COURSE MATERIALS FOR ECON 76: ENVIRONMENTAL ECONOMICS, SPRING 2003 & 2004


REQUIRED TEXTS

COURSE ORGANIZATION

DETERMINATION OF COURSE GRADE

READING ASSIGNMENTS

INSTRUCTOR'S POLICIES

FIRST AND SECOND PAPER ASSIGNMENTS - Spring 2003

PAPER ASSIGNMENT - Spring 2004

STUDY GUIDE FOR MIDTERM EXAMS

MIDTERM EXAM - Spring 2003

MIDTERM EXAM - Spring 2004

COMBINED THIRD PAPER AND FINAL EXAM - Spring 2003

FINAL EXAM - Spring 2004


REQUIRED TEXTS
Txt – T. Tietenberg, Environmental and Natural Resource Economics, 6th ed., 2003.

Sup – G. Heal, Nature and the Marketplace: Capturing the Value of Ecosystem Services, 2000.

Rdg – R.N. Stavins, Economics of the Environment: Selected Readings, 4th ed., 2000.

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COURSE ORGANIZATION

This course surveys the field of environmental economics & policy and examines some of the key issues within it in considerable depth. The textbook (Txt) provides the basis for the survey. The issues are covered using the reader (Rdg), which contains recent, notable contributions to the literature. The Heal monograph provides an additional perspective on principles and selected issues. All these materials are accessible to students having only an Introductory Economics background; but the course is also designed to be challenging and informative for students having an extensive background in economics.

Class meetings will consist of a mix of lecture and discussion, with the aim being to insure a full understanding of the principle concepts and ample opportunity to discuss the issues. As may be inferred from the determination of one’s course grade, students are expected to be well prepared for participation in class discussion.

There will be some form of paper / writing assignment, either one longer paper or two short papers. Student opinion and preferences will be sought before the assignment is finalized. Written instructions regarding the assignment will then be provided.

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DETERMINATION OF COURSE GRADE




Paper Assignment(s)
Mid-term exam (one hour)
Final exam (two hours)
Class participation
30 ~ 40 percent, depending...
15 ~ 20
20 ~ 30
20

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READING ASSIGNMENTS

Wk 1

The BIG Issues – Txt, ch.s 1,6, 22 (pp. 524-42 only); Rdg, ch. 2 (pages: 58; 14)

Wk 2

Static & dynamic allocation, Sustainability – Txt, ch.s 2,5; Rdg, ch. 5 (pages: 42; 10)

Wk 3
=>

Sources of environmental problems – Txt, ch. 4; Sup, ch. 8; Rdg, ch. 3 (pages: 27; 32; 27)
Sup – complete reading of ch.s 1,2,3 by end of this week (pages: 60)

Wk 4

Valuation methods & issues – Txt, ch. 3; Sup, ch. 7; Rdg, ch.s 10,11,12 (pages: 27; 22; 66)

Wk 5

Benefit-cost analysis – Txt, ch. 21; Rdg, ch.s 13,14,15 (pages: 23; 54)

Wk 6

Costs of environmental protection – Rdg, ch.s 6,7,8 (pages: 88)

Wk 7

Review, Midterm – Rdg, ch.s 1,25 (pages: 19)

Spring Break

Wk 8

Depletable resources, overview – Txt, ch.s 7,14 (pages: 48)

Wk 9

Environmental pollution, overview – Txt, ch.s 15; Rdg, ch.s 18,19 (pages: 29; 27)

Wk 10

Forests (non-market values), Fisheries, (absent property rights), Biodiversity –
Txt, ch.s 12,13; Rdg, ch. 26 (pages: 58; 17)

Wk 11
=>

Global climate change, Carbon tax – Rdg, ch.s 22,23,24, 17 (pages: 66)
Sup – complete reading of ch.s 4,5,6, by end of this week (pages: 50)

Wk 12

Depletable resources, cases – Txt, ch.s 8,9,10,11 (pages: 103)

Wk 13

Environmental pollution, cases – Txt, ch.s 16,17,18,19,20 (pages: 136)

Wk 14

What to conclude? – Txt, ch.s 23,24; Sup, ch.s 9,10 (pages: 42; 22)

Notes

Lectures will more or less keep up with reading assignments, but no doubt they will lag behind at some points. The number of pages of reading per week is uneven; accordingly, students are advised cum encouraged to balance their reading across the weeks as they find most sensible – this taking carefully into account the work to be done on assigned papers, all three being due in the second half of the semester. Readings per se are not formally discussed in class, but students are encouraged cum welcomed to raise in class any questions or issues elicited by the readings. Questions emailed in advance are particularly appreciated.

