GEOG 352: Day 10

1. GEOG 352: Day 10 Daly & Farley – Chapters 11 & 12 Market failure is when there are people who could be made better off without making other people worse off, or when the public good is not met or basic needs for significant numbers of people are not met as a result of the normal workings of the market.

2. Housekeeping items • I will hand back the outlines today. Very interesting reading; I look forward to seeing the final products. Return to me with the projects. Also: be sure to define the various forms of capital you look at, and evaluate and draw lessons from your case studies. • I have put the paper by Pam and myself on the value of small retail up on the web site. • New journals to be aware of: Review of Social Economy and Canadian Journal of Nonprofit and Social Economy Research. • See you the new items in the folder… • Today we will finish up Chapters 11 and 12.

3. Daly and farley – 11 and 12 • “If a resource is excludable, its market allocation is possible. If it is rival [e.g., open access fishery, unprotected forest, fresh water, air, waste assimilation capacity], we understand all the impacts of its use, and production and consumption generate no externalities, then market allocation is also efficient within the current generation. If the well-being of future generations is not affected by the use of the resource, then market allocation may also be intergenerationally fair. As we will see, however, no good or service provided by nature meets all of these criteria” – p. 193.

4. Daly and farley – 11 and 12 According to a Nobel Prize-winning economist, the war in Iraq cost the U.S. $850 billion, with an indirect $3 trillion impact on the U.S. economy. • They point out that, with respect to fossil fuels – while the industry contributes to jobs and GDP – the externalities are largely “public bads.” They affect “virtually everyone in the world today [and] future generations…” (See Table 11.1 on the externalities associated with the fossil fuel industry.) • Some would include in the externalities associated with the fossil fuel industry the military expenditures and loss of life associated with seeking to control or protect supplies of fossil fuels.

6. The externalities associated with the mineral sector are similarly extensive(the cost of cleaning up the est. ½ million mine sites in the U.S. is estimated to be $32-72 billion)

7. Daly and farley – 11 and 12 • The authors pose the question as to whether prices of commodities reflect their actual scarcity. What do you think? • Despite rapidly growing demand, the price of oil did not increase throughout most of the 20th century. Source: http://www.wtrg.com/prices.htm

8. Daly and farley – 11 and 12 • We won’t go into, but see the authors’ discussion of fresh water on pp. 204-206. • Ricardian land has interesting characteristics – it is limited in supply (i.e. they aren’t making any more of it, hence the tendency to speculate), and it often goes up (or down) in value depending on adjacent phenomena. • A decline in land value can occur as a result of adjacent pollution, undesirable land uses or residents, and it can go up because of increasing demand and infrastructural improvements paid for by government authorities. • Should landowners benefit from the latter unearned increments? While not fully addressing this issue, municipalities around the world use tax increment financing to pay for infrastructure improvements.

9. Daly and farley – 11 and 12 • It has seriously been argued by the American Enterprise Institute that the sun represents “unfair competition” against the fossil fuel industry because its energy is ‘free.’ • I will just hit on a couple of highlights from Chapter 12. • Species whose growth is slower than what could be earned from harvesting them and investing the resulting profit, rather than exercising long-term stewardship, often find themselves in trouble – i.e. facing possible extinction. • Despite depleting a resource, such as bluefin tuna, harvesters often use a scarcity-generating increase in price as an incentive to diminish the population still further, without taking into account that the price will rise further in the future.

10. Informal debate • One aspect of the ecological services provided by natural capital are the climate regulation and waste assimilation services provided by the atmosphere. These are being compromised by our release of GHGs. • What is the most effective strategy for curbing and reversing their release? • Regulations? • Carbon taxes? • ‘Cap and trade’? • Subsidies/ incentives for technology-switching? • Personal carbon quotas? • Other?