Environmental and Natural Resource Economics
Economics
322
Fall,
2002
Mencken's Law: "Whenever A annoys or
injures B on the pretense of saving or improving X, A is a scoundrel;" H.
L. Mencken, Newspaper Days (New York: Alfred A. Knopf, 1941), p. 38.
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Instructor: |
R. Morris Coats, Ph.D., Argent Bank Professor of Business Administration |
Office: |
102B White |
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Office Hours: |
10:30-12:00 noon, MTWR or by appointment |
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e-mail: |
Phone: |
(985)448-4237 |
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web: |
Fax: |
(985)448-4922 |
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Instructor’s Class Schedule:
ECON 211—4T & ET; ECON 322—2T
Catalog Course Description:
Environmental and Natural Resource Economics: 3-3-0. Environmental
economics examines environmental degradation and resource depletion as social
problems. This course examines both market and political institutions for
improving human wellbeing by making better use of our natural resources.
Prerequisite: Economics 211, 252 or 255
Required Text:
Tom Tietenberg, Environmental Economics & Policy, 3rd ed., 2001, Addison Wesley Longman. (Click on book cover or book title to go to textbook website.)
A Few Helpful Web Links and Resources (more to be added soon)
1. Tom Tietenberg’s Sustainable Development Page, at URL: http://www.colby.edu/personal/thtieten/sustain.html
2. The RESECON (resource economics) e-mail list-serve: To subscribe to the Land and Resource Economics Network, send email to: LISTSERV@UKCC.UKY.EDU and in the body of your message, write: Subscribe RESECON first_name last_name
Course Requirements:
A. Attendance is required by University Policy. However, attendance does not enter into the grade formula.
B. The text is required reading. The instructor may make additional reading assignments.
C. Basic understanding of supply and demand analysis is needed as a prerequisite to this course.
Methods of Evaluation:
Three or four equally weighted examinations will be given. All of the exam items require written answers using at least full sentences. The exams count for a total of 100 percent of your final grade. The grading scale is the usual 90/80/70/60 scale. Any instance of cheating will be reported and full action will be pursued (see the section on Cheating and Plagiarism).
Course Goal:
The goal or purpose of this course is to provide the student with the tools of analysis that will enable him or her to effectively compare various environmental policies as to their likely effects on human wellbeing and justice.
Specific Objectives of the Course:
- to give students an
awareness that there is a social dimension as well as scientific and
engineering dimensions to problems of pollution, resource depletion and
wildlife protection.
B.
to give students an understanding of how markets work
and fail to work in allocating resources efficiently—why the invisible hand
does not work in the case of common-ownership resources, particularly air,
water, and wildlife.
C. to give students an understanding of how political institutions work and fail to work in allocating resources efficiently--why government fails to solve pollution problems and fails to provide adequate protection of wildlife.
D.
to survey and compare various methods for environmental
regulation and enforcement.
E.
to analyze key provisions of major environmental
legislation.
F.
to enable the student to perform basic cost-benefit
analysis.
About
This Class:
Is it Economics vs. the Environment or Economics and the Environment?
Most parents would like to leave something to their children. Real estate, bank accounts, financial securities, family heirlooms, and family businesses can all be passed down. Some things are much more difficult to pass down: air and water that have not been fouled, hunting and fishing areas that have not been depleted, beautiful scenery that has not been spoiled. Notice the conflict between wealth and health, between economy and ecology, between private and public.
This supposed conflict between economy and environment is actually based on a misunderstanding of what is good for the economy. Often we think of increases in the Gross Domestic Product (GDP) or decreases in the unemployment rate as indicating improvements in the nation's economy. Though these indicators may point to some improvements in the health of the economy, sometimes they may prove misleading. Consider the case of a polluting factory that locates in a community, causing the people who live near the factory to become ill and spend more on expensive medical care. Not only is GDP increased and unemployment cut by the factory producing and employing people from this community, but also GDP is increased and unemployment cut by the increased medical expenditures made by these people. Some people who are employed by this factory are made better off, but many of those who do not work for the factory suffer the ill effects of the factory's pollution.
