A key component to this paper's findings is that, although the authors make the case that a tax (rather than an emission cap-and-trade policy) would be most efficient, policy for other emissions could offset the benefits of a CO2 tax. This is troubling, because it points at something all too evident in the current political race--polarization. Even if the "green" side set a tax for CO2 emissions, which would be revolutionary in its own right, it wouldn't do much good if it were offset by relaxation of other green policies. It seems that the authors are almost admitting that we are still far from reaching the social equilibrium in terms of harm to the environment. Progress in one area is almost sure to be offset by setbacks in other areas.

Will's post relates to the institutions class I took last term with professor Grajzl. In the same way that environmental econ must incorporate factors other than those presented in econ theory classes, econ of institutions does as well. It's interesting to see components of both of these classes come together: while the institution of corruption is considered a way of "getting things done" and expediting processes in certain countries, here it clashes with an environmental issue. How could we possibly create a model that incorporates all of these nuances?

This interesting study highlights a problem facing all environmental economists: how can we monetize something we can't really sell or buy? Surely, we would expect SCUBA divers to place a high value on sea biodiversity--it gives divers a more enriching, informative and fun experience. Therefore, the fact that SCUBA divers place a high monetary value on fish diversity and the well-being of reefs comes at no surprise. But this is only one side of the story. The biggest issue here is that the players that contribute the most to environmental degradation are typically not those whose hobbies center around the sea's environmental well-being. Rather, the people contributing most to the problem are those whose paycheck may be enhanced by degradation in the first place. Hence, we see the major issue of environmental economics at work here. Surely, it would be extremely difficult for sea enthusiasts, economists, and those degrading the coastal environment to agree on a "fair price" for degradation. Perhaps the best we can do would be to allow the government to set a price of this degradation; but this would probably not be the most efficient price for SCUBA divers--whose livelihoods and main hobbies are pinned exclusively on coastal biodiversity.

In many econ classes and electives beyond intro to Macro and Micro and Micro and Macro theory, we find that traditional economic models do not always represent the real world. Hardin's "The Tragedy of the Commons" offers further support of this notion. Hardin first uses population growth to describe the Tragedy of the Commons: uncapped population growth encouraged by the excessive welfare state allows parents to have as many children as they want. If parents can't provide for their kids, the state will. But this leads to the Malthusian catastrophe--too many people and too little resources, i.e. a complete depletion of natural resources. In more general terms, if people act out of their own self-interests in the consumption of natural resources, supply decreases and demand increases even further until the resource is completely depleted. Traditional economics models fail to account for the nuances of the tragedy of the commons. Who are the 'moral' economic players, who realize the danger of the tragedy of the commons? Who are those who are resource-greedy with no regard to limits in resources? How do we account for both types of players in a supply and demand or indifference curve model? How could we possibly model the circumstances leading to a Malthusian catastrophe? How can 'management' change these models?

I find it fascinating that different emotional responses reduce smoking by different amounts—namely that fear reduces smoking the least. Logically, the fear of cigarettes killing you should reduce smoking the most. In a sinister way, have smokers ultimately accepted the fact that cigarettes will kill them, thus making fear a less important response than, say, shame? And why does shame have such a significant effect on smoking? This implies that the fear of dying is less important to smokers than being judged by others. Once again, as we’ve seen time and time again throughout this course, the brain does not always influence our consuming behavior in completely rational ways—as the fear of death certainly should reduce smoking more than shame.

I found the section about mood to be particularly fascinating. We've all experience the endowment effect-- where the owner of a good is only willing to sell that good for a price higher than what a potential buyer is willing to pay. But a bad mood can actually change the endowment effect to a "reverse endowment effect"--where the seller lowers his selling price. Rarely in economics can we experience this reverse effect, but sad moods cause this to happen. In one experiment mentioned in the chapter, participants were showed different types of films: sad, disturbing and neutral. Those who were shown the sad films were willing to sell a set of highlighters for lower than the WTP of the buyer--the sad seller simply wants to get the highlighters out of his life in an attempt to change his mood. He associates something completely unrelated--his selling price--with the mood the films imposed on him. This seems to be another example of an economic player having behavior that is influenced by unrelated, outside events.

Glimcher references the work of others in the “Judgement” section, which I found very interesting: in attempting to determine the soundness of a written argument, our brains sometimes reach to something more accessible to determine the quality of the argument—such as the font in which it’s written. In other words, we may not understand the argument, but if it’s written is a clean, readable font, we just may determine that the argument is valid. I wonder how much this comes into play in advertising and the decisions consumers make. Is this phenomenon the reason why many of us simply reach for a nicer container or bottle, unaware of the quality of the product inside of it? Are advertisers aware of the brain’s odd judgement functions, and do they aim to exploit this?

I found the section on rewards and the brain to be particularly interesting. The textbook mentions that the human brain developed a rewards system for food drinks, and ornaments—all entities necessary for survival and held to high cultural value—long before humans even used money as a means for trade. In general, this makes me wonder: have we been tricked to place a distorted value on money, just because our brains adapted to it as some commodity or source of pleasure necessary for survival? And how would neuroeconomics change if we evolved enough to assign the “appropriate” amount of pleasure to money?

The article mentions that Smith claims that the pleasures we anticipate from consumption far outweigh the pleasure we actually get from it. This makes me wonder: is this good for the economy? The exaggerated expected utility could cause us to buy more and consume more, something that is good for the economy. But if "people ruin themselves by laying out money on trinkets of frivolous utility" because of the expected pleasure, you could be left with an inflated economy of debtors. My main question is whether the disparity between expected pleasure of consumption and actual pleasure of consumption is good or bad for an economy.