Environmental Economics

Marine Resource Economics 28(4), 2013

Table of Contents
Marine Resource Economics
Volume 28 No. 4
2013

"Making Cents Out of Barter Data from the British Columbia Groundfish ITQ Market"
Daniel S. Holland

Thalassorama

"Conservation Value of Coral Reefs around Kish Island, Iran"
Shima Madani, Adán L. Martínez-Cruz, and Kenneth E. McConnell

Special Section in Honor of the Career of Professor Rögnvaldur Hannesson

"On the Contributions of Professor Rögnvaldur Hannesson to Fisheries Economics"
Trond Bjørndal and Stein Ivar Steinshamn

"Fisheries Economics and Fisheries Management: A Reflective Note in Honor of Rögnvaldur Hannesson"
Peder Andersen

"On Optimal Dynamic Fisheries Enforcement"
Ragnar Arnason

"Catch, Stock Elasticity, and an Implicit Index of Fishing Effort"
Nils-Arne Ekerhovd and Daniel V. Gordon

Commentary

"The Newfoundland Fishery and Economy Twenty Years after the Northern Cod Moratorium"
William E. Schrank and Noel Roy

MarineResourceEconomics.com

"The Bet: Paul Ehrlich, Julian Simon, and Our Gamble over Earth’s Future" is a good bet

I know you have all missed me for the last week, but I'm glad John was able to maintain the professional standards we have set for Env-Econ in my absence.  As for me, I was able to spend five days of observational field research on coastal erosion in eastern Mexico.  A few things I learned:

1. My three years of high school spanish surprisingly made for servicable conversation (Cerveza? Bano? Como se dice "Could you please repeat that in English"?)
2. It was really hard to watch what could possibly have been the greatest day of College Football ever, when the locals kept trying to turn the channel to some other game they called football. 
3. The closest major U.S. city to Cancun is Miami, Fl.  Who knew?
4. Cancun caters to U.S. tourists.  Who knew?  OK, I knew that one going in.
5. When I have a full day to sit and read, I can read a whole book.  Which is what I did with "The Bet: Paul Ehrlich, Julian Simon, and Our Gamble over Earth’s Future."  So here's my highly objective (i.e. biased) review.

The Bet is Yale University historian Paul Sabin's (no relation to Nick) telling of the story and political culture surrounding Paul Ehrlich and Julian Simon's 1980-1990 $1,000 bet over the Hotelling rule.  OK, it wasn't really over the Hotelling rule, but it was about Hotelling-like predictions of changes in depletable resource prices.  In particular, the bet focused on the change in prices of five metals (Copper, tin, chromium, nickel and tungsten--I think they made that last one up) over a 10 year period.  Whack-job dooms-day ecologist Paul Ehrlich--OK, that's unfair to Ehrlich, he is a butterfly biologist, not an ecologist (is that biased?)--famously predicted throughout the late 1960's and 1970's the coming cataclysmic collapse of the Earth's environmental/ecological systems due to natural limits and exponential population growth.

In short, Ehrlich believed that humans are but one part of the broad ecosystem, and subject to all of the natural laws and limits that come with being part of that system--including species collapse due to exceeding the system's natural carrying capacity.  Ehrlich was the loudest voice of the early zero-economic growth movement (and a contemporary of the Club of Rome and Limits to Growth).  One observable indicator of Ehrlich's and his colleagues' dire predictions would be the Hotelling-like rise in depletable resource prices over time.  As resources become more scarce (reach their natural limits), prices would have to rise.  This is a somewhat ironic prediction from Ehrlich given the lack of price rationing in the Limits to Growth-type models of world collapse, but I digress.

Julian Simon, a mild-manned Chicago-trained University of Illinois professor of marketing (who eventually ended up in the University of Maryland School of Business), disagreed with Ehrlich's basic premise that population growth necessarily strained the natural limits of the ecosystem and instead argued that scarcity creates increasing opportunity costs and opportunities for investment, exploration, discovery, innovation and development of subsitute forms of capital.  In short, Simon the economist argued that the simple form of Hotelling (prices rise in response to increasing scarcity) was correct, but the extension needs to be accounted for--increasing prices create incentives for the generation/investment/invention of alternative resources.  Simon believes that increased in population actually increased general well being, increased the stock of human capital and would ultimately result in the creation of substitute pools of resources (whether natural or man-made).  Simon believed that man-made capital would remain substitutable for depleted natural capital and resource prices would fall.

