Nobel Laureate's Perspective on Environmental Governance

1. 由2009諾貝爾獎經濟學得主談起 Chi, Tze-wen Retired Assoc. Prof. Dec. 29, 2009

2. Outline • Common-Pool Resources (Common Goods) • Elinor Ostrom’s Work • Kuznets Environmental Curves • Basic Legal Documents • A Broad Brush Model • Pause for Thought

3. Goods/services Classification

4. Elinor Ostrom’s Work • Hardin’s Tragedy of the Commons • Prisoners’ Dilemma • Ostrom’s Institutional Design

5. Ostrom’s Institutional Design • Clearly defined boundaries • Congruence between appropriation and provision rules and local conditions • Collective-choice arrangements allowing for the participation of most of the appropriators in the decision making process • Effective monitoring by monitors who are part of or accountable to the appropriators • Graduated sanctions for appropriators who do not respect community rules • Conflict-resolution mechanisms which are cheap and easy of access • Minimal recognition of rights to organize (e.g., by the government) • In case of larger CPRs: Organisation in the form of multiple layers of nested enterprises, with small, local CPRs at their bases

6. Nobel Laureates Whose Works Relating to Environment • Economics 1991, R. Coase,: Property right & transaction cost. • Chemistry1995, P. Crutzen, M. Molina, S. Rowland: Ozone destruction by NOx & Cl. • Peace 2007, Al. Gore: Global climate changes. • Economics 2009, E. Ostrom, O. Williamson: Governance of commons, transaction cost, and firm’s boundaries.

7. Chinese Nobel Laureates • Physics 1957, Chen-ning Yang, Tsung-dao Lee • Physics 1976, C .C. Ting. • Chemistry 1986, Y. T. Lee • Physics 1997, Steven Chu • Physics 1998, Chee Tsui • Literature 2000, Xingjian Kao. • Chemistry 2008, Roger Y Tsien • Physics 2009, Charles Kao

8. Urban popu without adequate sanitation Popu without safe water Urban SO2 concentration Urban PM concentration Municipal wastes per capita CO2 emissions per capita Kuznets Environmental Curves World Bank Report(1992)

9. 中華民國憲法增修條文/民國94年 第 十 條 第二項: 　　 經濟及科學技術發展，應與環境及生態保護兼籌並顧。

10. 環境基本法 第  三  條 基於國家長期利益，經濟、科技及社會發展均應兼顧環境保護。但經濟、科技及社會發展對環境有嚴重不良影響或有危害之虞者(p)，應環境保護優先(q) 。 Proposition: If p, then q 。

11. Declaration of Independence • It is an argument (Syllogism): • If p, then q • P • Therefore q http://www.ushistory.org/declaration/document/index.htm

12. Economic Activity X Economic Output Y Ecosystem Services Z Human Welfare W A Broad Brush Model (Consider a Cylindrical Cow, by John Harte)

13. Assumptions for functional relationship: • W (human welfare) = aYZ • Y (economic output) = bXZ • Z (environmental condition) = Zo – cX • where a,b,c are parameters, Zo stands for pristine or initial environmental condition.

14. Problem 1: Maximize economic output (GNP) • Max. Y = bXZ • S.t. Z = Zo – cX • Or Max. Y = bX(Zo – cX). • Setup N.C. for solution (with subscript 1): • X1* = Zo/2c • Z1* = Zo/2 • Y1* = b(Zo)2/4c • W1* = ab(Zo)3/8c

15. Problem 2: Maximize human welfare • Max. W = aYZ • S.t. Y = bXZ, Z = Zo – cX • Setup N.C. for optimal solution (with subscript 2): • X2* = Zo/3c • Z2* = 2Zo/3 • Y2* = 2b(Zo)2/9c • W2* = 4ab(Zo)3/27c

16. Comparison • Human welfare W1*/ W2* = 27/32 • Economic output Y1*/ Y2* = 9/8 • Economic activity X1*/ X2* = 3/2 • Environmental condition Z1*/ Z2* = ¾ • Refer to www.gapminder.org

17. Discussion: • Shadow price of Zo: d(W2*)/d(Zo) (Zo)2 • Functional forms • Parameter values • More linkages • Dynamics

18. Thank for your attention ~

19. For your brains ( and mine) • Economic development is a N.C. for human welfare enhancement. • Is subsidy for scooters a N.C. or S.C. for air quality improvement? • What are N.C. (S.C.) for ambient O3 reduction? • Is halting over-drafting of ground water a N.C. or S.C. for land subsidence prevention? • For Prevention, control N.C., whereas implement S.C. for Promotion