Environmental Economics

"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.

 

Women in economics in the Chronicle of Higher Education

Kate Bahn ("a doctoral student in economics at the New School for Social Research and a writer and co-editor at LadyEconomist.com) in the Chronicle:

So the problem is really twofold: Women have been discouraged and excluded, and those who make an impact anyway have had their contributions discredited. Add these together, and economics has a long history of being a macho science as well as a dismal one.

So that’s the state of play. That said, women have made huge gains in the field over the past 40 years. According to the American Association of Economics’ Committee on the Status of Women in the Economics Profession (CSWEP), 35 percent of new economics Ph.D.’s are women, up from about 7 percent in the 1970s.

Dig a little deeper, though, and the signs are less encouraging. ...

A disproportionate number of women remain stuck in certain subfields. In 2006, a study by the UK-based Centre for Economic Policy Research found that there is a great deal of path dependence in economics: Women are drawn to those areas where they are already better represented. So while there are pockets of female economists within certain subfields, there’s still a major disparity across the field as a whole. ...

In the coming months, I’ll write more about what this all means, for women and for the field as a whole. For now, I won’t delve too deeply into my experiences as an openly feminist economist and the eye-rolls I get from some of my peers whenever I suggest we hold more lectures and classes on feminist economics. Discussing that subfield just opens up a whole other can of worms, except yuck, girls don’t like worms.

This should be an interesting series. 

Twenty-eight percent of our sample of AERE members are women and there are some gender differences on some of the items (if anyone wants to dig deeper and look at the data for men vs women split, let me know and the data is all yours).

I'm not sure where environmental and resource economics falls in the quant to caring field range. Probably closer to caring? Since we *might* care more about environmental issues than other economists?  

 

From Hopeless to Curious? Thoughts on Hausman's “Dubious to Hopeless” Critique of Contingent Valuation

For those who have followed our anticipatory posts, good news in the inbox this morning:

I am pleased to inform you that Oxford Journals has published your article [From Hopeless to Curious? Thoughts on Hausman's "Dubious to Hopeless" Critique of Contingent Valuation by Timothy C. Haab; Matthew G. Interis; Daniel R. Petrolia; John C. Whitehead] in Applied Economic Perspectives and Policy.

Here's the abstract:

Hausman “selectively” reviewed the contingent valuation method (CVM) literature in 2012 and failed to find progress in the method during the 18 years since Diamond and Hausman argued that unquantified benefits and costs are preferred to those quantified by CVM. In this manuscript, we provide counter-arguments to Hausman's claims, not with the intent to convince the reader that the debate over CVM is settled in favor of the method, but rather to argue that the intellectual debate over CVM is ongoing, that dismissing CVM is unwarranted, and that plenty of work remains to be done for the truly curious researcher.

For those who want to read the full paper, click here.  Once you click, be sure to download a full text version of the paper (either pdf or html)...OFTEN...one for each computer, iPad or iPhone you own.  And I'm sure you need a copy for your office, your living room, your kitchen, your bathroom (probably the most appropriate place)...

We want to give Harry de Gorter and David Just a run for most downloaded AEPP article: 20,500 full text downloads to date. 

And don't forget to cite our paper in every contingent valuation paper--oh what the hell--every paper you write.  Just cut and paste this:

Haab, Timothy C., Matthew G. Interis, Daniel R. Petrolia, John C. Whitehead. "From Hopeless to Curious? Thoughts on Hausman's "Dubious to Hopeless" Critique of Contingent Valuation."
Applied Economic Perspectives and Policy. 2013. doi: 10.1093/aepp/ppt029.

And don't forget to put it on your class reading list. Just cut and paste this:

Haab, Timothy C., Matthew G. Interis, Daniel R. Petrolia, John C. Whitehead. "From Hopeless to Curious? Thoughts on Hausman's "Dubious to Hopeless" Critique of Contingent Valuation."
Applied Economic Perspectives and Policy. 2013. doi: 10.1093/aepp/ppt029.

And since the Nobel Committee set a precedent this year for giving the prize to economists with opposing views, if Hausman is to ever win the prize, I think it's only logical that we join him on stage.

Did I mention you can (and should) download a copy of the full paper by clicking here?

Environmental and Natural Resource Economics: An Encyclopedia (coming soon)

Look what we just got in the inbox! It's not the actual encyclopedia, just the cover art.  But, for those of you who are planners, you can order it in advance on Amazon for $71.20.  Just imagine the picture below in the little spot where it says 'No Image Available.'

We can't claim to be Nobel Prize winners, but I did sleep in a Holiday Inn Express last night

Hey John, looks like we have some competition for our FORTHCOMING encyclopedia titled "Environmental and Natural Resource Economics, available for pre-order on Amazon for the low price of $71.20 (with a picture above).

And the competition comes from "Nobel Peace Prize winner"* and musician extraordinaire J. Shogren.

*..."the Intergovernmental Panel on Climate Change was awarded a Nobel Peace Prize for its research establishing a connection between human activity and global warming. Shogren was one of 2,000 scientists and researchers on the panel.

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).

If only we could figure out a way to value dolphins

Warning, blatant self-and-John-promotion ahead.

So I was reading this CNN story this morning about the recent increase in bottlenose dolphin deaths on the east coast.

