Allocation of Market and Non-Market Goods
This presentation is the property of its rightful owner.
Sponsored Links
1 / 20

Allocation of Market and Non-Market Goods VT-Law School Class 6 G. Flomenhoft PowerPoint PPT Presentation


  • 73 Views
  • Uploaded on
  • Presentation posted in: General

Allocation of Market and Non-Market Goods VT-Law School Class 6 G. Flomenhoft. CIRCULAR FLOW MODEL OF ECONOMY. “EXTERNALITIES” SOCIETY. ?. ECONOMY. ?. ENVIRONMENT. Rivalness and Excludability. Non-rival My use does not leave less for you to use

Download Presentation

Allocation of Market and Non-Market Goods VT-Law School Class 6 G. Flomenhoft

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript


Allocation of market and non market goods vt law school class 6 g flomenhoft

Allocation of Market and Non-Market Goods

VT-Law School

Class 6

G. Flomenhoft


Allocation of market and non market goods vt law school class 6 g flomenhoft

CIRCULAR FLOW MODEL OF ECONOMY

“EXTERNALITIES”

SOCIETY

?

ECONOMY

?

ENVIRONMENT


Allocation of market and non market goods vt law school class 6 g flomenhoft

Rivalness and Excludability

  • Non-rival

    • My use does not leave less for you to use

    • Market sells for a price, discouraging use, but social cost of use = 0, therefore market should not supply

  • Non-excludable

    • One person can’t keep another from using the good

    • Consumer will not pay, market will not supply

Must have a price to work in the free market!


Allocation of market and non market goods vt law school class 6 g flomenhoft

Non-Excludable

Excludable

Open Access Regime: (misnamed: Tragedy of the commons)

Oceanic fisheries, timberetc. from unprotected forests, waste absorption capacity, roads (congestible)

Market Good:

land, timber, fish once captured, farmed fish,

Rival}

Potential market good

(Tragedy of the

“non-commons”)but inefficient: patented information,

Pond

Pure Public Good:climate stability, ozone layer, clean air/water/land, Biodiversity, information, habitat, life support functions, social stability,

Freedom, democracy

Non-rival}


Allocation of market and non market goods vt law school class 6 g flomenhoft

Economic Theories of “externalities”

Coase Theorem

Pigouvian Taxes


Allocation of market and non market goods vt law school class 6 g flomenhoft

Marginal disutility


Allocation of market and non market goods vt law school class 6 g flomenhoft

Pigouvian Taxes (page 376)

How to internalize external costs?

Impose a tax = marginal external costs

Creates a property right for the state, using

Liability rule.


Allocation of market and non market goods vt law school class 6 g flomenhoft

Pigouvian Taxes-problems

  • Cannot accurately measure external costs

  • Costs change with amount of pollution

  • Firm may pay the costs

  • Enforcement?


Allocation of market and non market goods vt law school class 6 g flomenhoft

Pigouvian Taxes-advantages

  • Firm with with lowest costs will make large

  • Reductions

  • Maintains micro-level freedom

  • Biggest polluters may go out of business

  • Or change facilities

  • More palatable than “Command and Control”


Allocation of market and non market goods vt law school class 6 g flomenhoft

Coase Theorem (page 177)

Assign property rights to polluter or to

Agent impacted. Makes no difference from

Efficiency standpoint


Allocation of market and non market goods vt law school class 6 g flomenhoft

Marginal disutility


Allocation of market and non market goods vt law school class 6 g flomenhoft

“Coal plant and the laundry”

Coal plant-right to pollute: laundry must pay

not to pollute

“Willingness to pay” (to avoid pollution)

Laundry-right to clean air: Coal plant must

Compensate laundry for dirty air.

“Willingness to accept” (If compensated)

In theory WTP&WTA are same!

In reality?????


