Economics of Natural Resources - MSC 491 Q

Spring 2007, TT 12:30 - 1:45pm, PRC 101 http://mscserver.cox.miami.edu/msc491/msc491.html

Professor: David Letson. Office hours TT 11am - noon in Cox Science BLDG 160, and by appointment at the RSMAS Campus in 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.

Attendance: It is your responsibility to attend lectures regularly. Attendance at all classes is expected. Roll calls will occasionally be taken. If an absence is unavoidable, you should try to obtain the lecture notes from another student. You are also expected to be in your seat when class begins. Poor attendance may result in a lowering of your class 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.

Academic Integrity: Every student must abide by the UM Honor Code.

Requirements and Grading:

• Three exams will be given on Thurs, Feb 15, Tues, March 27 and Thurs, April 26.
• Each will count 30% toward your final grade.
• Classroom participation will count 10%.
• You may see last years' tests both online and on reserve at Richter Library.
• Make-up exams will be given only in extraordinary circumstances, and only if arranged at least one week in advance.

Each of you has a vital contribution to make to this course. To encourage participation, I will call on you in class. I also ask that each of you give a 15-minute presentation on one of our required readings. I post lecture outlines on my webpage, but be aware that these are a complement to and not a substitute for your attendance. I expect each of you to be prepared to contribute to each class session.

To keep abreast of current debate in environmental economics, I encourage you to:

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

Reading materials: Please read assigned materials before we discuss them in class.

• (TT) Tom Tietenberg. Environmental and Natural Resource Economics. 7^th edition. Addison Wesley Longman, 2006.

• (RFF) Wallace Oates, 2^nd ed. The RFF Reader in Environmental and Resource Management 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 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

• TT Chapter 1.
• “Happiness and Economics.” The Economist. Dec. 19, 2006.
• “The Etiquette of Bribery.” The Economist. Dec. 19, 2006.
• RFF, pp. 15-20.

Topic 2: Growth and Sustainability

• "Plenty of Gloom" The Economist December 20, 1997. Pp. 19-21.
• “The Story of Wheat: History’s Most Successful Crop” The Economist Dec. 24, 2005. Pp. 28-30.
• Kenneth Arrow et al. "Economic Growth, Carrying Capacity and the Environment" Science Vol. 268 April 28, 1995. Pp. 520-521.
• RFF pp. 21-26 and 247-262

Topic 3: Economic Principles

• TT Chapter 4.

Topic 4: Circular Economy

• TT Ch 2.
• 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.

Topic 5: Discounting

• RFF pp. 28-34.
• TT Ch 5.

Topic 6: Prediction Markets

Test 1, Thursday, February 15.

2. Non-market Valuation

How values do we hold for natural resources?

How can we measure values when prices do not exist?

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

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

Topic 7: Measuring Environmental Values

• TT Chapter 3.
• Edward Barbier and Geoffrey Heal. 2006. “Valuing Ecosystem Services” Economists’ Voice. Vol. 3 : Iss. 3, Article 2.
  Available at: http://www.bepress.com/ev/vol3/iss3/art2.
• “Environmental Economics: Are You Being Served?” The Economist April 21 2005.

Topic 8: Environmental Valuation Methods

• Douglas W. Lipton, Katherine Wellman, Isobel C. Sheifer, and Rodney F. Weiher 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 9: Contingent Valuation Method

• RFF, pp. 38-42

Topic 10: Valuation Case Studies

• Florida Coastal Environmental Resources: A Guide to Economic Valuation and Impact Analysis, (Florida Sea Grant), 2002. Online at: http://www.economics.noaa.gov/library/documents/economics_for_coastal_marine_management/florida_coastal_environmental_resources.pdf

3. Economic Policy Instruments

How could environmental policy be made more efficient?

How have economic policy instruments fared in practice?

Topic 11: Economic Theory of Environmental Policy

• “The Invisible Green Hand” The Economist July 4, 2002.

Topic 12: Incentive-Based Polices

• TT Chapter 15.
• RFF, pp. 51-71.
• “Should Fuel Economy Standards Be Raised?” Resources Fall 2005. Pp. 15-20.