The carcasses of dozens of the marine mammals, seven times more than normal, have been washing up on beaches this summer, and scientists are struggling for answers to the die-off.

In Virginia alone, at least 164 dead dolphins have been found this year, said Joan M. Barns, public relations manager for the Virginia Aquarium in Virginia Beach. Almost half of those, 78, have washed ashore in August, she said.

As of Tuesday, federal authorities say, they have recorded 228 dolphin deaths this year from New York to Virginia. In all of 2012, 111 deaths were recorded.

'Why,' you ask, 'would I bother reading about dolphins?' Well, I'm glad you asked.  First, dolphins are cute.  And B), I seem to have spent a significant portion of my adult life studying ways to use economics to inform decision makers on environmental and natural resource disasters.  So, upon reading of an anomolous (that's odd) increase in dolphin deaths, I naturally wonder, what are the costs of dolphin deaths, and what are the benefits of preventing dolphin deaths? 

So how do I find teh value of a dolphin.  Naturally I turn to the only reliable source for finding such information...Google.  So I Googled 'value of a dolhin.'  No, reallym, that's what I Googled.  because my typing skills suck.  Fortunately, Google planned for my sucky typing skills and gave me results for 'value of a dolphin.'*

The first entry that came up was this Guardian story from 2012 asking, fortuitously, 'how much is a dolphin worth?'   Using my amazing powers of recognition, I recognized the potential usefulness of the story and read:

At its most basic, the process now consuming teams of BP and government scientists and lawyers revolves around this: How much is a dolphin worth, and how exactly did it die?

...

"It is extraordinarily difficult to monetise environmental harm. What dollar value do we place on a destroyed marsh or the loss of a spawning ground? What is the price associated with killing birds and marine mammals? Even if we were capable of meaningfully establishing a price for ecological harm, there is so much that we do not know about the harm to the Gulf of Mexico – and will not know for years – that it may never be possible to come up with an accurate natural resource damage assessment," said David Uhlmann, a law professor at the University of Michigan and a former head of the justice department's environmental crimes section.

Warning: Snark ahead. Well, gee, if only the lawyers could figure out a way to value environmental harm?  Or a way to place a dollar value on dead birds or marine mammals.  Maybe, just maybe, a bunch of people should get together and think about how lessons learned from how people place values on things like blenders and hamburgers can be translated into ways to place values on things like oil spills, or fish kills, or fish species, or natural hazard mitigation.  And, maybe, with some pie-in-the-sky thinking, these new methods for valuing the impossible might develop to the point where someone could write a book explaining the methods with an obtuse title like "Valuing Environmental and Natural Resources."

Maybe.  Oh, Maybe.  Someday.  One can hope.

*Have I ever mentioned that I am convinced that Google is the greatest invention ever? 

What do you do when you meet the anonymous referee who trashed your work?

You write it up and send it to the Chronicle:

Although I expected that he would be at the conference, I hoped he wouldn't attend my presentation. He did. But even in my wildest imagination I never could have foreseen that over the next three days we would share each other's company over breakfasts, dinners, and drinks. It was as if my academic karma had gone grievously awry in a previous life.

This was, after all, the scholar who had trashed (with prejudice) my book during the peer-review process and thereby scotched any chance I had with my original publisher ...

"How to Write an Anonymous Peer Review"

Kevin Haggerty (editor of the Canadian Journal of Sociology) in the Chronicle:

Writing anonymous peer reviews is an academic "black art." Such assessments are vital to scholarly publishing but we receive no formal training in how to write one.

Drawing on my own experiences as an author and editor, I would like to offer guidance about this for young scholars. Some of my observations are particularly germane to the social sciences, but many recommendations pertain to publishing across all disciplines.

Read the rest.

I don't even have time to read this morning

Recommended reading (Inching Toward Energy Independence in America):

Across the country, the oil and gas industry is vastly increasing production, reversing two decades of decline. Using new technology and spurred by rising oil prices since the mid-2000s, the industry is extracting millions of barrels more a week, from the deepest waters of the Gulf of Mexico to the prairies of North Dakota.

At the same time, Americans are pumping significantly less gasoline. While that is partly a result of the recession and higher gasoline prices, people are also driving fewer miles and replacing older cars with more fuel-efficient vehicles at a greater clip, federal data show.

Taken together, the increasing production and declining consumption have unexpectedly brought the United States markedly closer to a goal that has tantalized presidents since Richard Nixon: independence from foreign energy sources, a milestone that could reconfigure American foreign policy, the economy and more. In 2011, the country imported just 45 percent of the liquid fuels it used, down from a record high of 60 percent in 2005. ...

How the country made this turnabout is a story of industry-friendly policies started by President Bush and largely continued by President Obama — many over the objections of environmental advocates — as well as technological advances that have allowed the extraction of oil and gas once considered too difficult and too expensive to reach. But mainly it is a story of the complex economics of energy, which sometimes seems to operate by its own rules of supply and demand.

No comment, as I have only read one+ of five web pages. It appears to be a must read for anyone interested in energy, the environment and economics. Later, I may have something inane to say (fingers crossed).

And here is a new (to me) pop-up box from the NY Times:

Beginning in April, visitors to NYTimes.com will have access to 10 free articles per month instead of 20.