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Benie Bolohan
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I found this paper to present some interesting ideas about policies regarding CO2 emissions. On one hand, there are taxes, which set a fixed price in hopes that the market will determine a new quantity lower than the current one. On the other hand, there is cap-and-trade, which predetermines the quantity, but leaves the price flexible. Theoretically, if we know where the market equilibrium is (once we include all the social costs and benefits in the MDF and the MAC curves), then the two policies should reach the same end result. Unfortunately, this is highly unlikely. For one, it is nearly impossible to determine where the market equilibrium is exactly. This is because markets in general are difficult to pinpoint precisely. Furthermore, this market includes non-market values (the social costs and benefits), which are oftentimes hard to quantify in dollars. Another consideration I believe plays an important factor in differentiating the two systems is how they set incentives. To me, the taxes encourage each business to attempt to cut emissions to the best of their abilities. A permit system would force companies to reach a certain level of pollution. It does not, however, encourage further action to be taken if the companies are emitting CO2 at levels below their allotted amount. Additionally, it seems that the permit system is less likely to be lenient. If a company cannot perform without reducing emissions, then it will no longer be able to survive. Overall, I believe that the tax system would work best. It allows more freedom to individual companies to determine what amount of pollution is acceptable and encourages companies from all regions to reduce how much they pollute. Furthermore, it continuously works to prioritize pollution reduction for each company at the pace that best suits them. To me, it seems to require less control--a cost for the government--and is less costly to firms as well.
Toggle Commented Mar 30, 2016 on ECON 255 for next Thursday at Jolly Green General
With an ever growing global population, I think the necessity for alternative energy should be prioritized much more than it currently is. It seems to me that many people believe that, because of the larger initial investment required for more sustainable energy sources, sustainable energy is too costly to pursue in large quantities. I think that, after reading these articles, the truth is the exact opposite. In the long-run, these investments will more than pay off—both financially and environmentally—especially with larger quantities of people using energy. Additionally, if the cost of sustainable energy is too high, then I am curious how people would respond if the less sustainable energy options reflected the true cost of consumption. Since 2006, when the “Fueling our Future” article from the Harvard magazine was published, I believe we have made sufficient technological progress that we can begin to implement more sustainable energy than nuclear power plants even, and on a much larger scale. We always hear about how quickly technology is changing—within the past generation alone the internet has been widely spread and developed to what it is today and phones have gone from bulky, simplistic, expensive devices to these small “smart” phones that can process multiple tasks at once. The world of technology is changing and, if we direct this change towards implementing widespread, sustainable energy, I think we would be amazed at the progress we make and how quickly we can accomplish this. But this can only be done if we prioritize sustainable energy—which cannot happen until the market accurately reflects the costs associated with various sources of energy. So long as people fear change, and how change may impact our "delicate" economy, I cannot see positive actions being pursued.
Toggle Commented Mar 16, 2016 on ECON 255 for next Thursday at Jolly Green General
Reading the article, it seems quite clear to me that the costs of using coal—at least in the way that we did during the time when this article was written—outweigh the benefits when there are so many development opportunities to sustainable energies exist. Mountain top removal, for example, contaminates the water with heavy metals and carcinogens. If such processes increase the risk of cancer for an entire population, then that is a huge cost that dramatically impacts peoples’ lives. I am not sure if such information was as easily accessible for the worker population at the time, but I believe that this cost is not necessarily accounted for in the market because of an imperfect information market failure. I am curious if those whose health is directly impacted by mountain top removal would react in such a way that the market supply would shift accordingly. If so, I’d suspect that prices would increase enough to encourage people to look for alternatives to energy from coal. Another thing I found particularly interesting was the map of biodiversity “hotspots” in the United States. Among some of the areas designated to be the highest levels of biodiversity were also some of the areas with the highest levels of coal mining, mountain top removal, and more. The habitat destruction and contamination associated with such detrimental processes impacts the amount of biodiversity significantly. This reminded me of chapter 14. If these habitats are destroyed and the biodiversity is diminished, they cannot be recovered in the short term. So, while we may receive temporary private benefits from such activities, in the long run there is more to be gained from not partaking in habitat destruction.
Toggle Commented Mar 9, 2016 on ECON 255 for Thursday at Jolly Green General
The article highlighted some of the issues with current conservation approaches, touching on points that I thought were quite interesting. To me, the major underlying problem is the mismatch between benefactors and cost carriers. One line from the article reads “…need to address the opportunity costs of conservation among the rural poor.” People often ignore the costs of conservation—the marginal abatement cost as we have labeled it in our class—either not seeing any or recognizing that they do not share in that burden. If this is such an important issue—which I would argue it is—then freeriding is detrimental to making progress. Costs for conservation should be better distributed in order to reflect more heavily on those that benefit from it. Then, perhaps, the success of various conservation methods would not seem so mixed. The true benefactors of conservation are outsiders—people who do not depend on the biodiverse ecosystem to make a living. Conservation in the “rural poor” areas is difficult because it comes at a great opportunity cost for the locals. For this reason, the people asked to conserve the local ecosystems are faced with a major dichotomy: either reduce their private income, sometimes well beyond what it may be worth to them to conserve the ecosystem, or hope that others will while they continue to earn the money necessary to survive. I think another major thing to keep in mind with this is the marginal value of money to individuals. For every additional dollar a person has, the marginal benefits of that dollar are likely to diminish. What I mean by this is simply that that law of diminishing returns also applies to money. Obviously, if you do not yet have enough money to support yourself (buy food, shelter and water), then the value of the dollar is still quite high for you. If you are debating whether or not to buy a multimillion dollar house in California, then a single dollar may not have much, if any, value to you. This income difference is again noted in conservation attempts because it further demonstrates how the burden of conserving the environment is incredibly difficult for locals. Their opportunity costs are substantial, and what may seem like a small fee to someone in the States may have much greater value to someone from the Caribbean.