Txt: Chapter assignments include contemplation of Discussion Questions and completion of the Problems (answers appear at back of book). Students having the math background necessary for comprehension of the Appendices that appear at the end of some chapters may wish to assimilate their content. These materials will be discussed in class only if students raise specific questions about them (by email, preferably).

Sup: Specific chapters are assigned to particular weeks only in three cases – weeks 3, 4, and 14. For the rest of the book, pacing is left to the student, but indicated reading should have been completed by the ends of the weeks noted.

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INSTRUCTOR'S POLICIES

Examinations: Students must take exams at the duly appointed times; a make-up exam will be given only in the case of a certified (by a Dean or Worth Health Center) emergency or medical excuse for having missed an exam.

Paper assignments: Papers must be submitted in hardcopy form. In extreme circumstances, with the instructor’s explicit prior approval, they may be submitted electronically.

Late assignments: Assignments are due at the beginning of class or at the time stated, as the case may be. Assignments turned in after the deadline will be marked down one “notch” (e.g., from A- to B+) per hour that they are late; an exception will be made only in the case of a certified (by a Dean or Worth Health Center) emergency or medical excuse.

On cheating and plagiarism: See the Student Handbook’s statement regarding Academic Honesty. Cases of suspected plagiarism and cheating on exams will be reported to the Dean’s Office for judicial action. In addition, the instructor has the automatic policy that any student whom he considers, on the basis of evidence available to him, to have engaged in plagiarism or cheating in any individually assigned work (i.e., in this course, exams and written reports) will automatically receive No Credit for the course.

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FIRST AND SECOND PAPER ASSIGNMENTS - Spring 2003

Note: A total of three short papers were assigned. The first two (2,000 words each) dealt with environmental issues in specific areas, with different groups of students working on distinct areas. The first of these papers was to survey the costs of environmental degradation and the associated net benefits of overcoming it to varying degrees; the second was to discuss alternative policies that might be pursued to achieve warranted environmental improvements, with due attention to the choice of optimal policy. In the third paper (1,500 words), each student independently wrote an evaluative synthesis of environmental issues as seen from the economists’ perspective. These papers served as the springboard for discussion during the final week of the class. Following here and in the section “Combined Third Paper and Final Exam” are the detailed assignment instructions.

The purpose of these twinned paper assignments is to provide some real depth of understanding of a specific environmental issue cum possible problem, both the positive (descriptive of the “real world” as best we can perceive it) and normative (prescriptive in relation to possible solutions via public policy or otherwise) analytics thereof. They are formulated in a way meant to encourage constant and intensive interaction with one or more fellow students working on very closely related issues. Each paper is – in its final writing – the sole responsibility of the individual student working on the particular issue; but this is not meant to preclude comments on drafts by one’s fellow students prior to final revision. Indeed, interactions / mutual assistance among students at all stages of research and ruminating are positively encouraged.

The first paper, due Wk 8, Thurs: This paper is to focus “exclusively” on the positive aspects: what is the issue; is there indeed a “problem” that warrants attention; what are the dimensions of the problem – the magnitude of the costs imposed, and on whom imposed; what are the apparent causes of the problem? Problems, like beauty, are in the eyes of the beholder; almost always, what is a problem in the view of some is no problem whatsoever in the views of others. Research must pay “equal” attention to arguments and evidence on both / all sides where there is controversy about whether a problem truly exists and / or major disagreement about orders of magnitudes of costs (where relevant, benefits of amelioration). Papers are to provide terse syntheses of findings from the literature, noting those differences that exist among analysts and arguing a particular resolution of them. The latter resolution (i.e. as regards the nature of the problem) is to form the starting place for the second paper.

Related oral reports: One member (chosen by pair) of each student pair working on closely related issues (i.e., falling under same area) is to present an oral overview of findings arrived at by both members working independently (albeit also interactively); time for each report is twenty minutes – 12 minutes maximum for report, with remainder of time devoted to class Q&A discussion. Note: The other of the pair’s members gives the related oral report from the second paper.

