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We read this paper last year in Environmental Economics, but upon reading it again I discovered nuances and implication that had previously escaped me. While the paper does an excellent job of quantifying the science – and the environmental implications of the changing climate – something that is not addressed in the paper are the effects that climate change has on global human capital. As noted in the paper, one of the characteristics of a warming world is an increase in vector-born disease and extreme weather. No pun intended, the perfect storm factor is that tropical regions are the most influenced by disease, extreme weather, and climate change (along with the poles). Tropical regions happen to be severely impoverished as well. Together, the convergence of these factors presents a haunting future for the world’s poor. These regions often lack the infrastructure and funding to warn against storms, to implement mitigation techniques, to rebuild after destruction, and prevent infectious disease from spreading and crippling populations. Based upon the facts and figures presented in this paper, the world’s poor will be hit the hardest by a warming climate and yet are the most powerless against it. As a sad irony to it all, these households contribute negligible amounts of greenhouse gases. Coupling this science with the reality of development economics, the picture becomes even bleaker. While aid programs, investments in education, protection of basic human rights, and increased agency are worthwhile, the lasting effects of these programs are negligible if the environment does not support (at least somewhat) stable human habitation. The uncertainty of tomorrow dictates the behavior of today, making individuals in developing countries significantly less likely to capitalize on opportunities already available and even less likely to create new opportunities for growth and development. In addition, even their basic human right of life (as Sen puts it) is called into question, making their potential contribution to the global fabric even more unlikely. Just as a country cannot harness all of its potential human capital if women are excluded from the labor force, the global market cannot maximize its production and efficiency if the human capital in tropical regions is consistently being decimated by global-warming induced unalterable ecological change. First things first, we must change our behavior to the planet, because if we don’t everything else will be of trivial impact.
One of the main salient points that Le Goff makes is that trade openness is not a magic bullet for poverty reduction; it isn’t “automatic”. In fact, trade can widen income inequality, with many of the benefits of trade missing the poor. To curb this effect, programs must be targeted to actually reach the poor, and alleviate structural unemployment and mismatched skills. This must be done on a national or regional level in order to provide aid where and through what means the population needs it most. What I found startling about this paper is Le Goff’s conclusion that without development in financial services, education, or an improvement in governance, trade will make poverty worse. Indeed, trade reform must be conducted alongside one or more of these other programs to not only increase a positive outcome, but to prevent harming the poor further. From a popular consensus perspective, free trade is viewed as the keystone effect in aiding development countries. However, further examination exposes a much more complex picture. Another aspect of the paper that I thought was interested was Le Goff’s insight that “too much heterogeneity in the effects of trade reform on the poor.” I would argue that the heterogeneity of the world’s poor leads to varying degrees of success from trade reform polices. As a result, increasing welfare must be approached from multiple angles. Development must be a dynamic process that aids in the country’s progression towards a developed nation. Someone wins and someone loses in trade. However, measures can be taken to alleviate this divide. What measures, in what proportion, and at what time in the process? Well, we are left with the catchphrase of this course, it depends.
Toggle Commented Nov 30, 2016 on Reading for Thursday at Jolly Green General
A topic that Sen and Bauchet et al. deliberate on – and one that I also find very interesting – is the simple phrase “details matter” (Bauchet, 19). While each author approaches it from a different frame, Sen uses economic markets and Bauchet uses microlending, to illustrate their points, they both discuss the benefits of using markets as a means to end economic efficiency and yet also highlight the often overlooked elements of a social structure that determine the efficacy of economic tools. Bauchet says is rather concisely, “No perfect design solution has been found to eliminate the issues of asymmetric information, but some types of risk should be easier to insure than others” (17). Overall, this economic paper outlines (in great detail) the complicated reality of microfinance. While prior economic postulation suggested that microcredit was the be-all-end-all for economic growth in developing countries, this paper reveals that the effectiveness of microcredit is dependent on many factors, some of which might not be obvious. Households need more than microcredit loans, but “when such needs are met appropriately, the impact should be nonetheless enhancing” (2). However, what constitutes these “needs” vary on a country-by-country basis. Different individuals will respond to microcredit in different ways. So will different societies. As an example, increases in microloans in India were not shown to significantly change how much the household spent or to reduce exogenous household shocks, but it did change what the spent their income on. A narrow study simply measuring income expenditures would overlook this increase in societal and individual welfare. A nuanced approach to measuring development must be adopted. Sen puts it this way: “The importance of substantive freedom has to be judged not just in terms of the number of options one has, but with the adequate sensitivity to the attractiveness of available options” (Sen, 117). But who defines “attractiveness” and the true “number of