Has the economy in this community been improved? Probably not. To answer this we must not only attempt to measure the value that people place on the output of the factory, but also the value of the loss to people's health because of the factory. Only when activities bring about more in gains than in losses has the economy been improved.
In many cases, we can count on a free market to do things only when the value of the gains exceeds the value of the losses. This will happen if all things that people value are privately owned. When things are held in common, they get overused. Property held in common is held by no one--no one has an individual interest protecting the value of that property. Air, water, and wildlife are all held in common. The reason we have a problem with overfishing of redfish, but not the overfishing of oysters is that oyster beds are privately leased. In effect, fishing and hunting limits and licensing arrangements are methods of buying the wildlife from the state. Hunters and fishermen teach their children that taking animals without a license or in excess of the limit is stealing.
This course will not focus on the physical and biological scientific environmental issues, such as "what will be the effect of a given level of a certain toxic chemical on a given species or on a specific ecosystem?" Instead, we will focus on the social science issues of pollution and natural resource use. For instance: 1) "what kind of world do we wish to leave to our children and their children?" 2) "what is the role of private property in the social problem of pollution?" 3) "what problems do markets have in dealing with the harm that some consumption and production activities do to others?" 4) "what problems do we have with government intervention into these activities?" and 5) "what regulatory methods can we use to reduce the damage to our environment at the lowest cost?"
If we and our children understand that the forces of the market can be harnessed to improve our environment, that we can make it profitable for firms to protect the earth, and that property rights mean property responsibility, maybe we can hand over to our children a healthier, greener, and more beautiful planet.
Make-up Policy:
Make-up exams will be given for those who have a valid excuse. Unless you
can give proof that you have been abducted by aliens or have been in a coma,
you must get in touch with me to schedule the make-up exam no later than the
end of the working day (4:30 pm MTWF) of the regularly scheduled exam or at the
end of the next working day if you are in an evening section. You must schedule
the make-up exam for a time either during regular office hours or during one of
my classes. Do not wait to talk to me about a missed exam.
Academic
Accommodations for Disabilities:
If you have a documented disability that requires assistance, you will need to register with the Office of Disability Services for coordination of your academic accommodations. The Office of Disability Services is located in Peltier Hall, Room100-A. The phone number is (985) 448-4430 (TDD 449-7002).
Course Outline:
A. The Social Dimension of the Environment (Chs. 1-5)
1. Does our Future Resemble the Past? (Ch. 1)
2. Economic Efficiency and Valuing the Environment (Ch. 2)
3. Valuing the Environment: Measurement Issues (Ch. 3)
4. The Environment and Human Institutions (Ch. 4)
a. The Invisible Hand -- Why markets tend to allocate
resources to their highest valued uses (Ch. 4).
b. The Invisible Foot -- Why markets sometimes fail to allocate some natural
resources to their highest valued uses -- Externalities and collective
consumption goods.
c. The Invisible Foot: The Sequel -- Public Sector Decision Making
--Voting, Legislation, Interest-group Politics, Bureaucratic Behavior.
5. Sustainable Development: What Do We Owe Future Generations? (Ch. 5)
Exam 1
B. Resource Economics: The Ghost of Malthus (Chs. 6-8, 10, 13)
1. Population Growth (Ch. 6)
2. Allocation of Natural Resources (Ch. 7)
3. Energy Resources (Ch. 8)
4. Water Resources (Ch. 9)
5. Biodiversity (Chs. 11&12)
Exam 2
C. The Economic Approach to Dealing with Pollution Problems (Chs. 13-19)
1. Methods of Social Cooperation to Improve Environmental
Quality and Economic Efficiency or Getting the Best Environment for the Buck
(Ch. 13.)
2. Air Pollution and Public Policy (Chs. 14-16)
3. Water Pollution and Public Policy (Ch. 17)
4. Solid and Hazardous Wastes and Toxic Substances (Chs. 18-19)
Exam 3
D. Environmental Justice, Now and in the Future (Chs. 20-21)
1. Environmental Justice, Development, Poverty and the
Environment (Ch. 20)
2. Sustainable Economic Development (Ch. 21)
Final Exam—Chs. 5, 6, 7, 12, 13, 14—Study Guide
for Final
Cheating and Plagiarism Policy (click here)