The second paper, due Wk 11, Thurs: This paper is to deal with the normative aspects: given that a problem exists, and following from an understanding of its causes and consequences – what are the principal alternative solutions using public policies of various kinds or other means (e.g., societal, institutional evolution); among them – which, if any (i.e., “do nothing” is an alternative!), should be considered the preferred way of ameliorating the problem, why? As in the first paper, arguments pro and con regarding each alternative are to be researched. The paper is to provide a terse synthesis along with a compelling argument in favor of the recommended solution; the argument must of course take proper note of opposing views.

Related oral reports: As for the first paper, but presented by the other member of the pair.

Paper requisites: Use double line spacing when printing. Please, if possible, use Times New Roman, 11 point font. You must include a word count, indicating the length of your paper measured in the number of words it contains, in the top right corner of the first page, where it can easily be seen. Recall, the word limit is 2,000 words.

Possible places to start information search:
- Lomborg, The Skeptical Environmentalist, associated web page (http://www.lomborg.org/), critical reviews.
- Web sites of major environmental organizations (and EPA?), especially those “economically inclined, etc:
Resources for the Future, Environmental Defense, Ocean Conservancy, Worldwatch Institute, Island Press, those listed in Tietenberg (text, p. xxi), Tietenberg’s web site.
- Environmentally focused journals, listed in Tietenberg (text, p. xxi) and periodicals, including Nature and Science.

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PAPER ASSIGNMENT - Spring 2004

Note: A single paper was assigned to each student. Students worked in pairs, with each of the two students responsible for one of two closely related topics, on which they jointly made an oral presentation to the class. Topics, selected by the students, included: fisheries regulation, comparative experiences of two countries; global climate change, international aspects and greenhouse gas tax versus permits; optimal R&D on a renewable substitute, solar energy versus petroleum; internationally optimal conservation, forestry and biodiversity; US experience with air-pollution tradable permits, where they work versus where they don’t; water resources, wetlands economics and paper mill effluents. Papers were due at semester’s end. To make room for the presentations, given two per class period during weeks 13 and 14, class discussion of reading assignments through week 14 was completed during weeks 11 and 12.

The purpose of these paired assignments is to give each student an opportunity to analyze an environmental issue of particular interest to her/him using the economics learned in this course. Though the focus of student research into the issue is to be on the economics of the matter, importantly related science should not be neglected. In turn, papers should deal both analytically and empirically with the positive (descriptive) and normative (value-laden) aspects of the issue under consideration.

In principle, papers should deal with existing policy as well as policies argued (in the paper) to be optimal in “holistic” terms; that is, taking into account not only economic theory, but also cultural, social, and political “reality.” Matters critically dependent on moral judgments should be identified; normative assumptions or judgments, where made, should be made explicitly. Attention should likewise be explicitly paid to vexing uncertainties which may, when taken into account, affect conclusions about policy.

Owing to the complexity of some / most of the issues / cases being dealt with, some degree of creativity may be required – indeed, is expected often to be necessary – in framing a defensible, workable research issue. This is all the more likely to the degree that paired students strive to achieve synergy between their projects. The instructor is happily available to consult on topic selection and refinement as well as on any other matter on which he may be able to provide useful guidance.

Students working on closely related topics have been paired in the hopes that they will agree on a fruitful division of labor between closely complementary, related aspects of the same overall issue, however the latter may be defined. Close student collaboration is strongly encouraged but, obviously, can not be meaningfully enforced. Each student pair, as a coordinated pair, is responsible for reporting to the class on research findings and conclusions. Reports, inclusive of time for several rounds of Q&A, are to last 35 minutes per pair (thus two reports per class period). Reports will not be formally graded; however, paper grades will be adjusted upward for students in pairs that give well organized and meaningfully informative reports.

While reports are the joint work of student pairs, papers are the sole responsibility of each student working as an individual. It is of course hoped and expected that students within, and even between, pairs will discuss with one another all aspects of their work in progress; no bounds are placed on student collaboration, however achieved, except that papers must be written by their authors working alone. The stipulated maximum length for the paper is to be respected. It has been set to encourage concise completeness of exposition, this in the belief that much virtue is to be found in informative brevity.