Allocation of market and non market goods vt law school class 6 g flomenhoft

Other Approaches

Regulation (command and control)

Cap and trade permits

Pigouvian subsidies

Abatement costs

ITQ-Individual transferable quotas

Eco-taxes


Allocation of market and non market goods vt law school class 6 g flomenhoft

Non-Excludable

Excludable

Open Access Regime: (misnamed: Tragedy of the commons)

Oceanic fisheries, timberetc. from unprotected forests, waste absorption capacity, roads (congestible)

Market Good:

land, timber, fish once captured, farmed fish,

Rival}

Potential market good

(Tragedy of the

“non-commons”)but inefficient: patented information,

Pond

Pure Public Good:climate stability, ozone layer, clean air/water/land, Biodiversity, information, habitat, life support functions, social stability,

Freedom, democracy

Non-rival}


Allocation of market and non market goods vt law school class 6 g flomenhoft

Stock-Flow/ Fund-service (page 72)

Stock-flow

Are materially transformed into what they produce

Can be used at any rate subject to use of capital

Productivity measured by physical units

Can be stockpiled

Are used up, not worn out

Fund-service

Are not materially transformed

Can only be used at a given rate

Productivity measured as output per unit of time

Cannot be stockpiled

Are worn out, not used up


Allocation of market and non market goods vt law school class 6 g flomenhoft

The Valuation of Ecosystem Goods and Services

Matthew A. Wilson

Gund Institute for Ecological Economics

&

School of Business Administration

Email: [email protected]


Allocation of market and non market goods vt law school class 6 g flomenhoft

List of Ecosystem Goods and Services

ECOSYSTEM SERVICES

ECOSYSTEM FUNCTIONS

Gas regulation

Regulation of atmospheric chemical composition.

Regulation of global temperature, precipitation, and other biologically mediated

Climate regulation

climatic processes at global, regional, or local levels.

Disturbance regulation

Capacitance, damping and integrity of ecosystem response to environmental

fluctuations such as sea level rise.

Water regulation

Regulation of hydrological flows.

Water supply

Storage and retention of water.

Erosion control and sediment retention

Retention of soil within an ecosystem.

Soil formation

Soil formation processes.

Nutrient cycling

Storage, internal cycling, processing, and acquisition of nutrients.

Waste treatment

Recovery of mobile nutrients and removal or breakdown of excess or

xenic nutrients and compounds.

Pollination

Movement of floral gametes.

Biological control

Trophic-dynamic regulations of populations.

Refugia

Habitat for resident and transient populations.

Food production

That portion of gross primary production extractable as food.

Raw materials

That portion of gross primary production extractable as raw materials.

Genetic resources

Sources of unique biological materials and products.

Recreation

Providing opportunities for recreational activities.

Cultural

Providing opportunities for non-commercial uses.

Adapted from Costanza et. Al. (1997) “The Value of the World’s Ecosystem Services and Natural Capital”

Nature, vol. 387 pp.253-260


Allocation of market and non market goods vt law school class 6 g flomenhoft

Techniques for Valuing Ecosystem Services

  • Avoided Cost (AC): services allow society to avoid costs that would have been incurred in the absence of those services; flood control (barrier islands) avoids property damages, and waste treatment by wetlands avoids incurred health costs.

  • Replacement Cost (RC): services could be replaced with man-made systems; natural waste treatment can be replaced with costly treatment systems.

  • Factor Income (FI): services provide for the enhancement of incomes; water quality improvements increase commercial fisheries harvest and thus, incomes of fishermen.

  • Travel Cost (TC): service demand may require travel, whose costs can reflect the implied value of the service; recreation areas attract distant visitors whose value placed on that area must be at least what they were willing to pay to travel to it.

  • Hedonic Pricing (HP): service demand may be reflected in the prices people will pay for associated goods: For example, housing prices along the shore of pristine freshwater lakes tend to exceed the prices of inland homes.

  • Contingent Valuation (CV): service demand may be elicited by posing hypothetical scenarios that involve some valuation of alternatives; people would be willing to pay for increased water quality in freshwater lakes and streams.

  • Marginal ProductEstimation (MP): Service demand is generated in a dynamic modeling environment using production function (i.e., Cobb-Douglas) to estimate value of output in response to corresponding material input.

  • Group Valuation (GV): This approach is based on principles of deliberative democracy and the assumption that public decision making should result, not from the aggregation of separately measured individual preferences, but from public debate.


Allocation of market and non market goods vt law school class 6 g flomenhoft

Full World or Empty World?


Allocation of market and non market goods vt law school class 6 g flomenhoft

Valuation of Non-Market Social Services:


  • Login