AEnvEconomics.ppt environmental economics is the field of study

Environmental economics

1. 1
Introduction of Environmental
Economics
Why People Pollute?
有關期中考 ：
文中加底線部份為考填充題之重點
文中加“Q&A”部份為考簡答題之重點
張保興 副教授
淡江大學水資源暨環境工程學系
http://mail.tku.edu.tw/086138/

2. 2
What is Economy?
•The economy is a collection of
technological, legal, and social
arrangements through which a group of
people seek to augment their material and
spiritual standards of life.
»See the next two pages for further discussions on
“their” and “material and spiritual”.
more

3. 3
Moral discussion on
“their”
•現在人類 (或某些人種 )之福祉(welfare) ，
還是 生態、後代子孫或萬物之福祉？
•歐美等國目前消耗地球的資源極大，用
完了則後代子孫怎麼辦？對落後國家應
敬盡什麼樣的責任？ . . .

4. 4
Moral discussion on
“material and spiritual”
•有開發多半就有污染與生態上之破壞，
則 material 與 spiritual 何者重要？

5. 5
The fundamental circular flow
model of economic activity, “Q&A”
•
Output
market
Households Firms
Factor
market
Demand
for goods
and
services
expenditures
Supply for goods and
services
revenues
costs
Demand for
resources
income
Supply of
resources

6. 6
The materials balance model: the interdependence of
economic activity and nature, “Q&A”
•
Output
market
Households Firms
Factor
market
Demand for goods
and services
Supply for goods
and services
Residuals from
production
Reduce
Reuse
Recycling
Demand for
resources
Supply of
resources
Nature
Reduce 減量
Reuse 再利用
Recycling 再循環
Residuals from
consumption
Natural resources
drawn from
nature

7. 7
Produce Less Waste by
Practicing the 3 Rs:
Reduce, Reuse, Recycle,
“Q&A”
http://www.epa.gov/epaoswer/non-hw/muncpl/reduce.htm#reduce
•Reduce
Source reduction, often called waste
prevention, means consuming and
throwing away less.

8. 8
•Reuse
Reusing items by repairing them,
donating them to charity and
community groups, or selling them also
reduces waste. (A shower curtain story, 暖手包)
•Recycle
Recycling turns materials that would
otherwise become waste into valuable
resources and generates a host of
environmental, financial, and social
benefits.

9. 9
再加一個 R , 3+1,一共4R
“Q&A”
•Refuse：拒用（無環保觀念產品）
•http://recycle.epa.gov.tw/main.asp

10. 10
Definition of economics
•Economics is the study of how people
choose to use their limited resources (land,
labor, and capital (資本的) goods like
trucks and machinery and buildings) to
produce, exchange, and consume goods and
services.

11. 11

•Natural resource economics:
•A field of study concerned with the flow of
resources from nature to economic activity.
•Environmental economics:
•A field of study concerned with the flow of
residuals from economic activity back to nature.
–residual: The amount of a pollutant remaining in the
environment after a natural or technological process has
occurred.

12. 12
Scope of environmental damage

13. 13
Local pollution examples
•Urban smog (=smoke + fog)
•Solid waste pollution
–Leaching contaminants such as lead and
mercury may flow into soil or groundwater.

14. 14
Regional pollution examples
•Acid rain damages:中央氣象局
–human respiratory system
–ecosystems: soil, lake, forest
–Building
•http://www.guardians.net/egypt/sphinx/
•http://mail.tku.edu.tw/086138/EnvFutures/TajMahal
.doc

15. 15
Global pollution examples
•Ozone depletion --- ultraviolet radiation
–Caused by CFCs (ChloFluoroCarbons)
–Damages:
•weakens human immune system
•cause skin cancer
•affect ecosystems
•Global warming --- 水世界, …

16. 16
An Abrupt Climate Change
Scenario and Its Implications
for United States National
Security
http://www.ems
.org/climate/pentagon_climate_chang
e.html#report

17. 17
Scene 1
•“Recent research, however, suggests that there is a
possibility that this gradual global warming could
lead to a relatively abrupt slowing of the ocean's
thermohaline conveyor （熱鹽環流傳輸帶） ,
which could lead to harsher winter weather
conditions, sharply reduced soil moisture, and
more intense winds in certain regions that
currently provide a significant fraction of the
world's food production.” See home page