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STUDY GUIDE FOR MIDTERM EXAMS

General advice: You will of course want to review your lecture notes and both the text and the reading assignments. In the text, each chapter concludes with a “minimally useful” summary which identifies at least some of the principal matters with which you should be thoroughly familiar. More useful perhaps is the Glossary in the back of the text which can be used as a checklist of terms cum concepts with which you should be familiar; of course, not all terms there pertain, only those which relate to material so far covered.

Short-answer questions: Most of the exam will consist of short-answer questions designed to probe your basic understanding of particular concepts, their meaning, significance, and implications (e.g., with regard to optimal allocation / utilization) in the context of environmental economics.

Essay questions: You will be asked to select one or two among several essay questions designed to probe your understanding of some issue in greater depth.

Starting list of terms, a study guide of sorts: A “not fully exhaustive list” of terms denoting concepts with which you should be familiar follows. Of course, this list is not only about definitions; rather each term serves as the "gateway" to a whole host of ensuing conceptual and / or empirical matters. That is the spirit in which the terms constitute a study guide. Questions on the exam will draw from the knowledge surrounding these, and perhaps a few other, concepts.

Averting (or defensive) expenditures
"Big picture" optimists (eg. Simon)
____ pessimists (eg. Malthus, Meadows)
Carrying capacity
Coase on externalities
Competitiveness
Contingent valuation, ranking: pros, cons, caveats
Cost-benefit (or vice versa) analysis:
____ pros, cons, caveats
Cost effectiveness
Demographic transition
Depletable / exhaustible resources
Discounting, incl. wrt future generations
Dose – response relationships, studies
Efficiency: Pareto, static, dynamic
Elasticity of substitution; incl. in re sustainability
Environmental justice: static, dynamic
Environmental “problem;” ecologist vs economist
Equity; progressive vs regressive impacts *
____ Progressive, biased in favor of the poor
____ Vertical, proportional and progressive
Existence (non-use) versus use value
Expected value
Externalities
Fertility: private choice vs social considerations
Impact analysis
Incidence (broadly defined) of pollution control costs
Indirect effects (in benefit-cost analysis)
Institutions, incl. norms
Hartwick rule
Hedonic regressions
Government Failure
Liability rules.
Market structure, incl. potential effect thereof
Microeconomic theory of fertility
Net present value; definition, use as criterion
Normative (prescriptive) vs positive
____ (descriptive) economics
Open access resources
Option value
Overfishing
Pigouvian taxes
Population, environmental impact of
“Porter hypothesis”
Poverty, environmental impact of
Risk assessment; incl. proper conduct of
Risk: aversion, neutrality; proper treatment of
Risk – risk analysis
Property rights; incl. secure...
Public goods: (non-)rivalry, (non-)excludability
Rent
Social vs private benefit, cost
Substitution; incl. in relation to scarcity
Surplus, consumer and producer
Sustainability: definitions, criteria;
____ theoretical determinants
Transactions costs
Travel cost method
User cost
Valuation of environmental goods, bads
Value of a statistical life
Willingness to pay, to accept

* Regarding "Equity; progressive vs regressive impacts" -- if you use either of the latter terms in answer(s) to midterm questions, I will assume that your usage is consistent with the text usage UNLESS you otherwise indicate by providing your definition. The text's usage is consistent with the general usage in which "progressive" means biased in favor of the poor. Should you use the term "vertical" in reference to equity, please be sure -- if relevant -- to clarify whether in your usage vertical equity includes proportional impacts AS WELL AS progressive impacts.

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MIDTERM EXAM - Spring 2003

In your answers to all questions, be sure to use any diagrams, graphs, or equations that you consider to be pertinent to the matter(s) at hand.

Part I -- Short-answer questions.

Briefly answer four of the five questions appearing below. BE SURE that your answer in each case includes clear definitions of the principal terms involved in answering the question. Each question is worth 15 points; allocate roughly 9 minutes to each (totals: 60 points; 36 minutes).

1. What is the demographic transition; what factors underlie it; why should environmentalists care about it?

2. How do impact analysis and risk-risk analysis differ from benefit-cost (or vice versa) analysis; under what circumstances ought one to be favored over the others?

3. What is “existence value;” is there any evidence it exists; can it be ascertained with any degree of reliability?

4. What is “user cost;” where does it have significance with respect to efficient resource allocation, and what is it’s significance?

5. Why is the elasticity of substitution between capital and natural resources a matter of intense concern? In the same context, what else should be of equal, if not more, concern?

