the economy and property rights.pdf
the economy and property rights.pdf NREM 203
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This 3 page Class Notes was uploaded by Cassandra Miller on Wednesday February 24, 2016. The Class Notes belongs to NREM 203 at Ball State University taught by Megan Sharp in Spring 2016. Since its upload, it has received 22 views. For similar materials see Decision Making in Natural Resource Management in Environmental Science at Ball State University.
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Date Created: 02/24/16
Greening the Economy Wednesday, February 17, 2016 9:02 AM United Nations Environment Program (UNEP) One that results in improved human well-being and social equity, while significantly reducing environmental risks and ecological scarcities. One which is low carbon, resource efficient and socially inclusive. Growth in income and employment is driven by public and private investments that reduce carbon emissions and pollution, enhance energy and resource efficiency and prevent the loss of biodiversity and ecosystem services. Decoupling: breaking the correlation between increased economic activity and similar increases in environmental impacts. Relative decoupling: growth rate of negative environmental impact is positive, but less than economic growth rate Absolute decoupling: the level of the negative environment mental impact is stable or decreasing, while the economy continues to rise. Environmental Kuznuts Curve Environmental impacts increases with increased wealth however, eventually it tappers off and begins to decrease The Porter hypothesis Traditional Economic Theory Firms minimize costs to remain competitive Compliance costs make firms uncompetitive Porter hypothesis Key to competitiveness lies in ability to continually innovate Environmental regulations provide impetus for innovation with net positive outcomes Even where net effect of regulation is negative, innovation can reduce compliance costs Benefit-cost ratio of environmental regulations ranges from 2.8:1 through 23:1 Common Property Resources Monday, February 22, 2016 9:04 AM Accessible to everyone Not subject to private ownership Nonexclusive good: people cannot easily be excluded from using the resource Rival good: the use of the resource by one person affects the ability of others to fully utilize the resource The Tragedy of the commons Written in 1968 by Garrett Hardin Exponential population growth in a finite world means that the per capita share of the world's goods must steadily decrease "the morality of an act is a function of the state of the system at the time the act is performed" The morality of the act is a matter of scale If we are dumping so much waste that we are overloading the system it is immoral "Ruin is the destination toward which all men rush, each pursuing his own interest in a society that believes in the freedom of the commons" Economics of a fishery Ocean fisheries are generally open-access resources High seas No regulation, usage progresses without limits 1. A few boats start operations in a rich fishery 2. Others are attracted 3. More boats join 4. Capacity of fishery becomes strained 5. More boats lead to fishery collapse Traditional economic theory Free entry and profit maximization promote economic efficiency Opposite effect in a common pool resource Encourage over harvest Eliminate profitability Destroy the resource Economic explanation Underpriced resources are overused Solutions Voluntary limits - individual economic incentives may cause agreement to break down New fishers attracted by incentives are not bound by agreement License fee - removes incentive for additional boats above the optimum, an further boats would be unprofitable Competition protects the ecosystem rather than destroying it Quotas - catch limits Individual transferable quotas allow fishers to buy and sell their shares Managing public goods Available to everyone Nonexclusive and non-rival No individual has an incentive to pay for something that everyone else can enjoy freely Privatization Charging a price provides benefits to buyers and excludes nonbuyers Changes the inherent nature of the good Reliance on Donations Generally not sufficient for complete and efficient provision of public goods Enables free riders Government intervention Level of favor varies among citizens Decision must be made All citizens pay share through taxes Economic theory can help determine public demand and appropriate government spending on environmental public goods Public goods represent the DEMAND side problem Demand expresses marginal benefits and WTP Marginal benefits do not necessarily equal willingness to pay for public goods Social marginal benefit is determined by vertical addition of the two arginal benefit curves Assume forest preservation costs $7 per acre 10 acres would be social optimum forest preservation Marginal social benefits = marginal costs For a public good, marginal benefit and willingness to pay are not always equal Economic incentive to be a free rider Jonny receives $5 of marginal benefit at 10 acres May only pay $3 (if anything) "correct) social level of forest preservation is 10 acres At $7/per acre the gvnmt needs to raise $70 Tax Johnny and Annie $35 each At $5/acre Johnny receives $50 of benefits At $2/acres Annie receives $20 of benefits The role of Property Rights Wednesday, February 24, 2016 9:05 AM Property Rights are the right to Use something Exclude others from using it Sell, rent, or lease it Must satisfy three conditions Defined Defendable Divestible Holds owner accountable Provide incentive to innovate Must be protected by law From theft, assault, trespass, and pollution Foster cooperation Property ownership impacts stance in negotiations The Coase Theorem If property rights are well defined and there are no transaction costs, resources will be allocated efficiently, even if there are externalities Through negotiations, the two parties will balance the external costs against the economic benefits of a given action Well-fare analysis: Determines how each party is impacted
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