18. 18
Scene 2
•“The research suggests that once
temperature rises above some threshold (門
檻值，起點), adverse weather conditions
could develop relatively abruptly, with
persistent changes in the atmospheric
circulation causing drops in some regions of
5-10 degrees Fahrenheit in a single decade. ”

19. 19
Scene 3
•“The report explores how such an abrupt
climate change scenario could potentially
de-stabilize the geo-political environment,
leading to skirmishes, battles, and even war
due to resource constraints such as: ”

20. 20
Scene 4
•“1) Food shortages due to decreases in net
global agricultural production
2) Decreased availability and quality of
fresh water in key regions due to shifted
precipitation patterns, causing more
frequent floods and droughts
3) Disrupted access to energy supplies due
to extensive sea ice and storminess ”

21. 21
Scene 5
•“As global and local carrying capacities are reduced,
tensions could mount around the world, leading to two
fundamental strategies: defensive and offensive.
  Nations
with the resources to do so may build virtual fortresses
around their countries, preserving resources for themselves.
 
Less fortunate nations especially those with ancient enmities
with their neighbors, may initiate in struggles for access to
food, clean water, or energy.
  Unlikely alliances could be
formed as defense priorities shift and the goal is resources
for survival rather than religion (Israel?), ideology
(Taiwan?), or national honor (Nazi?). ” 電影: 明天過後

22. 22
Environmental objectives, “Q&A”
1. Environmental quality (present
oriented)
2. Sustainable development (future
oriented)
3. Biodiversity (future oriented)

23. 23
Environmental quality
•Demand for zero pollution is impractical.
•What pollution level is acceptable to society?
–It is a difficult decision, and it depends on the following
factors.
•human health
•pollution reduction expenditures
•availability of pollution abatement technology
•the risk of a given environmental hazard

24. 24
Sustainable development
•Definition: The management of earth’s
resources such that their long-term quality
and abundance are ensured.
•But, a nation’s primal objective is speeding
its economic growth that is usually
measured by GDP.

25. 25
Definition of GDP
國內生產毛額
•Gross domestic product (GDP) is the total
value in money terms of all the production
in a country in one year.
•GDP calculation: adding the price of goods
and services produced.

26. 26
The objective: GDP growth
•Economists and many government officials
often use GDP as a measure of economic
welfare.
•The desire to achieve the targeted GDP
growth may imply the growth of industrial
productive activity.

27. 27
GDP is not a good indicator!
•The consequences of this expended
productive activity are ecological damages
and natural resource depletion.
•矛盾的例子 ：當政府花錢清除有毒性廢棄
物掩埋場址，或因環境惡化而造成民間及
政府的醫療支出增加時，通常會造成 GDP
也同時增加。

28. 28
Biodiversity
•Biodiversity, or biological diversity, refers
to the variety of distinct species, their
genetic variability, and the variety of
ecosystems they inhabit.
•Biologists believe there may be as many as
100 million species on earth.

29. 29
Biodiversity
•The major threat to biological species is
the destruction of natural habitat.
–Reasons for the destruction:
•population growth
•poverty
•economic development (which includes)
–harvesting for tropical forests (woods for example)
–conversion of natural land masses into alternative uses

30. 30
Biodiversity
•Other minor threats to biological species are,
–pollutants
–commercial activity
–sport hunting
•In contrast, killing in animal world is not for pleasure.
Example: Lion cub murder. Stronger or better gene are
preserved through the killing process.

31. 31
Why people pollute?

Main Entry:
2
good
Function: noun 3 a : something that has
economic utility or satisfies an economic want
b plural : personal property having intrinsic
value but usually excluding money, securities,
and negotiable instruments

32. 32
Market
•The interaction between consumers (or
buyers) and producers (or sellers) to
execute the exchange of a well-defined
commodity.

33. 33
Private goods
•A commodity that has two characteristics,
rivalry in consumption and excludability.
•Examples: ice cream, tissue paper, ….
•rivalry in consumption: The consumption of the
goods by one person precludes that of another.
•excludability:The benefits of consumption are
exclusive to that single consumer.