In the end, Simon won the bet and Ehrlich paid off without much fanfare.  But in Sabin's view, the bet highlighted a growing set of divides: The academic divide between ecoologists and economists on matters of the environment, the philosophical divide between growthers and zero-growthers, and the political divide between the left and the right over matters of economic management.  Sabin does an intriguing job of couching the bet within the heated political environment of the 1970's and 80's tracing the environmental movement through the national political scene from the environmental conservatism of Nixon, to the limited growth/strict conservation advocacy of Carter (not much mention of Ford), to the deregulated free-marketism of Reagan.  In the end Sabin draws lessons from both Ehrlich and Simon to make a strong and lucid case for a middle ground between the coercive population reduction arguments of Ehrlich and the free-market environmentalism of Simon. 

On a personal note, I found the book particularly useful at providing a different perspective on my own training in environmental economics.  Beginning my graduate training in 1991, the year after the bet ended, the foundations of market-based environmental interventions had already been accepted by most economists  and much of the mainstream public (to varying degrees of course).  "The Bet" provides an interesting, easy-to-read introduction to the muddy politics and social setting that served as a backdrop for the development and relevance of the field of environmental economics.  The political and public context provided by "The Bet" has helped to provide me with a much better understanding of how I ended up thinking like I do about environmental issues. 

But that's just me.

 

Daily Demand and Supply: Baltimoronomics

From John, via Newmark's Door, via Slate comes this intriguing story of the real origins of Maryland Blue Crabs:

Lots of local [Maryland] diners have a taste for blue crab. Lots of chefs and restaurateurs have good crab-based recipes. Lots of home cooks enjoy hosting crab-related events and have their own preferred methods of crab preparation. Over time, as the region's population has grown, this local crab economy's ferocious demand for crab has outstripped the local ecosystem's [Chesapeake Bay] sustainable level of crabbing. So the market demands that crabs [from Louisianna] be shipped not to crabless parts of America but to America's crab-production heartland [Maryland]—the place where the secondary and tertiary elements of the crab economy are in place, and the finished product has maximum value.

via www.slate.com

What's next?  Are they going to tell me that Natty Boh is produced in North Carolina.

Oh, the horror!

Increased demand causes increases in quantity supplied.  When the local economy can no longer supple the quantity demanded, non-local producers will increase the quantity supplied (because the relative willingness to pay is higher).

 

Table of Contents for Marine Resource Economics 28(1)

Don't miss that last book review!

Content of Marine Resource Economics Volume 28 No. 1 March 2013

Sharing a Migrating Fish Stock, Rögnvaldur Hannesson

Remuneration Systems and Economic Performance: Theory and Vietnamese Small-scale Purse Seine Fisheries, Pham Thi Thanh Thuy, Ola Flaaten, and Nguyen Thi Kim Anh

The Impact of Technical and Non-technical Measures of Water Qualityon Coastal Waterfront Property Values in South Florida, Okmyung Bin and Jeffrey Czajkowski

To Have One’s Cake and Eat it Too—Managing the Alien Invasive Red King Crab, Jannike Falk-Petersen and Claire W. Armstrong

Fisheries Management under Irreversible Investment: Does Stochasticity Matter? Diwakar Poudel, Leif K. Sandal, Sturla F. Kvamsdal, and Stein I. Steinshamn

Books Reviewed

Resource Economics: An Economic Approach to Natural Resourceand Environmental Policy, Third Edition by John C. Bergstrom and Alan Randall, Reviewed by Göran Bostedt

Contingent Valuation: A Comprehensive Bibliography and History, by Richard T. Carson, Reviewed by John C. Whitehead

Congratulations to Zinnia Mukherjee and Kathleen Segerson who receive the 2011 Dr. S.-Y. Hong Award for Outstanding Article in Marine Resource Economics Volume 26

The editors of Marine Resource Economics are pleased to announce the recipients of the 2011 Hong Award for Outstanding Article in MRE. Established by Dr. Seoung-Yong Hong, President, Inha University, Incheon, Korea, this award is given annually to recognize outstanding works published in MRE.