Toggle Commented Mar 2, 2016 on ECON 255 for Thursday at Jolly Green General
It seems like current policies regarding natural resources are not effective in accomplishing the equilibrium we desire in the MAC and MDF model. One potential issue that stuck out to me is that US policies focus more on non-point source pollution rather than point source pollution. To me, this does not seem to make as much sense because point source pollution is more easily identified and, as a result, prevented--as is demonstrated in the low-hanging fruit principle. Essentially, I do not believe the current approach is as effective in finding a solution as it could be. Also, I felt that chapter 15 re-brought up the issue of inefficiency. Because people are not accounting for the externalities that exist when they pollute (such as limited clean water supplies, the depletion of fisheries, the negative effects on recreational markets, and general biodiversity loss) the costs of polluting are not properly aligned with reality and, therefore, cannot lead to the true equilibrium. The solution presented in the chapter is to raise the cost of water. The effect of this would be two fold. Firstly, it would reduce consumption and lead to a more conservative mindset for the public. Secondly, the additional money could serve to counteract the negative impacts of pollution. Overall, this change could be a simple yet effective solution to the problem.
Toggle Commented Feb 10, 2016 on More Chapters from Kahn at Jolly Green General
There are two main ideas that came to my mind as I read the article. The first is that people often exclude the tradeoff between restoration and prevention. Obviously, for environmental reasons, prevention seems ideal. That being said, it is something that I feel often gets ignored because it is future-based rather than current. For this reason, I do not believe it is considered in the economics side of this argument. The second point I thought of was that people traveling to places like Barbados would very likely be willing to pay more to participate in activities such as scuba diving. My first point, regarding the prevention versus restoration matter, is simply that I believe people to be fairly short-sighted. Based off the trends I've both noticed and read about, it seems that many people only see the current issues and ignore many important future considerations. People value the current issues over those of the future. It is reasonable to do so, one could justify, simply because the present situation is something that must be dealt with in the present whereas the future is insecure and often unpredictable. That being said, it does not seem too far-fetched to say that if we continue to ignore the environment, or do little to help improve its situation, then other things will be effected too. For example, something we discussed last class was that islands like Barbados depend on tourism and raising the prices for activities could potentially harm the economy. To me, there is also the flip argument that if we do not limit our ecological footprint, there will be less biodiversity or "exotic," cool things to see and tourism will die on its own. Either way, the economy will suffer; however, if we look in the short-term continuing as we are seems better. In the long-term, changing our behavior, limiting visitors, increasing prices, spending money on protection measures is better. My second point is that people spending so much on travel to be in places such as Barbados would likely be willing to pay more to scuba dive. Put simply, if you spend $500 on a plane ticket and $500 for a nice resort, an extra $10 or $20 to scuba dive does not seem unreasonable. On Tuesday we discussed relative prices. A $10 increase in scuba diving might be a 10% or more increase from the previous price, but I think that is the wrong "relative price" at which to look. The true relative price is more accurately depicted in a comparison of the price increase to the cost of travel. So the $10 increase in scuba diving is only a 1% increase in comparison to the travel costs. For this reason, I do not believe increasing the prices of scuba diving would actually cause a significant decrease in tourism--especially if it resulted in an improved scuba experience.
Toggle Commented Feb 3, 2016 on ECON 255 for next Thursday at Jolly Green General
In biology, students tend to learn that each species has its carrying capacity and that a generalized population graph for any given species grows at a decreasing rate until it finally levels off at that carrying capacity. This graph is a simplified model used to explain broad-spectrum theories, just as is done in economics. That being said, there are certain assumptions we take for granted in these models—assumptions we do not always address. For example, we assume that the environment is a constant, meaning that the food supply stays the same, predator populations do not fluctuate greatly, and so on. If any of these assumptions were no longer true, those individuals that were the best suited to survive would continue to propagate and, over time, the species would adapted. None of the species we studied in biology had learned to adapt their environment to suit their needs. That is what humans have done. We take pride in being well-educated, having a high-level, well-respected job, accumulating wealth, being “civilized,” and more, but has that all had a positive effect on our species? In my anthropology course, we learned that the more economically developed a society becomes, the more removed from nature it becomes as well. In economic classes, students learn how to best manage an economy through fiscal and monetary policies in order to ensure a “strong and healthy” economy or to help developing countries grow their economies quickly. In other words, we learn how to be more removed from our natural environment. This has had both benefits and costs for society. On the one hand, we have increased the standard of living from decades, and even centuries, ago. We have developed advanced technology that has improved medicine and the average life expectancy greatly, systemized food production in such a way as to support a greater population, and created methods for travelling and communicating internationally. On the other hand, we have created higher expectations for what life has to offer and we have developed a system in which we incentivize people to be as profitable and productive as possible. Human nature is, as Hardin points out, self-centered. We want to consume the most we can while paying the least possible. We want a life of grandeur and luxury, and we strive towards this goal the best we can. But what happens when we reach the point where there are too many people to support our current lifestyles for everyone? We are competitive and we have our goals—we want to strive for better, not worse. We do not want to give up what we already have, we want to consume more. It is this question that I think Hardin pushes us to ask ourselves, because, while logical, it is slightly too abstract to truly imagine implementing in the real world. If the world is truly finite, we can only expand to a certain point. Our environment-adapting behavior can only delay this question for so long. We have grown accustomed to what we already have and seek the new, but at some point this will have to end, won’t it?
Toggle Commented Jan 21, 2016 on ECON 255 for Friday at Jolly Green General
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Jan 21, 2016