Dollars and Environmental Sense: Economics of Environmental Issues

1. Dollars and Environmental Sense: Economics of Environmental Issues Botkin & Keller chapter 28Plan B 2.0, Hardin Article

2. The Economic Importance of the Environment • Environmental Economics • The study of relationships of the importance of the environment to the economy • Includes: • The impact of environment as a result of economic activity • Regulation of the economy and economic processes • The objective of balancing environmental and economic goals of society • Development of economic policy to minimize environmental degradation • Finding solutions to environmental problems • How environmental policy is often dictated by economics

3. Discussion Point Your book states (page 605) that environmental policy is often created based on tangible and intangible factors. • Please give an example as to what this means. • How do we handle policy in regard to intangibles?

4. The Environment as a Commons • Commons: • Land or another resources owned publicly with public access for private uses

5. Discussion Point In regard to the commons. Many people do not behave in a way that leads to sustainable use of a common area, which leads to major problems in the future when the resource is depleted or destroyed. • Why do people not act in their own best interest by preserving the commons? • According to Garrett Hardin is this rational behavior?

6. Solutions? • How might one solve the tragedy of the commons? (Garrett Harding gave several suggestions)

7. Externalities • Direct Costs • Those borne by the producer and passed directly on to the user or purchaser • Externality (Indirect Cost) • An effect not normally accounted for in the cost-revenue analysis of producers and often not recognized by them as part of their costs and benefits

8. Discussion Point:Public Service Functionsof Nature Ecosystems can maintain themselves quite well naturally and perform many public services. • What are some examples of ecosystem services? • How do you put a price on these services? What if they are lost? • How do you put a price on the beauty of nature?

9. Future Value?? • Is profit now worth more than profit in the future?

10. Risk-Benefit Analysis • Def: The riskiness of a present action in terms of its possible outcomes • The relation between risk and benefit affects our willingness to pay for an environmental good • How much risk is acceptable? What if it is long term risk?

11. Risk-Benefit Analysis • Evaluation of environmental intangibles is becoming more common in environmental analysis • When quantitative, such evaluation balances the more traditional economic evaluation and helps separate facts from emotion in complex environmental problems

12. How Do We Achieve an Environmental Goal? • Moral suasion • Direct controls • Market processes • Government investment What do these terms mean? (page 615) • Many controls have been applied to the use of desirable resources and the control of pollution

13. Marginal Costs and the Control of Pollutants • Marginal Costs: the cost to reduce one additional unit of pollutant • 3 methods of direct control of pollution • Setting maximum levels of emission • Requiring processes and procedures • Charging fees for emission