ECONOMICS

1. ECONOMICS

4. * * dot-com crash of 90s, housing and banking crisis today…building a future on finite oil, etc etc

5. What does economics tell us about value?

6. Suppose that I, your beloved teacher, were zapped by a faulty power point cord… How would my death be compensated? Or, more generally…

7. How much are you worth? • Your enemies say 0$ and bye bye • Your loved ones say “priceless” • The courts might put a value on the lost income to the family (utilitarian value) • The jury might consider the pain and suffering of the family and add more (non-market value)

8. When the Valdez oil tanker sank, many sea otters died from exposure • Courts initially decided to value each sea otter by the market price of the food they ate • This was disputed by conservationists who pointed out the many roles that sea otters play in coastal ecosystems • Negotiated settlement was $228/otter • How much would the last otter be worth?

9. The point is that many decisions that are made in conservation have both utilitarian (monetary value) and non-utilitarian (non-market value) components.

11. Point is that some functions that are typically considered non-market can be monetized, at least somewhat. • But many things can’t rationally be monetized, at least fully

12. Consider….. Value zero Value ????

13. Different values for the Mona Lisa • Cultural context (remember Oogy) • It is worth what I paid for it (pure utilitarian economics) • It is worth what someone will pay me not to destroy it (substitution value) • You can’t destroy it period (non-market option value)

14. How bad debts can be good for conservation Debt for Nature Swaps

15. Bilateral Debt for Nature • Creditor nation agrees to forgive all or part of a debtor nation’s debt (Why??) • In return, the debtor nation agrees to dedicate a negotiated amount of local currency for conservation, e.g., 100m loan forgiven if debtor nation provides 20m in local currency for conservation. • NGOs like WWF or TNC act as facilitators and may help set terms for the conservation agreement • Works for the poorest countries with heavy debt loads and original loan has low repayment chance.

16. Commercial Debt for Nature • NGO buys all or part of debt held by creditor nation or bank at discount (e.g., 100m debt at 40%) • Debtor nation agrees to set aside 90% of capital in local conservation project (e.g., 90m) • Creditor settles debt, debtor saves 10%, NGO buys 90m conservation project for 40m

17. Peru Debt for Nature Swap • WWF, TNC, CI contribute 1.11m • Through Tropical Forest Conservation Act, U.S. contributes 5.5m • 14.3m debt cancelled for Peru over 16 years • Peru provides local NGOs 10.6m over 12 years for conservation of Amazonian forests • Note some “in kind” payment such as building a research station would count as part of the 10.6m obligation

18. When nature has monetary value, stewardship may follow but so might poaching and over-exploitation

19. Ginseng is mostly grown on plantations in Wisconsin and Korea Doctrine of signatures

20. (top left) Taxol is a potent anti-cancer compound from the Pacific yew. Formerly the trees were killed. Now synthetic taxol compounds are being developed. (bottom right) Poachers strip the bark form slippery elm, usually killing the tree. The compound is used to treat sore throats.

21. Rhinoceros horn is sold as an aphrodisiac and for making Middle Eastern daggers Rhino horns and elephant ivory confiscated from poachers and ready for burning

22. Tiger bone drink at fair Tiger bones are used in China to treat medical problems and to make a drink thought to increase physical stamina. The gall bladder, as with bears, is used as an aphrodisiac.

23. Tragedy of the Commons …but what are “Commons”?

26. Tragedy of the Commons One gains benefit but all share losses Exploiter adds sheep until cost of adding one more sheep equals the return; perhaps because supplemental feeding is needed as commons becomes degraded.

27. The economist argument….. Exploit the resource until the marginal costs equal the returns. Some resource will remain because it is not “economical” (rational) to continue the exploitation. Why will this protect oil but maybe not biodiversity??

28. Economics and exploitation of wild species: special problems • Rate of exploitation must be less than rate of natural increase • Population must remain above minimal viable size • Population must retain its functional ecosystem role • Genetic diversity must not be degraded • Size distribution, age structure, sex ratios must not be permanently altered • Social behavior must be retained (the last three= Darwin’s debt)

29. And then there are the general problems of any resource exploitation • Scarcity leads to higher unit value (Blue fin tuna) • Higher unit value of a scarce resource leads to investment in more efficient harvest technology (higher resolution sonar to find small schools of tuna)

30. For wild populations…… Exploitation down to low population levels plus the effect of Darwin’s Debt means that recovery will be slow and extinction likely.

31. What kind of economic values does biodiversity have?

33. Surrogate Market Values

38. Hedonic pricing How much does an environmental feature add or subtract to perceptions of value??

39. Full life cycle analysis • Accumulates all environmental and social costs from getting the raw material to disposing of the product. • Accumulates all benefits…. • Ray Anderson carpet example