Topic 13: Economics of Air and Water Pollution Control

• TT Chapters 16-19.
• “The Greening of General Electric” The Economist Dec 10, 2005. Pp. 77-79.

Test 2, Tuesday, March 27.

4. Renewable and Exhaustible Resource Economics

How rapidly should we use resources?

How can technical innovation reduce resource scarcity?

How does resource abundance influence economic development?

Topic 14: Natural Resource Allocation in an Intertemporal Setting

• TT Ch. 7.
• “Why the World is not about to Run out of Oil” The Economist April 20 2006.
• “Working Miracles: Can Technology Save the Planet?” The Economist July 4 2002.

Topic 15: Fishery Economics

• TT 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.

Topic 16: Forestry Economics

• TT Ch. 12.
• RFF, pp. 141-145.
• “Saving the Rain Forest” The Economist July 22 2004.

Topic 17: Coastal Economics

• Pew Center http://www.pewoceans.org/
• NOAA/National Ocean Service http://www.marineeconomics.noaa.gov/
• Heinz Center http://www.heinzctr.org/Programs/SOCW/overview.htm
• Florida Coastal Environmental Resources: A Guide to Economic Valuation and Impact Analysis, (Florida Sea Grant), 2002. Online at: http://www.economics.noaa.gov/library/documents/economics_for_coastal_marine_management/florida_coastal_environmental_resources.pdf
• 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 18: Climate Change

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

Topic 19: El Niño-Southern Oscillation

• International Research Institute for Climate Prediction http://iri.columbia.edu/climate/ENSO/index.html
• NOAA http://www.gfdl.noaa.gov/~atw/enso/

Topic 20: Biodiversity

• RFF, pp. 158-168.

Topic 21: Trade and the Environment

• “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 3, Thursday, April 26.

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 Tuesday, January 23. All readings are on reserve at the Richter library. Please note that the projected presentation dates are subject to revision.

(1) "Plenty of Gloom" The Economist Dec 20, 1997. Pages 19-21. Jan 30.

(2) “The Story of Wheat: History’s Most Successful Crop” The Economist Dec. 24, 2005. Pp. 28-30. Feb 1.

(3) “Local Difficulties” The Economist July 4 2002. Feb 6.

(4) "How Much Will People Pay for Longevity?" Alan Krupnick. RFF, pp. 38-42. Feb. 8.

(5) “Environmental Economics: Are You Being Served?” The Economist April 21 2005. Feb 13.

(6) “The Invisible Green Hand” The Economist July 4, 2002. Feb. 20.

(7) “Should Fuel Economy Standards Be Raised?” Resources Fall 2005. Pp. 15-20. Feb. 22.

(8) “The Greening of General Electric” The Economist Dec 10 2005. Pp. 77-9. Feb. 27.

(9) “Working Miracles: Can Technology Save the Planet?” The Economist July 4 2002. March 1.

(10) “Catching Market Efficiencies: Quota-based Fisheries Management” James Sanchirico and Richard Newell. RFF, pp. 131-35. March 6.

(11) “The Blue Revolution: A New Way to Feed the World” The Economist Aug 7, 2003. March 8.

(12) “A Fisherman’s Tale” The Economist May 21, 1998. March 20.

(13) “Saving the Rain Forest” The Economist July 22 2004. March 22.

(14) "Ecosystem Management: Public Forests" Roger Sedjo. RFF, pp. 141-45. March 29.

(15) "Cost-Effective Conservation: Review of What Works to Preserve Biodiversity" Paul Ferraro and R. David Simpson. RFF, pp. 163-68. April 3.

(16) “Tax or Trade” The Economist Feb 14 2002. April 5.

(17) "Forest Sinks as a Tool for Climate Change Policy" R. Sedjo. RFF, pp. 240-43. April 10.

(18) "Choosing Price or Quantity Controls for Greenhouse Gases" W. Pizer. RFF, pp. 225-34. April 12.

(19) “The Curse of Oil: Paradox of Plenty” The Economist Dec 24, 2005. Pp. 46-47. April 17.

(20) “Atmospheric Pressure: Why Some Environmental Agreements Work and Other Don’t” The Economist April 17, 2003. April 19.

(21-22) 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. April 24.