaled $49 billion in 2009, up 29 percent since 2003, according to Harvard University's Joint Center for Housing Studies. But having paid a little extra to go green, many consumers are now encountering an unexpected irritation: They have to pay more than their neighbors to stay green. The price of maintaining, repairing and even getting insurance for green products can often be higher than for their ordinary counterparts. "There are hidden costs that people don't think about," says Tim Haab, an environmental economist and a professor at Ohio State University. And with many tax credits for energy-efficient upgrades likely to expire soon, some consumers are finding themselves having to recalculate the cost of being eco-conscious." http://www.smartmoney.com/spending/for-the-home/the-hidden-cost-of-gong-green-1292011716331/

Your facts are wrong. That 't' should be a 'T'

From the inbox:

My name is XXXX, and I am a fact-checker at SmartMoney magazine based in New York. I believe you corresponded with one of our writers, Anna Prior, for an upcoming story. I therefore have a few quick questions, to make sure we don't have any errors. Please let me know ASAP if any of the following is incorrect:

• Your name is spelled Tim Haab

Yep.

• From what I understand, you talked about how there can be hidden costs associated with going green that people don't always think about. For example, the price of maintaining, repairing and getting insurance for green products (such as cars, appliances, etc.) can be higher than for non-green alternatives.

Yep.

• You are an environmental economist and professor at the Ohio State University

Close.  From the Visual Identity Guidelines for The Ohio State University:

The logo consists of a solid box with the words "The Ohio State University" reversing out of it.