options”? Is it the developing country, the developed countries providing social and economic support, some objective international third party? Where does the autonomy lie? Though I’ve never spoken with either, I would postulate that both Bauchet and Sen would argue that this somewhat qualitative assessment lies in the lands of the country itself. I thought Professor Goldsmith’s insights in class regarding students who have studied abroad and not understood the culture – but were conscious to not intervene but first observe and then act – was very apropos. While markets do have a universal effect in bettering the conditions of the citizens, the execution of the most growth for the most people in the sectors of the society that need it most and will use it best must be done by the people who are versed in the unquantifiable details that cumulate in a society and market tone. In the same manner, the investment in education, health, and access to credit markets leads to the greatest advancements in human capital. But in what stage of education or what aspect of health care would aid be most effective? Who should receive the microcredit loan, and under what conditions? Once again, only the citizens of that state are able to make that call. While ways of improving human agency, general quality of life, human capacity and overall economic output can be effectively outlined by economic giants like Sen and Bauchet et al., the day-to-day work must be done and specific policies must be formulated at the national or regional level. However, these frameworks do begin an interesting and necessary discussion.
Toggle Commented Nov 13, 2016 on Readings for this week at Jolly Green General
The “The Economic and Social Burden of Malaria” outlines a number of different causes of malaria’s prevalence in the developing world, what I found to be the most concerning in this article is the 2,000 “missing children” every year because of malaria. Similar to Sen’s circuitous reasoning between development and freedom, malaria is a means and a cause of poverty. Ester Duflo’s concept of “missing women,” also applies to these children – by dint of being born in the developing world in absolute poverty – as they are discriminated against since birth, and often at the prenatal stage as well. As the article points out, GNI per captia is an adequate measure of the effects of malaria-related deaths, but the unquantifiable social costs of losing 2,000 young members of the population annually represents a much more staggering loss for the country. In the way that economist argue that the full productive capacity of the nation cannot be reached if half of its population (women) are not utilized, how much more so when children – both boys and girls – are not utilized because they are dead. Their death does not only cause an immediate economic and emotional loss to their family, but has ramifications because these individuals are not reaching productive age though family resources are being allocated to their development. Simply, malaria makes children an investment with little chance of return. Even from a detached and calculated perspective, this is a crisis that plagues the least developed countries the worst. I think that a policy similar to “the Big Push” would be an effective strategy in this scenario, with aid programs directly targeting simple measures of prevention and education on the disease. On this front, I agree with Kinsey’s outrage at the inefficacy of the government to provide what appears to be very simple things like bednets and HIV-tested blood for transfusions and Andy Kleinlein’s point about where “all the money is going.” Targeted aid seems to be an answer to solve the crisis of thousands of preventable deaths, though the actual execution of this reduction in the ultimate market inefficiency seems significantly harder in practice than it does on paper.
Toggle Commented Nov 2, 2016 on Readings for Thursday at Jolly Green General
One of the most pertinent points Duflo makes in her paper is the reason behind girls and women’s preferential treatment. In other sources we have examined this term, language such as “missing,” “not valued” and “commodity” are often used to discuss the social perspective on women in the developing world. This is a bleak outlook, and the immediate question becomes how any economic development will help erase this discrimination – the problem of true equality and advancement is daunting. However, Duflo does an excellent job, and provides an uplifting perspective, on what the actual fate of women is (both through extreme poverty as well as expansion). Yes, while girls are the first to starve in droughts or be kept out of school during times where the money is tight, she cites several specific examples to support the idea as money becomes more available, households are sending girls to school, giving them vaccinations, and feeding them at nearly the same rate as boys. Duflo argues that gender inequality is a positive feedback loop, and economic development is the way out of poverty and inequality. However, the line is blurred with, for example, the breakdown of the caste system and increases in Business Process Outsourcing Programs (BPOs) due to economic advancement. This breakdown allows women to access the labor markets they were previously shut out from. This is an example of a co-dependent advancement - to use the words of Sen, development is the means and end of freedom. Though the second half of the paper discusses the ways in which economic development is not enough – especially once development has reached a certain level – Duflo takes the reader through a well-catalogued array of improvements that come with economic developments. She also hints at her theory she outlined in the TED Talk – the “last mile” with the image of a bridge built from two banks but not connected in the middle. Ultimately, Duflo argues that economic development builds the two arms of the bridge from the bank, but social and cultural perception must connect the two pieces. Compared to other sources we’ve read, Duflo does an excellent job of making the reader feel that all hope is not lost and women are not confined to the sphere of domesticity while not ignoring the injustices done to women. This manner of presenting the issue of gender inequality and women’s empowerment is an effective one.
