Economics of Natural Resources - MAF 502

Fall 2006, TR 2:00 - 3:15, S/A 114 http://mafweb.rsmas.miami.edu/courses/maf502/syllabus502.htm

Professor: David Letson. Office hours TR 10:45am-12 noon, and by appointment. South Grosvenor 125-D. Telephone 305-421-4083. E-mail: dletson@rsmas.miami.edu

Course Description: This course provides a comprehensive overview of the economics of national, international, and global environmental problems. A unifying theme throughout is sustainable development, defined as "maximizing the net benefits of economic development while maintaining the services and quality of natural resources over time". We will use economic reasoning to examine causes and consequences of environmental and resource problems, and measures for dealing with them.

Objectives: A basic, critical appreciation of economics as applied to natural resources management. Specific goals include comprehension of:

• the economics of sustainability,
• non-market valuation,
• economic policy instruments and
• international trade and the environment.

Two exams will be given on Oct. 5 and Nov. 21. The tests count 20% each toward your final grade, while the course paper counts 50%. Several papers from previous years are available online and on reserve at the RSMAS Library. You may see last years' tests for this course, both online and on reserve at the RSMAS Library. Make-up exams will be given only in extraordinary circumstances, and only if arranged at least one week in advance.

A writing assignment, ten pages (typed, double-spaced) is due Nov. 30. To encourage study and reflection, I ask that you commit to a topic, in the form of a one-page proposal with at least three references, six weeks prior to the due date (Oct. 19). The papers should analyze a policy issue related to the course, from an economic perspective. I have put several papers from previous students on reserve. Students should not restrict themselves to course readings but should show knowledge of this material. Please carefully note due dates, as no late papers will be accepted.

Each of you has a vital contribution to make to this course. I expect you to read assigned materials before class and to be prepared to contribute. To encourage classroom participation, I ask that you give a 15-minute presentation on an assigned reading and a 15-minute presentation of your course paper. Classroom participation will count 10% toward your final grade. Attendance is required for student presentations. Unexcused absences from your classmates' presentations will result in a one-point per day loss from your classroom participation grade.

Please keep abreast of current debate in environmental economics. To do so, I encourage you to:

• see the UM Econ Dept webpage or my list of marine resource economics websites; and
• read periodicals such as Environment or The Economist.

(HSW) Nick Hanley, Jason Shogren and Ben White. Introduction to Environmental Economics. OxfordUniv. Press. 2001.

(RFF) Wallace Oates, ed. The RFF Reader in Environmental and Resource Management 2^nd ed. Resources for the Future, 2006.
 

 

Course Outline

1. Economic Growth and Sustainability

What is sustainability? When is growth sustainable?

How do economists view natural resources?

What are some of the basic principles of economics?
 

For all we know, it may be perfectly possible to dispense with natural environments in favor of an encapsulated world of plastics and microchips. In all probability the issue is not survival in that sense. But the issue surely is one of how far down that road we wish to travel, and what regrets we think our grandchildren will have if we travel down it too far.

David Pearce and Kerry Turner.

Topic 1: Introduction

• RFF, pp. 15-20.
• HSW ch. 1

Topic 2: Growth and Sustainability

• HSW ch. 2 and 6
• RFF pp. 21-26 and 247-262
• Kenneth Arrow et al. "Economic Growth, Carrying Capacity and the Environment" Science Vol. 268 April 28, 1995. Pp. 520-521.
• "Plenty of Gloom" The Economist December 20, 1997. Pp. 19-21.

Topic 3: Economic Principles

Topic 4: Circular Economy

• K. Boulding. "Economics of the Coming Spaceship Earth" pp. 27-35 in Environmental Economics: A Reader. A. Markandya and J. Richardson, eds. St. Martin's Press, 1993.
• “Local Difficulties” The Economist July 4 2002.

• RFF pp. 28-34.
• HSW, ch. 4.

2. Non-market Valuation
 

How values do we hold for natural resources?

Do natural resource prices indicate values?

How can we measure values when prices do not exist?

Does anyone believe non-market valuation?

What problems do coastal and marine resource pose for non-market valuation?
 

"A cynic knows the price of everything and the value of nothing." Oscar Wilde

Topic 6: Measuring Environmental Values

• HSW ch. 3.
• “Environmental Economics: Are You Being Served?” The Economist April 21 2005.

• Myrick Freeman. "Economic Valuation of Coastal Resources Supporting Recreation" Pp. 87-103 in C. Colgan, ed. Sustaining Coastal Resources: Economics and the Natural Sciences. Univ. Southern Maine. 1995.
• Doug Lipton et al. 1995. Economic Valuation of Natural Resources--Handbook for Coastal Resource Policymakers. NOAA/Coastal Ocean Program. Decision Analysis Series #5. Online: http://www.mdsg.umd.edu/Extension/valuation/handbook.htm

Topic 8: Contingent Valuation Method

• RFF, pp. 38-42

Topic 9: Valuation Case Studies

Midterm, Thursday October 5.

3. Economic Policy Instruments

How do economists view waste flows?

How could environmental policy be made more efficient?

How have economic policy instruments fared in practice?
 

Topic 10: Economic Theory of Environmental Policy

• HSW ch. 7
• “The Invisible Green Hand” The Economist July 4, 2002.
• RFF pp. 51-92.

• “Should Fuel Economy Standards Be Raised?” Resources Fall 2005. Pp. 15-20.

Topic 12: Economics of Air and Water Pollution Control

• HSW ch. 11
• “The Greening of General Electric” The Economist Dec 10, 2005. Pp. 77-79.

Term paper proposals due: Thursday, October 19.
 