34. 34
What is market failure?
•當market在classical microeconomic theory
之下運作時，產生出正面或負面之結果
(outcome) 。此現象稱為 market failure 。
–Inefficient market conditions （見下頁）常會
使市場無法在預期的最佳效率狀態下運作
（i.e., the equilibrium point under the allocative
efficiency criterion），故將此市場之結果稱為
market failure。

35. 35
Market failure
•Market failure (e. g., the problem of
environmental pollution) is the result of an
inefficient market condition such as,
•imperfect information: 如consumer不知道污染、
或某中藥對健康之影響
•imperfect competition: 如某行業有 entry
barrier
。
請扶持老二 。
•public goods: (see next slide)

36. 36
Public good
•A commodity that is non-rival and non-excludable.
–Examples: light house, national defense, environmental
quality.
–non-rivalry in consumption: The characteristic that makes it
impossible (or prohibitively costly in a less strict sense) to
prevent others from sharing in the benefits of a good’s
consumption.
– non-excludability: The characteristic of individual benefits of
consumption such that one person’s consumption of a good
does not preclude that of another.

37. 37
Free-ridership behavior
•This behavior occurs when a rational
consumer recognizes that the benefits of a
public good are accessible by allowing
someone else to purchase it.

38. 38
Why people pollute?
•Environmental quality is a public good.
•Free-ridership is an attitude toward a public
good.
–This attitude implies everyone expects others to
pay the abatement cost for the degraded
environmental quality. As a result, pollution
problems persist and no further improvements
due to polluters’ free-ridership attitude.

39. 39
Comment
•The desire of profit motivated self-interest,
or greed, is the cause of degraded
environmental quality and ecological
catastrophe.

40. 40
Common property resources

（
Common：共有的，公共
的）
•Those resources for which property rights are
shared by some, not all, group of individuals.
–Common property resources fall somewhere on a
continuum between the extremes of pure public
goods and private goods.
–Examples: fisheries, animal populations, road
network common, and grass land for pasture（牧草
地,放牧場）.

41. 41
A famous paper by a biologist,
Hardin
•Hardin, G., “The tragedy of the commons”,
Science, 168:1246-1248, 1968.
–The system containing resources, e. g., food, air,
energy, to which most people have ready access are
called commons. 此common泛指public good及
common property resources。
•He presents a cold logic that indicates the ruin of a
common is resulting from the self-interest motive
of those resource exploiters.

42. 42
A grass land for pasture example
[2], p17
•Four farmer families live on a grass land,
farmer Jones is one of them, and each
farmer has 10 cows.
•The carrying capacity （涵容能力） of
this grass land is 40 cattle.

43. 43
Payoff matrix
•
1000*10=10,000
1000*10=10,000
880*11=9,680
880*10=8,800
970*10=9,700
970*11=10,670
820*11=9,020
820*11=9,020
The other farmers’ action
F
a
r
m
e
r

J
o
n
e
s
’

a
c
t
i
o
n
Does not add
additional
cows
Does not add
additional cows
Add one
more cow
Each add one
additional cow

44. 44
Farmer Jones’ rational decision
•No matter what the other farmers do,
Jones’ rational choice is to add one cow.
•The other three farmers make the same rational
choice independently.
•The result: 44 cows on this grass land.
»Note that the carrying capacity allows 40 cows only.
•The tragedy begins from these self-interest
rational choices.

45. 45
We can act luxuriously, as long
as we take within the limit of
nature’s carrying capacity.
An example of non-tragedy :
American bison, 150 years ago …
http://news.nationalgeographic
.com/news/2006/02/0223_060223_bison_vide
o.html

46. 46
The solutions to avoid the
tragedy , “Q&A”
•Direct provision of public goods
•Examples: roadways, parks, and fire protection,…
•Education and public information
•Many people do not know the implications or the
consequences of pollution or resources depletion
problems.
•Legislation
•No laws, no enforcement.
---More---

47. 47
The solutions to avoid the
tragedy , “Q&A”
•Assignment of property right
•Property (e. g., park, lake, forest) owners will
protect their property from damages.
•Establish policies that raise the price of a
product to reflect the social cost of
environmental damages
•Establish a market and a price for pollution

48. 48
Bibliography
•[1] Callan, Scott J., Thomas, Janet M.,
Environmental Economics and Management:
Theory, Policy, and Applications, Dryden Press,
2000.
•[2] Chechile, Richard and Carlisle Susan,
“Environmental Decision Making: a
multidisciplinary perspective”, Van Nostrand
Reinhold, 1991.