Toggle Commented Oct 19, 2016 on Reading for Thursday at Jolly Green General
I thought this paper does an excellent job mixing theory of economic development with specific case examples that highlight Rodrick’s message. One of the more interesting points, and a topic that is frequently addressed, is China’s startling rate of growth especially with respect to other East-Asian country’s growth rate. Rodrick outlines the elements of China’s policy development as a way of explaining why they were so successful, but I am interested in learning the specifics of what aided, as well as prevented, Indian economic growth on the same scale. The paper notes that there are some properties of economic development policy that are uniform, but the details vary situationally, and the need for contextualized policies. While India’s gradualism is noted as a cause for their slower growth, I was interested in the specific policies that lead to this growth, or whether it was a lack of policies or social and political drive. For example, Rodrick notes, “China did not even adopt a private property rights regime and it merely appended a market system to the scaffolding of a planned economy.” Was India similar in its approach? Why was China’s success multiples of other Asian nations, especially India? I thought Rodrick does a great job of pulling back the veil in terms of economic theory and the policies that encourage growth. We have been walked through why China developed the way it did, why did India?
Toggle Commented Oct 5, 2016 on Reading for Thursday at Jolly Green General
Blog Post _ Sept 28 I thought one of the most salient points of “The Fall and Rise of Development Economics” was the inherent variability of the data, and what constitutes an effective development policy, based on the country or region being observed. Hard data definitely serves its purpose, but as Krugman states “the pressures to produce button-down, mathematically consistent analyses” needs to be resisted “and adopt instead a muscular pragmatism in grappling with the problem of development.” We are learning about a similar problem in my econometrics class this term – a regression equation can never account for every variable that influences the explanatory variable, yet the statisticians do their best to incorporate any foreseen and measureable variable in addition to an error term to try and statistically explain the relationship between two or more variables. And yet, despite this careful math, when the social and anthropology qualities are taken into account (even of the same variable) the explanation for the equation becomes unique to the population being analyzed. Simply, the numbers are not sufficient. Krugman touches on this point when he highlights the importance of economies of scale to high development theory. However, these models “were very difficult to introduce into the increasingly formal models of mainstream economic theory” and so for a time were ignored. I think an essential aspect of development economics is to separate from traditional economics. Yes, while the basic studies are similar – a focus on markets, representative pricing, full information, utility maximization – the applications are totally different. Often, traditional economic models deal with theoretical situations while development economics attempt to quantify extremely tangible circumstances for the world’s poor. Ultimately, I think the most noteworthy point of this article is that development economists must adhere to a “discursive, non-mathematical style.” I would add, however, that the use of statistical analysis as a means of quantifying data sets is a useful tool in the field. However, once again, these computations must be analyzed through a lens that takes into account the circumstances under which the data was taken, the culture of the population, as well as potentially extraneous, but important, variables that are not included in the regression. Numbers are not enough, but numbers combined with informed decision makers sets the stage for effective and targeted aid and change.
Of the most thought provoking aspects of the first two chapters of Sen’s “Development as Freedom” is what exactly constitutes freedom, and the engines of development. As an American, when I hear “freedom” I think of the vote, rights of expression, self-determination. But for much of the world, “freedom” is as simple as having the option to live through the day, to find enough food, to have access to clean water. For much of the developing world, what is considered a freedom is considered a basic human right in the developed world. As outlined by Sen, the five distinct types of freedom are political freedoms, economic facilities, social opportunities, transparency guarantees, and protective security (10). However, I would argue that social opportunities are the preeminent force behind development. A nation is made up of groups of individuals, and while there may be economic and government institutions in place to structure the other four types of freedom, if the population is unable to maintain or access these institutions then they serve no purpose, other than to further empower the wealthy minority. I think the intersection of these two ideas – what freedom means and the importance of the individual as the engine for development – has important implications for the type of economic and political aid offered to developing countries. Often, aid programs will give money to governments or NGOs that provide access to clean water, food, and even education. But if the culture does not value, or understand the importance of, these resources there are little long-term benefits to continuing these programs. The old saying, “give a man a fish and he’ll eat for a day, teach a man to fish and he’ll eat for a lifetime” is applicable to poverty as well – if programs target social change rather than physical and monetary inputs, individuals will improve their own condition because they now have to tools to do so. In the same way that workfare incentivizes development of skills, social programs targeting literacy and health education and the value of a human life and human capital I would argue would be much more effective than food-supply drops.