Part II -- Essay question. Answer in a separate bluebook, labeled Part II.

Answer either question 1 or 2 appearing below. The question answered is worth 40 points; allocate roughly 24 minutes to it.

1. “There is no environmental problem that does not involve aspects of a public good.” This statement is both true and false. Discuss.

2. What are the dimensions of equity as regards environmental policy? Are there any commonly-agreed principles to guide equitable resource allocation in the environmental realm? Are these principals followed in practice?

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MIDTERM EXAM - Spring 2004

In your answers to all questions, be sure to use any diagrams, graphs, or equations that you consider to be pertinent to the matter(s) at hand.

Part I -- Short-answer questions.

Briefly answer seven of the nine questions appearing below. BE SURE that your answer in each case includes clear definitions of the principal terms involved in answering the question. Each question is worth 10 points; allocate roughly 6 minutes to each (totals: 70 points; 42 minutes).

Caveat: One could write at considerable length in answering each of these questions, but only a short answer is wanted. Concise completeness with respect to the most significant points at issue is of the essence.

1. What are the full costs and benefits of having a (another) child? Insofar as those making the decision fail to take account of all relevant costs and benefits, what should be done in terms of social policy?

2. What is the meaning of dynamic efficiency? How does net present value relate to its achievement?

3. Why is it necessary, even a good thing, to place a value on human life when contemplating environmental issues? How should human life be valued? Should the same value be used regardless of the issue under consideration?

4. What is “contingent valuation?” What are the principal arguments in favor of and against its use in environmental policy making?

5. What are “averting expenditures?” What roles can and should they play in placing values on environmental assets? Answer in general terms but also be sure to provide an example.

6. Consider some given change in environmental quality. What is the distinction between “willingness to pay” versus “willingness to accept payment” in relation to the change? What are the considerations in choosing between the two measures?

7. What is benefit-cost analysis? How should it be conducted in framing public policy related to environmental assets, what role should it play in policy making?

8. Do market forces lead to an equitable allocation of waste disposal and treatment facilities over geographic space? Where is the responsibility to be placed if they do not (“what” or “who” is at fault)?

9. “The greater is the degree of monopoly power possessed by a firm, the more likely is the firm to despoil the environment.” True or false; explain with respect both to principle and practice as you understand both.

Part II -- Essay question.

Answer either question 1 or 2 appearing below. The question answered is worth 30 points; allocate roughly 18 minutes to it.

1. The debate between optimists and pessimists about sustainability issues has been on-going since at least the time of Malthus. What are the elements (distinct factors) in the debate? How do those on each side appraise each element? On which element(s) do you believe the debate should be focused; why?

2. As a general matter, what are the principal, underlying causes of significant environmental problems (that is, of perceived over-exploitation of environmental assets)? Does knowledge of them help one to assess whether purported problems are in fact real ones? What are the principal ways in which public policy can address the real ones?

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COMBINED THIRD PAPER AND FINAL EXAM - Spring 2003

Pedagogic principles

Exams aren’t about grades! Exams are about discipline – ensuring that material is “internalized!”

The intention of this assignment is to insure that you review thoroughly -- and to some meaningful extent internalize the most salient elements of -- ALL of the course materials (lectures, discussions, readings), but this without facing the presumably unsettling prospect of confronting randomly chosen, mostly specific questions on a lengthy exam. The hope is that you will indeed review all of the materials thoroughly and from most, if not all, of the directions / points of view from which you might otherwise have approached them in studying for a “conventional” final exam; additionally, that you will find that the questions asked provide a challenging perspective that affords new and useful insights as you achieve a valuable synthesis of the subject matter, one that facilitates comprehension of most, if not all, salient details while placing them in a meaningful overall context. Of course, it is in the nature of this assignment that depth / details will be sacrificed in favor of breadth / synthesis in the papers written for it. But depth / details are obviously important! Accordingly, questions focused on details may be asked during the roundtable discussion (see below), and final course grades may reflect the adequacy of the answers given.

The assignment

You are to choose, in the first instance (but may ultimately be assigned), one of the conundrums – A, B, or C – given below on which to write a coherent essay of no more than 2,000 words. Papers are to be handed in to the instructor (or left in the box outside K209) no later than noon, Monday, May 12. Additional consequential details regarding the paper appear further below.

