Posts Tagged ‘Env-Econ’

Valuing Environment and Natural Resources

February 27, 2013

ValuingEnvironmentAndNaturalResourcesThe two-volume tome Valuing Environment and Natural Resources, edited by Kenneth G. Willis and Guy Garrod, was published last year. It is interesting of at least two reasons. In the interest of backwardness, the least important reason is that it is titled almost identically to the book Valuing Environmental and Natural Resources (look again) by Timothy C. Haab (of and Kenneth E. McConnell. As if the similarity in the title was not enough, they are both published on Edward Elgar.

The other, more important, reason for taking an interest in Valuing Environment and Natural Resources is buried deep in volume two. In chapter 32 of volume two, to be exact. Chapter 32, the first chapter in Part X (Marine), is namely a reprint of my very first published article. The article appeared initially in the journal Marine Resource Economics, volume 23, number 2, and was titled ‘The Premium of Marine Protected Areas: A Simple Valuation Model.’ The abstract goes as follows:


The article addresses the induced cost, the premium, from establishing a marine protected area in a deterministic model of a fishery. Outside the protected area, the fishery is managed optimally through total allowable catch quotas. The premium is found to be increasing and convex along the protection parameter. Biological measures are introduced to increase the understanding of the mechanisms in the bioeconomic system. Time-series solutions show that the net return per unit of fish increases after the protected area is established.

In fact, I discovered that the article was reprinted by mere accident (if to google yourself could be regarded a ‘mere’ accident). While I know the journal holds certain rights, I was surprised I was not even informed about the reprint. Oh well. Other authors who’s work are reprinted include big guns like Ian Bateman, Nick Hanley, John List, V. Kerry Smith, Jason Shogren, and a number of others and it is rather pleasant to be reprinted in the same book as them. The publisher describes the book as follows:

Over-exploitation of environment and natural resources is becoming increasingly widespread in the modern world. To combat this, environmental economists have attempted to value such resources in order to ensure that they are given due recognition in any ex ante appraisal, or ex post evaluation of projects or policies; and also to ensure that optimal levels of consumption are determined for the resource. This authoritative collection, along with an original introduction by the editors, brings together seminal papers published in the last three decades which demonstrate the application of a number of techniques employed to value a range of environmental and natural resources. It will be of immense value to students, scholars and practitioners with an interest in environmental affairs and natural resources. [Yes, italics are mine…]



Picture of the Day: Rocket Science

September 22, 2010

Today’s picture is a tounge-in-cheek response to John Whitehead’s picture over at Env-Econ:

Krugman Picks Up the Ball

September 29, 2009

After I started discussing cap-and-trade, Krugman saw the need to explain the economics behind it (not the best ‘popular’ explanation of an economic idea, maybe, but fair enough; from the top of his head, I guess).

Anyway, in Krugman’s picture it is fairly easy to see the equivalence of a cap on emissions, which limits the amount of pollution allowed, and a tax on emissions, which increases the costs of pollution and thus indirectly limits pollution. A tax would be set equal to the permit price, polluters would pollute until their marginal benefit of more polluting activity equals the tax, and the deadweight loss would be the same as in Krugman’s picture.

As Kolstad pointed out, a cap may be better because the market knows best how to price pollution (a bureucrat would need to know the marginal benefits curves of all polluters to set the right tax). The right (or ‘optimal’) cap level, however, needs to be set by a bureucrat, and that is not necessarily any easier. (‘Really low’ is perhaps good enough in the current situation, though.) Main point is, there’s a lot of uncertainty around these things; how much do we need to reduce pollution, how much should we spend, what are the benefits; it goes on and on.

Hat-tip: Env-econ.

UPDATE: Jim Roumasset makes a lot of sense over on Env-Econ:

Taxes are better we are told because they generate more revenue. In contrast, cap and trade is said to be better because its primary purpose is to control pollution, whereas the primary purpose of emission taxes is to raise revenue. I’m afraid that these propositions cloud the waters.

[…] In the world of perfect competition, controlling quantity with price (Pigouvian taxation) is exactly equivalent to controlling price with quantity via transferable and auctioned permits. This remains true even if there is uncertainty about marginal damage costs but not about the marginal benefits of emissions (Weitzman, 1974).

[…] The equivalence perspective is also useful for understanding the implications of taxes vs. permits for revenue. In the world of certainty, there are none! Again, a specific tax on all emissions is equivalent to auctioning the permits. Same price, same quantity, same revenue. […] cap and trade can be designed to match the revenue-raising implications of carbon taxes and vice versa.

So much for blackboard economics. In the real world we have uncertainty about both costs and benefits. Clearly it is possible to design hybrid schemes that are superior to either taxes or permits, but I don’t think we have strong results about the optimal hybrid scheme.

Innarresting Links

September 17, 2009

Various interesting stuff:

Wall Street Journal’s Top 25 Economics Blogs

July 17, 2009

The Wall Street Journal lists their top 25 economics blogs. Jim Hamilton’s Econbrowser is among them:

Originality: 5 light bulbs
Geekiness: 5 calculators
Readability: 3 reading glasses
For his day job at the University of Calif.-San Diego, economist James Hamilton works on the sorts of statistical problems that can leave even other trained economists confused. On Econbrowser, the blog he started in 2005, he (mostly) puts his insights on the economy into plain English. With a keen interest in energy markets, he was early with analysis of how a rapidly developing world and slowing oil production was pushing energy prices higher, and how those prices were affecting the economy. With his co-blogger, University of Wisconsin economist Menzie Chinn, he’s been delving into thorny macroeconomic questions and offering detailed, but understandable, explanations of how the Federal Reserve’s unconventional policy shifts work.
Quibble: Usually Messrs. Hamilton and Chin keep the wonk factor down, but not always. One recent post made the point that “dY = (1/Ä){[((Yññi+Yi))m/Di )+YññR]dR + YññZdZ}.”

Among others are Freakonomics, Paul Krugman’s blog, and Matt Kahn’s Environmental and Urban Economics blog.

Hat-tip: Env-Econ