One of the most shocking elements of this article, in conjunction with the textbook reading, is the influence that culture plays in keeping our world’s poor very poor. The data suggests that consuming the highest level of sustenance is not the poor’s first priority. “Perhaps more surprising, it is apparent that spending on festivals is an important part of the budget for many extremely poor households” (5). The data also shows that as income increases, so does consumption of more expensive grains and sugars. This, from a caloric standpoint, is inefficient because an increase in income could buy more nutritious food rather than more luxury items. The immediate question is: if you don’t have enough to eat, why would you spend money on parties and luxury items? But if efficiency is defined as maximum utility, and the individual gets more utility from a unit of sugar or a radio than an additional unit of nutritious grain, then isn’t the decision economically efficient? However, cultural decisions often dictate utility often at the expense of enough food, land, health care, education, material goods, even productive assets for their businesses. Lack of proper banking structures and court systems prohibits efficient lending practices that slow growth. They lack the tools needed to make the most economically efficient decision the highest in individual utility. As we’re learning, the factors that go in to making as society poor are numerous and complicated, but the balance between what is cultural (i.e. what is determined as useful) and what is structural (i.e. the lack of ways to save money), and their relation to one another is complicated but interesting. This article does a good job of highlighting the poor’s behaviors that keep them poor but also explains why it would be difficult for one individual to break away from their cultural reality, as the community is often the only thing standing in the way between poor individuals and death and often the task of crawling out of poverty is harder than just getting by. It’s a disturbing set of decisions to be made, but the manner in which they are made and what the world’s poor spends their limited resources on also gives pause for thought.
Toggle Commented Sep 13, 2016 on ECON 280 Reading for Thursday at Jolly Green General
Though this was certainly a well-developed and comprehensive paper, I disagree with a claim that Aldy makes early in his paper, though it is one that remains unsubstantiated. In fact, Aldy argues against his own claim that that both the cap-and-trade policy and carbon tax are both market systems in the sense that their effectiveness relies in affecting market behavior through emissions pricing” (2). Very simply, I think that Aldy miscategorizes cap-and-trade as a market system. He himself points out that cap and trade “fixes the quantity of emissions, leaving marginal abatement costs to fluctuate with economic conditions” (6). How then, is the market supposed to efficiently allocate resources intertemporally when prices are not the main market signal? In a cap and trade economy, the arbitrary level of emissions determines the cost of all other pollution-related behaviors in the market. This policy does not directly affect behavior through pricing, it affects behavior by manipulating the costs of certain activities. As Aldy himself shows in Figure 1, “under a fixed emissions cap of QE, abatement will be excessive if marginal costs are higher then expected, or too low if marginal costs are lower than expected, resulting in deadweight losses (DWL), relative to the emissions tax” (9). Cap and trade systems are based on the principle of assumptions and predictions and do not allow for volatility in the market without significant losses to economic efficiency. However, Aldy suggests an amendment to the cap and trade system that would make it more responsive, to “incorporate provisions to contain allowance price volatility and to transition to full revenue-neutral allowance auctions” (17). This is also addressed on an international level, “Under an international cap-and-trade system, marginal abatement costs are equated across different regions at a point in time if the international regime fully integrates efficient domestic allowance-trading markets” (26). Essentially, the amendments to the traditional cap and trade system transform them into a carbon tax by another name. Cap and trade systems use a series of government-created incentives to cap pollution at a certain level and lets firms self-allocate pollution levels based on marginal costs. However, a carbon tax caps the level of carbon emissions with a price rather than a set value of pounds of CO2. So if Aldy’s solution to the rigidity of the cap and trade argument is allowing price volatility, why wouldn’t a carbon tax be more favorable? There is little argument that carbon taxes are less favorable if the economics suggest that prices are the best means of allocation – which they overwhelmingly are. The paper contains more detail on the exact comparison of carbon taxes and cap and trade systems, but very narrowly Aldy arrives at the same conclusion from two different sides of the same coin – he charts the merits of the carbon tax, and yet also outlines the steps needed to adjust the classic cap and trade model to accommodate volatility in the market. What we’re left with is two different frameworks but one solution – the carbon tax. Ultimately, this paper (at risk of over-simplifying it) is yet another example of the supremacy of prices to determine efficient behavior. Attaining accurate pricing, however, is another matter.