Everyone in the class must be present for a roundtable discussion, 9 am to noon on Thursday, May 15. [This is the regularly scheduled final exam period for this class.] The discussion will begin with conundrum A and pick up elements or themes from conundrums B and C as they become relevant in the course of the evolving give-and-take. Work / studying done in preparation for writing your paper should suffice for your participation in this discussion; that is, assuming that you have confidence in your mastery as regards matters of depth / details.

Each of the conundrums posed below involves formulating a “policy relevant” evaluative synthesis of environmental issues as seen from the economist’s perspective. Each in some way asks you to develop, explicitly or implicitly, some sort of hierarchical typology based on some set of analytical principles or discriminative facets pertinent to the matter at hand. A good paper will delineate the discriminatory elements, consider the weights to be assigned to each, and apply them logically in setting forth the hierarchical typology. A good paper on any one conundrum will also reflect some cognizance of matters relating to the other conundrums, for they are in fact interrelated even though separable.

The space required to state each conundrum should not be thought indicative of anything consequential. In turn, first impressions regarding their difficulty may be misleading. For example, one might think it quite a simple matter to specify the discriminative element that is at the heart of conundrum A. Indeed, the benefit-cost criterion (maximize net present value using appropriate prices) is central to establishing priorities, but just how far does this recognition take one as a practical matter? Not very far, one might think: consider, for example, our ignorance in many cases of how the world really works, how goods and bads ought to valued, how risk and uncertainty are often dominating concerns.

A: Policy priorities

Over the course of the semester we have seen that there are many environmental problems that impose social costs and require some form of government intervention (or policy) if they are to be resolved to society’s benefit. We have also observed that the American government has implemented various policies with the intention of ameliorating numerous environmental ills. But it has not dealt with all problems needing attention; and where it has intervened, its policies have typically not achieved the most that might be expected from government intervention. In short, it would seem that a great deal yet remains to be done to fashion and implement appropriate environmental policies. The world being as it is, it would be foolish to expect that all environmental policy deficiencies (including absent policies) could be rectified within a short period of time. Thus it is necessary to formulate priorities among deficiencies: which should be rectified most quickly; which can be set aside as being of relatively negligible adverse consequence (over a period of, say, ten to twenty years)?

Your assignment in this paper is to answer the following three questions: First, on what principles, or on what bases, should a priority ranking of environmental policy deficiencies be established? Second, what then are two otherwise dissimilar areas of policy deficiency to which you would attach the highest priority? Third, what is one area deserving of lowest priority? In answering the first question: focus on matters of economics, including administrative and enforcement costs; but take care not to neglect issues of scientific ignorance where they are relevant. In answering the second and third questions: justify your choices in terms of the principles identified in your answer to the first question; consider “area” to be synonymous with “generic environmental problem” of the kind typically dealt with in a single policy or closely related set of policies (or, in mechanical terms, discussed in a single “section” of the text); and, briefly indicate what is needed to rectify the policy failing (overt or covert), again with reference to your answer to the first question.

B. Market possibilities

Economists advocate allocating environmental goods (source or sink) and resolving environmental bads (existing or potential; distinct from goods) on the basis of expected net benefit maximization, inclusive of achieving expected marginal benefit equal to expected marginal cost. Additionally, as a corollary, they advocate that market means (i.e., voluntary exchange based on secure property rights) should be used wherever possible. But it seems clear that market means are not equally applicable (or feasible) in all cases. Sketch a typology (or suggest a classification) of environmental goods and bads that covers the spectrum from those most amenable to market means of allocation and resolution to those least amenable. For each type: a) identify the relevant externalities, if any; b) consider whether and how they are or could be resolved by market means; c1) where market means are tenable: indicate, if relevant, any deficiencies (with respect to expected net benefit maximization and, if relevant, otherwise) of these means; c2) where market means are untenable: state why this is so; indicate the appropriate alternative means and note its deficiencies (as in c1). Generalize from the typology – what kinds of goods / bads are most amenable to being allocated / resolved by market means; what kinds are least amenable?