4. Renewable and Exhaustible Resource Economics

How rapidly should we use resources?

How much can technical innovation reduce resource scarcity?

How does resource abundance influence economic development?
 

Topic 13: Natural Resource Allocation in an Intertemporal Setting

• HSW ch. 14
• Tietenberg. "Allocation of Depletable and Renewable Resources" Ch. 7.

Topic 14: Fishery Economics

• Tietenberg. "Renewable Common-Property Resources: Fisheries" Ch.13.
• RFF, pp. 131-135.
• “The Blue Revolution: A New Way to Feed the World” The Economist Aug 7, 2003.
• “A fisherman’s tale” The Economist May 21, 1998.

• HSW ch. 10
• Tietenberg. "Storable, Renewable Resources: Forests" Ch. 12.
• RFF, pp. 141-145.
• “Saving the Rain Forest” The Economist July 22 2004.

•Florida Coastal Environmental Resources: A Guide to Economic Valuation and Impact Analysis, (FloridaSea Grant), 2002. Online at: http://nsgl.gso.uri.edu/flsgp/flsgph02002.pdf

•

•NOAA's Coastal and Ocean Resource Economics: http://www.marineeconomics.noaa.gov/

•Pew Oceans Commission: http://www.pewoceans.org/

•Coastal Environmental Economics Extension Network: http://www.mdsg.umd.edu/Extension/valuation/

 

5. The International Setting

Do rich nations consume too much?

Does globalization worsen environmental problems?

What does economic theory say about large scale environmental issues?

How can trade liberalization protect the environment?
 

Topic 17: Climate Change

• RFF, pp. 201-243.
• HSW ch. 12
• “Tax or Trade” The Economist Feb 14 2002.

• International Research Institute for Climate Prediction http://iri.columbia.edu/climate/ENSO/index.html 

• NOAA http://www.gfdl.noaa.gov/~atw/enso/

• RFF, pp. 158-168.
• HSW ch. 13

Topic 20: Trade and the Environment

• HSW ch. 8
• “The Curse of Oil: Paradox of Plenty” The Economist Dec 24, 2005. Pp. 46-47.
• “Atmospheric Pressure: Why Some Environmental Agreements Work and Other Don’t” The Economist April 17, 2003.
• N. Myers, J. Vincent & T. Panayotou. "Policy Forum: Consumption--Challenge to Sustainable Development...or to Distraction?" Science Vol. 276(4 Apr 97): 53-57.

Test 2, Tuesday, November 21.

Let's Play Ten Questions

1. What is your name? How may we address you?

2. Where are you from? Why have you come to the University of Miami?

3. What is (was) your undergraduate major?

4. Do you plan further studies beyond your degree here?

5. Have you taken economics courses before? If so, which ones? When and where did you take them?

6. Any related work experience?

7. Do you have any questions or concerns that I or someone else here could assist you with?

8. What are your career goals?

9. Is there something else you would like to tell us about yourself?

10. What is the best way to reach in case of class cancellations, etc. ?

Presentation of a Course Reading

Your 15-minute powerpoint presentation should include a title page, your objectives, an outline, the main body, and conclusions. Please submit an electronic copy to me and circulate the slide notes to the class on the day of your presentation. Please choose from the following papers, with my consent, no later than Thurs., Aug. 31. All readings are on reserve at the RSMAS library. Please note that the projected presentation dates are subject to revision. 

(1) "Plenty of Gloom" The Economist Dec 20, 1997. Pages 19-21. Sept 5.

(2)“Local Difficulties” The Economist July 4, 2002. Sept 7.

(3) "How Much Will People Pay for Longevity?" Alan Krupnick. RFF, pp. 38-42. Sept 14.

(4) “Environmental Economics: Are You Being Served?” The Economist April 21, 2005. Sept 21.

(5) “The Invisible Green Hand” The Economist July 4, 2002.Sept 26.

(6) “Should Fuel Economy Standards Be Raised?” Resources Fall 2005. Pp. 15-20. Sept 28.

(7) “The Greening of General Electric” The Economist Dec 10, 2005. Pp. 77-9. Oct 3.

(8) "Is Gasoline Under-taxed in the United States?" Ian Parry. RFF, pp. 83-87. Oct 10.

(9) “The Blue Revolution: A New Way to Feed the World” The Economist Aug 7, 2003. Oct 17.

(10) “Catching Market Efficiencies: Quota-based Fisheries Management” James Sanchirico and Richard Newell. RFF, pp. 131-35. Oct 19.

(11) “Saving the Rain Forest” The Economist July 22 2004. Oct 24.

(12) "Ecosystem Management: Public Forests" RogerSedjo. RFF, pp. 141-45. Oct 26.

(13) "Choosing Price or Quantity Controls for Greenhouse Gases" W. Pizer. RFF, pp. 225-34. Oct 31.

(14) "Forest Sinks as a Tool for Climate Change Policy" R. Sedjo. RFF, pp. 240-43. Nov 2.

(15) "Cost-Effective Conservation: Review of What Works to Preserve Biodiversity" Paul Ferraro and R. David Simpson. RFF, pp. 163-68. Nov 7.

(16) “Curse of Oil: Paradox of Plenty” The Economist Dec 24, 2005. Pp. 46-47. Nov 9.

(17) “Atmospheric Pressure: Why Some Environmental Agreements Work and Other Don’t” The Economist April 17, 2003. Nov 14.

(18-19) N. Myers, J. Vincent & T. Panayotou.
"Policy Forum: Consumption--Challenge to Sustainable Development...or to Distraction?" Science Vol. 276(4 Apr 97): 53-57.

One person to argue wealthy nations over-consume and another that they do not. Nov 30.