Toggle Commented Mar 31, 2016 on ECON 255 for next Thursday at Jolly Green General
Aside from the startling reality of what these articles expose about the actual state of the environment and the implications for both the near and distant future, two of them touched on above, one of the realizations I had listening to Professor Casey today in class and reading these articles is the variability in the way the science is presented. Skeptics aside, which presents its own complications, even these three scholarly articles – though ultimately containing the same message – presented their information in differing ways. One specific example was the way in which the long-term effects of CO2 emissions were addressed in Schrag’s own paper vs. the Harvard publication regarding his research. Schrag chose to focus on the Keeling curve and highlight the inadequacies of current climate models and their effects on glaciers - simulations cannot accurately predict what future climate change will do to the planet because of the lack of precedent. Though the Eocene consisted of a very warm earth, Schrag makes sure to point out that this condition was caused most likely by thick stratospheric clouds, and this cloud variable is noticeably absent from climate models because it is not a current factor in Earth’s climate and there is no quantifiable way to model something that doesn’t now exist. There is not enough time for the environment to reach equilibrium, and even the climatologists cannot keep up with the amount of change currently occurring. In comparison, the Harvard publication approached the problem of CO2 emissions with photographs and data on the oceans. The ocean is the biggest unknown variable in the sharp rise in CO2, as 60% of all emitted CO2 gas gets absorbed in the oceans. While the article is of course littered with data and figures, the overall message of the article focuses on mitigation and adaptation solutions to dealing with the reality of continued emissions. Specifically, the Integrated Gassification Combined Cycle is presented as a means of capturing the CO2 waste being given off by the burning of coal. While Schrag’s earlier paper focuses on understanding the problem of climate change and presented some broad ideas of mitigation and adaptation, the Harvard publication spends much more time on coming up with plausible solutions. While there are united lobbies for emissions-heavy industries that present unified information and market themselves quite well, there is no united lobby or central board for the environment. Even seemingly united concerned climatologists, or the same climatologist, and even individual governments cannot control the behavior of other institutions, and each has a way of spinning the data to suit their own needs. Add to that the reality that most pollutants are global pollutants, which basically means that their effect is uniform across the globe no matter where they are emitted, and this quickly becomes a worst-case negative externality example. The polluters are not even receiving a proportionally more concentrated negative effect of their emissions. I think ultimately what I realized from reading these papers is the need, once again, for a uniform “front” to combat climate change, and increased funding for climate models that will, for lack of a better term, scare countries and firms into taking better care of the environment. Specifically, while Schrag is presenting the same information he does so in two very different ways. This is simply a function of the vast and complicated nature of understanding climate change, as well as a result of advancing science and new discoveries. Though theoretically a “one-stop-shop” for the reality of climate change would facilitate a more concentrated effort to enact change, but the likelihood of this happening over state, country, cultural, and even opinion boundaries anytime soon, however, is sadly very slim.