Zinnia Mukherjee and Kathleen Segerson, Turtle Excluder Device Regulation and Shrimp Harvest: The Role of Behavioral and Market Responses, MRE Vol. 26(3):173-189

Award Selection:

Selection is made annually by the associate editors of Marine Resource Economics. Only articles that have been published in Marine Resource Economics are eligible for consideration. The award consists of a monetary prize and recognition on a perpetual plaque housed in the Department of Environmental & Natural Resource Economics at the University of Rhode Island.

They're here*

Cue Carol Anne:

Federal authorities on Wednesday announced that about 1,900 square miles of Atlantic Ocean waters are open for building offshore wind farms, making North Carolina the nation’s new energy hotspot for planting forests of whirling turbines in the high seas.

The U.S. Department of Interior identified a combined sector that’s larger than any such previously designated for hosting the 400-foot turbines. Two of the maritime blocks are between Myrtle Beach and Wilmington, while one lies beyond the Outer Banks, across from Kitty Hawk, Nags Head and Manteo.

A host of developers are expected to express interest, setting the stage for a federal lease auction as early as next year to allow projects to move forward. North Carolina’s ocean waters are considered to have some of the best wind resources along the East Coast. What’s more, the offshore areas picked by the feds have the advantage of being near populated regions with existing transmission capacity and other infrastructure needed to move gigawatts of electricity onto the power grid.

But offshore wind energy remains among the most expensive forms of electricity today, and building a wind farm in the sea has proven an elusive goal in this country. The industry is still distrusted by some as a subsidy-dependent boondoggle, even though advocates depict wind energy as a clean and safe alternative to mining, fracking, energy imports and nuclear waste.

An offshore wind farm long planned in Nantucket Sound off Cape Cod in Massachusetts is tied up in legal challenges, while plans to build one in Delaware waters fell through in recent weeks because of the likely expiration of federal tax incentives for these multibillion dollar projects. ...

One company that expects to file a notice of interest in bidding for leases is Arcadia Offshore, the New Jersey company whose Delaware deal collapsed for lack of subsidies. Arcadia president Peter Mandelstam ...

... acknowledged that with historically low natural gas prices, no utility is likely to buy offshore wind power unless it’s required to do so by state regulators or lawmakers. The argument for investing in wind power is that it’s an emissions-free source of electricity with a fixed price, as opposed to wagering on natural gas, which could spike in price and strand consumers with soaring bills, he said.

via www.newsobserver.com

You can say a lot of things about me, and people do, but one thing people can never say is that I missed an opportunity to suggest you look at some of my research. 

*It has been a long time since we titled a post "A mighty wind" and I almost did it this time, but doesn't the thought of wind turbines in North Carolina send chills down your spine? No? What, are you some sort of hobgoblin?

An example of the dangers of an unregulated extractive monopoly

From the New York Times:

For seven decades, Pemex, Mexico’s state-owned oil monopoly and a mainstay of the government’s revenue, regulated itself — which is a polite way of saying it could do pretty much as it pleased.

The Mexican government relies on Pemex oil revenue from wells like these in Veracruz for as much as 40 percent of its budget.

No authority challenged the wisdom of investments like the billions it has spent here in the Chicontepec oil field to extract just a trickle of petroleum even as private companies have pulled torrents from similar shale rock in Texas and North Dakota.

The company’s safety procedures went largely unscrutinized as it joined the oil majors drilling in deepwater areas of the Gulf of Mexico. And the company faced no serious consequences for not keeping its promises to raise output or operate more efficiently.