C: Sustainability concerns

Environmental economics – inclusive of natural resource economics – deals with issues of efficiency as well as sustainability. What considerations are entailed in the notion of sustainability that are not also implicated in the concept of efficiency? With these considerations in mind: Sketch (or propose) a hierarchy of environmental goods and bads, starting with that which involves the most serious problem(s) of sustainability and ending with those which involve the least serious problem(s). State your criteria for “serious.” For each element in the hierarchy, indicate the remedial means most consistent with economic principles. Does your hierarchy suggest any generalizations about the fundamental causes of sustainability concerns? Does your contemplation of remedial means across particular goods and bads imply any principles of policy design, some simple matching between sustainability specifics and policy choices?

Paper requisites

Use double line spacing when printing. Please, if possible, use Times New Roman, 11 point font. You must include a word count, indicating the length of your paper measured in the number of words it contains, in the top right corner of the first page, where it can easily be seen. Recall, the limit is 2,000 words. Specific citations -- of the form (xxx, nn); xxx = text or reader, nn = page number -- are required whenever reference is being made to information, statements, or arguments from specific parts of the course materials. You are free to consult other published sources if you wish, but only if you list them as references and cite them as appropriate where relying on them.

You are free to discuss this assignment with anyone, whether in the class or not, BUT only up to the point at which you begin writing your paper. Your paper, once writing commences, is to be the product of your own thinking and reflection without further discussion with others during the period that you are writing it – from start through to finish which means handing it in. There is but one exception to this: you may seek WA (only) assistance with respect to matters of presentation, style, and the like. Any violation of these terms will be considered cheating.

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FINAL EXAM - Spring 2004

Note: Students were given the exam questions below ahead of time, with the following advice: At least part of the last class meeting will be devoted to a discussion around these questions. In turn, you are encouraged to study / work with other students in the class as you strive to contemplate how you would answer these questions. You may bring into the examination, for your use in answering these questions, one 5” x 8” index card (or equivalent) with whatever notes written beforehand that you would find useful in taking the exam. Notes are to be confined to a single side of the card.

You have three hours to take the exam. If you require more than one blue book to complete the exam, please number blue books consecutively before turning them in. If you chose to bring into the exam a 5x8 card with your notes, be sure to turn in the card when you turn in your blue books.

Over the course of the semester we have seen that there are many environmental problems that impose social costs and require some form of government intervention (or policy) if they are to be resolved to society’s benefit. We have also observed that the American government has implemented various policies with the intention of ameliorating numerous environmental ills. But it has not dealt with all problems needing attention; and where it has intervened, its policies have typically not achieved the most that might be expected from government intervention. In short, it would seem that a great deal yet remains to be done to fashion and implement appropriate environmental policies. The world being as it is, it would be foolish to expect that all environmental policy deficiencies (including absent policies) could be rectified within a short period of time. Thus it is necessary to formulate priorities among deficiencies: which should be rectified most quickly; which can be set aside as being of relatively negligible adverse consequence (over a period of, say, ten to twenty years)?

The examination consists of five questions, stated below, inspired by the foregoing observations. You may answer question-by-question or in a single consolidated statement. Apportion your time among the questions so as to give the best possible overall answer, all questions considered together. The questions:

1) On what principles, or on what bases, should a priority ranking of environmental policy deficiencies be established?

2) What then is one area of policy deficiency to which you would attach highest priority?

3) What is one area deserving of lowest priority?

4) Consider the issue dealt with in your paper and the principal policy deficiency identified in your paper: what priority should be attached to it considered both “absolutely” (i.e., in terms of the principles stated in answer to the first question) and in comparison to the areas of highest and lowest priority you have identified and discussed in this exam? Note: Be sure to identify clearly both the issue and the deficiency being discussed.

5) Considering that you (should) know a great deal more in rather specific detail about the issue / deficiency dealt with in your paper than about many / most other issues / deficiencies, how have you guarded against the bias that derives from knowing far more about “your problem” than any other environmental problem? More generally: what is the nature of this bias; how ought one engaged in policy formulation to guard against – or, avoid, offset – it?

Advice: In answering the first question: focus on matters of “holistic” economics, including administrative and enforcement costs; but take care not to neglect issues of scientific ignorance where they are relevant. In answering the second, third, and fourth questions: justify your choices in terms of the principles identified in your answer to the first question; consider “area” to be synonymous with “generic environmental problem” of the kind typically dealt with in a single policy or closely related set of policies (or, in mechanical terms, discussed in a single “section” of the text); and, briefly indicate what is needed to rectify the policy failing (overt or covert), again with reference to your answer to the first question.

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