Toggle Commented Mar 16, 2016 on ECON 255 for next Thursday at Jolly Green General
The first question that struck me upon beginning to read this paper was the somewhat startling “Why haven’t I heard of this before?” Arguably, a work this substantial, with seemingly every angle analyzed and quantified, should be sensational. Yet mainstream media, and even mainstream politics, startlingly ignores this seemingly irrefutable quantitative evidence of the true expense of the inefficiency of the market is startlingly at best. One element that I thought was extremely poignant was in regard to cancer and the low birth weight effects directly generated by carbon emissions. These externalities extend far beyond environmental damage. Coal mining drains areas socio-economically, harms the children both in utero and developmentally, and of course causes environmental damage that we are all familiar with. As a related but different point an aside, inspired by Mitch’s question and of course the Epstein paper regarding the full cost of coal, I did some further research into the volume of one pound of carbon at room temperature. While the calculations are rather black and white, I found it difficult to wrap my head around what exactly those dimensions meant. However, I found a few images that were helpful to me in grasping the scale of our emissions, here’s the link: https://www.flickr.com/photos/carbonquilt/8229754868/in/photostream/ What I think this paper, and in a different way these images, do is quantify each individual aspect of the process of carbon being taken out of the ground to its release into the atmosphere. The obvious weak link, and therefore even more obviously the enabler for most environmental negative externalities, is the current political system in which the silent majority of those that suffer from excess carbon pollution and suffer private and social cost. However, the minority that privately benefits from the lack of appropriate pricing is a powerful group. What was also illuminating is the US Federal and State Government subsidization of the coal industry. As established both by Kahn and Epstein, coal sources around the world are prevalent, which is counterintuitive to subsidizing and industry as their supply is guaranteed for the next approximately 200 years. And yet there are “aggregate damages of $65 billion, including damages to public health, property, crops, forests, foregone recreation, and visibility due to emissions from coal-fired power plants” (86). To say that the continuation of this damage is confusing is putting it mildly, but the lack of political action and inadequate information can be blamed for much of these damages. That, however, does not diminish the alarming effects outlined by Epstein on the far-reaching damage that occurs due to this inefficient usage, and pricing, of coal.
Toggle Commented Mar 10, 2016 on ECON 255 for Thursday at Jolly Green General
The question of what is correct versus what is conducted is always worthy, and almost always occurs with disparity. Unfortunately the field of environmental economics falls prey to this phenomenon, especially due to the economic aspects of the environment as much of it is non-rival, non-excludable, and plagued with asymmetric pricing that results in market failures and loss of efficiency. This article catalogs the biodiversity conservation efforts, but one aspect of this process that became almost immediately obvious upon reading was the clear break and lack of communication and coordination between the civil organizations that are driving much of this conservation, and the people and governments of the countries where these protected areas are located. While there as certainly been a targeted increase in conservation areas, these zones were created as a result of the hard work and lobbying of special interest groups, such as the Nature Conservancy in the United States, the Royal Society for the Protection of Birds in the United Kingdom, and the Worldwide Wildlife Fund. However, there seems to be little collaboration among these groups and in different sections of the world. This is not a failing of these private organizations – in reality they are almost single-handedly responsible for biodiversity preservation. Ostensibly, there are established organizations in place that facilitate this collaboration. And yet, bodies such as the UN and others are plagued with political corrupting and lobbyists that make effective change almost impossible. This political reality manifests itself physically. As the article mentions, there are many protected areas, and growing, and yet there is no apparent (or effective) oversight by an organization or group with as an aerial perspective on the conversation efforts being made around the globe. While the article notes that there is inequality in education and access to scientific principles, this point furthers the support for a well-funded non-political international network for conservation. The authors note the presence in interlinked challenges in conserving biodiversity, but the obvious response is the adoption of interlinked solutions. While the actual implementation of these solutions is very difficult, one could argue that mirroring the behavior of the problem would allow more effective solutions to be generated. The article suggests turning biodiversity into a public good, integration of biodiversity as a good into the market, and creating opportunities for policy decisions as ways to mitigate the destruction. While certainly noble, the likelihood that these actions are taken, and taken in full, is highly unlikely. As seen by the skewed pricing in America alone – specifically with regards to the agriculture industry – economic efficiency is not always the primary objective of policy. Therefore, as an initial means of effecting change, I argue that the creation of a network of either private or public organizations, not unlike those already in existence and cited at the beginning of the article, should be created so that the conservation of biodiversity is not as haphazard as it currently appears. Then, after a conglomeration (of sorts) has been established, economic policy that efficiently prices and categorizes the environment can be more accurately implemented. Though the article also argues that governmental and civil organizations must be organized, the distinction in timing is important. In order for actual economic change and challenge political pressures, these organizations must be consolidated or united to create a powerful lobby and compete with groups who are destroying biodiversity.
Toggle Commented Mar 2, 2016 on ECON 255 for Thursday at Jolly Green General
Question: In terms of the relationship between carrying capacity and the idea of preservation, how frequently does it occur (either by environmental realities or human behavior) that the ecosystem can be efficiently managed by selective harvesting? In other words how common is it to have the environment benefit from being appropriately used by humans? How often do the needs of the ecosystem align with localized human needs? Is there success when this occurs? Success for whom? Specific examples or successful tactics?