But in the last few years, that has begun to change. The tiny National Hydrocarbons Commission, created by the Mexican Congress in 2008 to increase regulatory oversight of the company, is proving to be a surprisingly sharp thorn in Pemex’s side.

The five-member panel of energy specialists, which has a staff of 61 and an annual budget of about $7 million, has begun to confront the company’s executives over where and how they drill for oil. With a raft of new regulations and its own blunt assessments of the practicality of Pemex’s projects, the commission is pushing the company to explain its plans.

Pemex does not have to follow the regulators’ recommendations, but the commission’s young president, Juan Carlos Zepeda, is speaking out when it does not.

“The strength of the commission is in public opinion,” said Mr. Zepeda, 42, an economist who contends that Pemex, officially Petróleos Mexicanos, should be more transparent as it spends $20 billion this year to find and pump oil. “The force of change will come from Congress, from opinion leaders, from national universities, from society.”

... In the last few weeks, Pemex and the chief of its production and exploration subsidiary, Carlos Morales Gil, have begun responding to the pressure. The company officially reduced its estimate for probable reserves in Chicontepec by about 30 percent, to 6.49 billion barrels of oil equivalent, ending two years of wrangling with Mr. Zepeda’s team.

Then, at the end of March, Pemex announced that it had signed a contract with Wild Well Control, a Houston company that handles oil well disasters, including the 2010 BP spill, to provide deepwater containment systems, and it is in talks with a consortium of gulf oil companies to provide additional services. Pemex is also analyzing whether it should buy additional insurance for the deepwater wells, Mr. Morales said.

"Senators unveil bill to funnel oil-spill penalty money to Gulf"

The Hill's E2-Wire:

A bipartisan group of senators floated legislation Thursday that would funnel billions of dollars in fines from last year’s oil spill to Gulf Coast states.

The legislation mandates that 80 percent of Clean Water Act penalties eventually imposed on BP or other companies deemed responsible for the spill go to five Gulf states. Under current law, penalty money goes to the federal Treasury. ...

In total, 35 percent of the penalty money is evenly split among the five Gulf coast states under the legislation. Thirty percent goes to a Gulf Coast Ecosystem Restoration Council and another 30 percent is divvied up among states based on those most heavily affected by the spill. The remaining 5 percent will be allocated equally for Gulf science and fisheries programs.

BP and the other companies deemed responsible for the spill face billions of dollars in penalties. If BP is deemed negligent under the Clean Water Act by the courts, the company will have to pay $1,000 for every barrel of oil spilled into the Gulf. If the courts find that BP was grossly negligent, the company will have to pay $4,200 per barrel.

Last year's spill spewed about 4.9 million barrels of oil into the Gulf, meaning BP could have to fork over between $5.4 billion and $21.1 billion.

Stingray Point

Nothing happens in this video, which gives you an idea of what I did a couple of days ago ... my first sailboat ride.

 

"BP to Pay $1 Billion for Gulf Restoration"

I burned one of my freebies on this one, I should at least get a blog post out of it:

BP will provide $1 billion for early oil spill restoration efforts in the Gulf of Mexico in a voluntary agreement with the federal government and five states, company and government officials announced on Thursday.

The agreement, the largest of its kind in an oil pollution case, does not absolve BP of legal liability for the explosion and spill that occurred April 20, 2010, or from the costs of any additional economic and environmental damages. The company faces fines and penalties of as much as $21 billion as a result of the disaster, the worst offshore drilling accident in United States history. The company could face additional penalties under a Justice Department criminal and civil investigation.

The advance payment, to be divided among the states and the two lead federal agencies overseeing restoration efforts, will be used to rebuild coastal marshes, replenish damaged beaches, conserve ocean habitat and restore barrier islands.

The $1 billion does not represent the governments’ estimate of the ultimate environmental cost of the explosion and spill, which poured nearly five million barrels of oil into the gulf over 87 days last year. Federal and state officials are conducting a review known as a natural resource damage assessment to measure the injury to the gulf habitat and devise a plan for restoring it, a process that generally takes years. Any restoration efforts financed by the $1 billion will count toward the company’s final liability, officials said.

via www.nytimes.com