Chapter 3

1. Chapter 3 MEASURING RISK Decisions in life ruled by Risk and Cost Take Hwy at 70 or side road at 35? • How likely will someone or something be hurt?  • How much will it cost to prevent? • Probability versus Possibility

2. Chapter 3 RISK ASSESSMENT • Facts and assumptions to estimate probability of harm. • Well known versus little known actions. • Animal tests versus human responses. (example: carcinogens) • Estimates of probabilities. • Not all people respond the same. • Err on the side of safety.

3. Chapter 3 • RISK MANAGEMENT  • Decision making process: 1.            Which risks have highest priorities? 2.                  Cost to reduce risks?  3.                  Where to spend limited dollars? • 4.                  How much risk is acceptable? • 5.                  How to enforce? • Answers to questions are controversial • Science is often incomplete • We often don’t understand the risks we accept and those we won’t.

4. Chapter 3 TRUE AND PERCEIVED RISKS • Daily, common events and infrequent but dramatic events. • “Experts” and the “public” often differ. • public trust of experts • Degree of risk that is acceptable • zero risk vs. negligible risk • voluntary vs. involuntary risk • What is the proper balance?

5. Chapter 3 ECONOMICS AND ENVIRONMENT • To achieve long-term economic growth while improving/sustaining the environment. Whose goal? • Economics are associated with environmental issues---Resource Allocation

6. Chapter 3 ECONOMIC CONCEPTS • “Goods” or “services” are those things that are scarce. • “Resources” make goods and services available. • “Supply” is the amount of goods or services available. • 1.                  raw materials • 2.                  amount available • 3.                  cost to utilize raw material • 4.                  competition for raw material • 5.                  feasibility of recycling material • 6.                  societal costs • “Demand” is the amount of goods or services that are being purchased. • Supply/Demand curve

7. Demand Supply Chapter 3 Demand is the amount of goods or services that consumers are willing/able to buy at various prices. Supply is amount available. When supply exceeds demand, must lower prices to sell product

8. Chapter 3 • MARKET-BASED INSTRUMENTS • Supplement but do not substitute • Require open dynamic market system, other aspects of more developed nations. • 1.                  Information Program • 2.                  Tradable Emissions Programs • 3.                  Emission Fees, Taxes and Charges • 4.                  Deposit-Refund programs • 5.                  Subsidies

9. Chapter3 COST-BENEFIT ANALYSIS •  1.                  ID the project. •  2.                  Determine all impacts (+ and -). •  3.                  Value of impacts. •  4.                  Calculate cost/benefit ratio -- profits? CONCERNS • Does everything have economic value? • How can you determine all impacts (both + and -)? • Assumes that money is the most important thing.

10. Chapter 3 SUSTAINABLE DEVELOPMENT • “Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” • Is economic growth necessary to finance investments in environmental improvements? • Will technological advances solve environmental improvements? • These two approaches view the environment as part of the allocation of resources process. • Are economic and environmental well-being mutually reinforcing goals?

11. Chapter 3 • Economic growth may create its own failing. • Healthy economies are necessary to invest in environmental protection. • Can economic growth be managed such that the environment is not damaged? • Different abilities in different countries.

12. Chapter 3 Sustainable development will require change in our economic policy: • GNP currently does not include environmental costs and benefits. • Short term gains often have long term effects.  • Politicians are on 2 to 6 year terms. • Investors have 3 month to a year outlook.

13. Chapter 3 Sustainability requires: •  1. Use renewable resources. •  2.  Substitute renewable resources for non- renewable ones. •  3. Recognize the interdependence of the large system. •  4.   Adaptability of system requires diversity. •  5.   Institutional commitment.

14. Chapter 3 EXTERNAL COSTS (Externalities) • Expenses generated by producer, but borne by someone else. That would be you and I. • Pollution-prevention costs are passed on to others.  • Sewage treatment • Pollution costs: • 1.  Expenditures to avoid or remove damage once pollution has occurred. • 2.  Increased health costs or loss of use of a resource.

15. Chapter 3 THE PROBLEM WITH “COMMONS” • When something belongs to everyone, it will almost always be aggressively exploited. • Burn wastes because air is free.  • Dump in the ocean. • Fish the ocean. • Garrett Hardin’s “Tragedy of the Commons”

16. Chapter 3 ECONOMICS AND THE BIOPHYSICAL ENVIRONMENT  • Humans change the environment for human gain. • Population size cause changes such as loss of biodiversity and climate change. • Time for biodiversity to develop. • Rate for reduction in biodiversity. • Market decisions cannot take into account the inner-connectivity of the environment. • Uniqueness of some locations is not considered in many economic decisions.

17. Chapter 3 DEVELOPING NATIONS • Most ecological diversity now occurs where developing nations occur. • Developing nations borrow money for large development projects. • Debt for Nature exchanges • Tremendous debt forces short-term returns.  • Environmental protection is ignored. • Long term future is jeopardized.