Toggle Commented Feb 10, 2016 on More Chapters from Kahn at Jolly Green General
The main dichotomy expressed in this paper, as well as the course as a whole, is the idea that while money is scare, so is the environment. Therefore the key to an efficient use of both is an accurate pricing of biodiversity; just because it doesn’t have a price doesn’t mean it’s not valuable. In light of this, natural resources are unique – they are arguably one of the only goods whose preservation today certainly means a higher value in the future. While almost all rival and excludable, i.e. private, goods have unclear future price projections, biodiversity’s price trends in one direction, upward. This is because as population increases and depletion occurs over time, demand increases driving the price up as shown in a simple supply and demand model. However, “there is a short term imbalance between costs of conservation and the immediate gains from activities that deplete and/or degrade the environment” (30, Daily et al. 1997). This short-term imbalance, a skew that can arguably carry on into future time periods, is caused by the problem of asymmetric information. This lack of perfect knowledge of the true costs and benefits of each aspect of the market leads to incorrect valuation of both human development and conservation. Specific to the SCUBA paper, this leads to an undervaluation of the coral reef environment. Ultimately, the goal is to derive tangible economic benefit from natural resources without depleting them. And yet, as identified in the text, SCUBA divers have “a clear appreciation of, and willingness to pay for, lower levels of site crowding and higher levels of coral quality, fish species diversity and sightings of sea turtles” (34). Therefore, this high willingness to pay should be capitalized upon (no pun intended) to generated funds that can educate citizens on the importance of the ecosystem, explore ways to balance human and abiotic and biotic interaction, and accurately price the environmental resource – a process outlined in the conclusion of the paper. The answer lies in the appropriate assignment of cost and benefit, though with goods that are as complex, public, and widespread as biodiversity this task is nearly impossible. However, through using non-market valuation techniques – both consumptive and non-consumptive based and education (as addressed in Conservation Reconsidered) the true value of these resources both now and in the future as well as independent and dependent on one another can be estimated. The failure is not in the model of supply and demand and using price as a signal for efficient and utility-maximizing behavior, but rather in the failure to determine an accurate and comprehensive price for the environment in all of its facets.
Toggle Commented Feb 3, 2016 on ECON 255 for next Thursday at Jolly Green General
While certainly both "The Tragedy of the Commons" and "Conservation Reconsidered" address several complicated issues in the field of environmental economics, one of the prevailing themes in both of these papers is the concept that temporal choice cannot be analyzed independently when attempting to model the natural environment and its relationship to capital markets. When an economic decision is made during a time period, it often irreversibly affects two time periods - the present one and the future one. For example, a tree cut down today is one less tree in that present forest, but this action also robs the future forest of that tree (assuming it has not been replanted, which is a different scenario). Krutilla cites Davidson, Adams, and Seneca's argument that there is an "interaction between present and future demand functions, which will result in a public good externality, as present demand enters into the utility function of future users" (782). However, "present action [must be] compatible with the attainment of future state of affairs" (785). This poses a challenge specific to environmental economics - the one in which both present and future states are unknown in full and choices are intertemporal and often irreversible. While Krutilla also notes that landscape rehabilitation process has experienced stark technological advances in the recent past, these tactics are still insufficient in recreating the natural environment, independent of the often irrevocable damage done to species as the topography is also being altered. In essence, preservation is easier than replication. Just as Krutilla highlights the inability of environmental economics to be divided into clean time periods, and the idea that the choices made in one time period affect that time period, all future time periods, and are often permanent, Hardin highlights a similar school of thinking - namely his claim that there "is no technical solution." Hardin also assumes that space (and by default its resources) is finite and that allocation decisions must be made. In his classic "commons" scenario, due to the imbalance of benefit and cost (as a function of shared grazing land) the farmer adds to his herd without thought of the present or future environmental impact. He argues that the "invisible hand" does not account for depleteable assets. In essence, Hardin's argument is much like Krutilla's - the classic free market model does not adequately account for the intertemporal and depleteable nature of natural resources and there are no clearly defined answers that suggest a way to manage the natural environment in all of its functions for this time period and the next with limited information on both.
Toggle Commented Jan 21, 2016 on ECON 255 for Friday at Jolly Green General
Elizabeth Wolf is now following The Typepad Team
Jan 20, 2016