Chapter 12 Market Failures and Biotic Resources. Geog 3890: ecological economics. Outline of Topics. Stock Flow vs. Fund Service Biotic Resources Sustainable yield and Maximum sustainable yield Absorptive capacity Per unit effort curve Stable and Unstable Equilibrium
Geog 3890: ecological economics
Do biotic resources meet the criteria necessary for
efficient market allocation?
Renewable Resource stocks and flows are rival and potentially excludable depending on whether or not institutions exist that can regulate access to them.
Renewable Resource Stocks and Flows are nonrival between generations as long as they are depleted at rates less than regeneration rates.
Economic incentives can nonetheless lead us to deplete reenwable resources at rates greater than regeneration rates.
There are many externalities associated with the depletion of renewable resource stocks and flows that are difficult to quantify, characterize, and place a dollar value on.
Sustainable Yield CurveNote: ‘K’ on x axis is carrying capacity where growth [y axis] is zeroMSY is Maximum Sustainable Yield. ‘S’ is a stable equilibrium point‘U’ is an unstable equilibrium point. At Q” QQ” is harvest, Q”Q’ is growth, net result is reduction of total Stock to R”. The different Y = qXE lines representdifferent levels of ‘Effort’ to catch fish. Note that there are unsustainable levels of effort e.g. E”
Y axis is now total revenue (Price of Fish * lbs of Fish or Pf*N); N starts at 0 on the Right at ‘K’,
and increases as you go left (thus N3 > N2 > N1). TC is total cost of ‘effort’ which is cost of effort times price of effort. In this graph TC increases linearly with size of catch (N). Profit (∏) is given by: ∏ = TR – TC. Profit is maximized at point N1. This occurs at the point where Marginal Revenue (MR – slope of TR curve) is equal to Marginal Cost (MC – slope of TC curve) – this our old ‘When to stop’ rule in action. Note that this is not at the MSY.
all of the world’s bluefin
tuna and that stock grew
at a lower annual growth
rate than a savings
account – SORRY CHARLIE*
Open Access Regime
$150,000 for a Bluefin Tuna?!
Costanza, R; d’Arge, R; de Groot, R; Farber, S; Grasso, M; Hannon, B; Naeem, S; Limburg, K; Paruelo, J; O’Neill, R; Raskin, R; Sutton, P; van den Belt, M; (1997) The Value of the World’s Ecosystem Services and Natural Capital Nature Vol 387 May 15
Needless to say, The great Pacific
Garbage Gyre suggests the ocean
is way past its waste absorption
capacity for plastic garbage.
There are high levels of uncertainty and ignorance concerning waste absorption
Capacity – Therefore the MEC curve below should be a broad fuzzy smear
There are aggregate total population effects on the MNPB curve.
Marginal External costs
Do go to infinity with the
Collapse of the ecosystem
Pollution permits will fail to
Generate all the wonderful
Properties associated with
The free market because
People are essentially forced
To be price takers of a the
Fun TED talk by Barry Schwartz, author of “The Paradox of Choice” with a
Significant criticism of neoclassical economics. Check it out.