Category Archives: Resource economics

Divorce and the environment

 

Resource-inefficient lifestyles such as divorce?  Yu and Liu in Environmental impacts of divorce , published online Dec 5 2007 in the Proceedings of the National Academy of Sciences USA suggest that divorce increase the amount of resources devoted to housing and quantify such increase.

The point they make is simple: there are economies of scale in housing so that a person living in a large household consumes less resources than one living in a smaller one. Divorce increases the number of households and thereby the amount of resources housing uses up.

In the abstract, the authors use the expression “resource-inefficient lifestyles such as divorce“. I am perplexed: shouldn’t one evaluate the efficiency or inefficiency of a lifestyle taking into account, in addition to the resource used, also the benefit such use yields? Russ Roberts is outright critical in Not from the Onion:

The environmental impact of divorce? Are you kidding me? This is the cost of not understanding economics, not understanding trade-offs, not understanding the role of prices. The virtue of prices is that prices tell us what things cost. Some things are relatively cheap. Some are relatively expensive. Marriage is tough on cotton. When you marry, you tend to have kids. Kids tend to wear clothes and that means marriage is tough on cotton. But we don’t worry about that. We understand that the price of clothes discourages people from consuming too much clothing. And when clothing gets cheaper, as it has over the last 50 years, people buy more clothing as a result, use more cotton, devote more land to cotton farming and so on. That’s not a downside of marriage or having kids–people pay for the clothing they use. They take account of the cost when they decide to buy something. So when they do buy it or use it, that means that the benefits outweigh the costs. And that means that live IMPROVES and gets better, not worse when we use more of something.

In the case of water or electricity, if they’re subsidized, then yes, people ignore the full costs when they use more of those things, whether it’s because they’re divorced or simply because they want a warmer home or take a longer shower. The solution isn’t to decry divorce, it’s to fix the prices.”

We could fix prices with Pigouvian taxes as suggested in the Pigou club manifesto.

More on the topic: NPR podcast ‘Marketplace:’ Divorce, an Environmental Hazard?

Mankiw on Oil Shocks

Mankiw asks:
Oil prices are near record highs, which raises a fascinating question. In recent years, the U.S. and world economies have typically shrugged off oil price increases. By contrast, oil price increases are a major part of the conventional story of the economic turmoil of the 1970s. Why the difference?

Read Mankiw’s view at Where have all the oil shocks gone?.
See also my previous post on the topic.

Behavioral Economics and Sustainable Forest Management

Jack Knetsch of Simon Fraser University investigates the links between behavioral economics and forest management in the chapter Behavioral Economics and Sustainable Forest Management from the book “Economics, Sustainability, and Natural Resources: Economics of Sustainable Forest Management”, 2005, Dordrecht and New York: Springer, pp. 91-103. Below is the abstract:

Taking account of recent findings that, for example, people value losses more than otherwise commensurate gains, discount future losses at lower rates than future gains, and tend to make choices on the basis of mental accounts, could markedly improve the guidance offered by economic analyses of forest management options. Asymmetrical incentives and restraints facing individuals and organizations favour continued use of earlier views of standard economic assumptions and such evidence is now largely ignored as are issues such as the appropriate choice of measure to use in valuing the various gains and losses being traded off in managing forest lands.

Experimental and environmental economics at ESA 2007

Have you ever conducted a contigent valuation study in which you need to portray some kind of risk (risk of oil spill, risk of wildfire, etc..) in an understandable form? If you have, you’re certainly aware of the difficulties in portraying risk in contingent valuation surveys.

In her ESA 2007 presentation Virtual Experiments And Environmental Policy at http://www.luiss.it/esa2007/programme/programme3.php?paper=212
Rutström Elisabet (co-authors Stephen Fiore, Glenn Harrison, and Charles Hughes) demonstrated the use of virtual experiments to assess the willingness to pay of people for an increase the forested area subject to prescribed burn in Florida. Prescribed burns are a tool to reduce the risk of wildfire, so that crucial to measuring such willingness to pay is the subjects’ proper understading of such risk and of the variables that affect it.

You can follow audio and video an earlier presentation of the same paper ( Feb 2007) by Glenn Harrison from the the web page of RFF’s Frontiers in Environmental Economics conference at http://www.rff.org/rff/Events/Frontiers-of-Environmental-Economics.cfm#Paper3

Here is the abstract:

“We develop the concept of virtual experiments and consider their application to environmental policy. A virtual experiment combines insights from virtual reality in computer science, naturalistic decision-making from psychology, and field experiments from economics. The environmental policy applications of interest to us include traditional valuation tasks and less traditional normative decision-making. The methodological objective of virtual experiments is to bridge the gap between the artefactual controls of laboratory experiments and the naturalistic domain of field experiments or direct field studies. This should provide tools for policy analysis that combine the inferential power of replicable experimental treatments with the natural look and feel of a field domain.”

On the last day of ESA 2007 there was another presentation related to environmental economics by Stefan Traub titled “Energy Taxation And Renewable Energy: Testing For Incentives, Framing Effects And Perceptions Of Justice In Experimental Settings”. Here’s the abstract (no link available for the paper):

“This paper addresses the following two questions: First, how does the individual willingness-to-pay for green electricity – some kind of public good – react on different institutional settings? Second, are individual votes on taxes for the support of green electricity subject to framing effects resulting from different institutional settings and do these votes correspond to different perceptions and attitudes concerning public finance and environmental policy? We try to answer these questions by means of an artefacutal field experiment that was conducted with 368 subjects. Six different treatments were run, which were based on two different institutional settings, namely the poluter-pays principle and the public-pays principle. Preliminary econometric analysis suggest that much of the individual variance in the willingness-to-pay can be explained by the treatment variables as well as by the subjects’ attitudes towards public finance and environmental policy.”

Trade, Tigers, and Elephants

Can we save wild tigers by selling off the parts of their domesticated cousins?‘ asks Brandon Fuller on Aplia Econ Blog.
In Tiger Conservation Revisited Fuller discusses again (see earlier post a proposal by Barun Mitra to legalize trade in domesticated tiger parts. Mitra argues that the selling of domesticated tiger parts would reduce price by increasing supply and thus decrease the profits from poaching.

In addition to Fuller’s post, Fisher’s (2003) article Trading in Endangered Species from Resources for the Future is also an interesting reading. Although the article deals with a different question, that is, whether governments should be allowed to sell rather than destroy confiscated endangered species products, the economic issue is basically the same.