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Environmental Economics. Robert D. Mohr Fall 2005 Week 1. Organization. Syllabus Textbooks Groups Lecture I Outline of remaining lectures Lecture II. Week 1. Lecture I. Defining environmental economics Definitions Central questions Paradigms (models) Outline of course content
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Environmental Economics Robert D. Mohr Fall 2005 Week 1
Organization • Syllabus • Textbooks • Groups • Lecture I • Outline of remaining lectures • Lecture II
Week 1 Lecture I. Defining environmental economics • Definitions • Central questions • Paradigms (models) • Outline of course content Lecture II. Economic theory on the role of government • First welfare theorem • Property rights approach • Materials balance approach • Assignment for group I
Defining environmental economics • “Environmental issues on the boundaries of economic and natural systems, are undoubtedly complex and in many cases contain inherently uncertain outcomes. The sub-discipline of environmental economics which seeks to analyze issues consequently sits on the boundaries…”--Pierce and Turner (pg. 4)
Defining environmental economics • “In this book you will study… environmental and natural resource economics [with] a general focus on economic development in the presence of limited environmental and natural resources.” --Tietenberg
Environmental Economics vs. Natural Resource Economics • Closely linked & lots of overlap • Environmental classes normally emphasize economics of pollution • Externalities, analysis is often static • Natural resource economics generally emphasizes resource management problems • Public goods and common access resources • Generally intertemporal • Renewable (fisheries, timber, etc.) • Non-renewable (oil, coal, water)
Central Questions • Sustainability • Are market economies consistent with environmental sustainability? Are markets good or bad for the environment? • Do environmental concerns imply the need for government regulation? • If yes, is this extensive regulation to carefully manage overall resource use, growth and patterns of development • Or do we propose more limited regulation for particular environmental and resource issues? • How should regulations be designed? • Is there an “optimal” level of pollution, etc.
Paradigms & Models • Both texts start with contrasting different paradigms and models that we might apply to environmental economics • Pearce & Turner start with a history of economic thought • Tietenberg starts with a contrast of an “optimist” and a “pessimist” model. • Fullerton and Stavins identify myths about how economists think about the environment.
Paradigms & Models Common Themes: • Analysis of environment-economic interactions is based on models (either implicit or explicit). • Models are simplified versions of reality (analogous to a map). • Different models might be built on different assumptions. • We therefore need to apply some criteria to assess the models. (See Tietenberg, pg. 11). • Although the class is primarily based on one type of paradigm (“mainstream” or “neoclassical,” see P&T), we need to be aware of limitations of this viewpoint.
Primary Paradigm for this Course This course is “mainstream” in the sense that it builds on the tools students typically learn in a principles of microeconomics course. • Markets are characterized by independent supply and demand curves. • Firms (typically suppliers) wish to maximize profits • Consumers (people) have clearly defined and stable preferences, which can be represented with “utility.” • Often assume rigorous (perfect) competition, perfect information, etc… • Read Fullerton and Stavins for a discussion of this paradigm.
Outline of remaining lectures • Role of government • Comparing alternative policy instruments • Midterm exam • Policy design • Measuring environmental benefits • Topics: Recycling, cars, other topics by student input
