Chapter 2

Question 1

What is a normative issue?

Answer 1

Focuses our attention on what should be rather than what is.

Question 2

What are the 3 different pollution standards?

Answer 2

1. Efficiency standard.
2. Safety standard.
3. Sustainability standard.

Question 3

What is utilitarianism?

Answer 3

Anthropocentrisme moral foundation of economic analysis.

Philosophy in which environmental cleanup is important solely for happiness (utility) that it brings to people alive today and in the future.

Economists assume that market goods and non market goods make people happy.

Question 4

What is a biocentric view?

Answer 4

Independent of the utility of doing so, people have a moral responsibility to treat the earth with respect.

Question 5

What are the 2 questions that utilitarians need to settle before they can apply their analysis to issues like pollution? How do economists respond?

Answer 5

1. What makes people happy?
   - the consumption of goods brings happiness or gains utility (market or no market goods).
2. How does one add up invidious happiness to social happiness?

Question 6

What ar examples of market and non market goods?

Answer 6

Market: tomatoes, smartphones, shoes, etc.

No market: clean air, charitable deeds, view of a mountain top.

Question 7

What is a utility function?

Answer 7

The positive relationship between consumption of goods and utility in a mathematical relationship.

X = all the goods a person consumes
U = utility

Utility = UX

Question 8

How and why do we include pollution in the utility function?

Answer 8

The production of many of the market goods in someone’s consumption bundle X also creates pollution.

U = U(X (+), P (-)

Utility decline as the exposure to pollution increases.

Question 9

What assumption underlies the utility function and its approach to environmental issues?

Answer 9

A fundamental trade-off for human happiness exists between increased material consumption (economic growth) and environmental quality.

Whenever P goes down (the environment is cleaned, X goes down too (other consumption falls too) and vice versa.

Question 10

Explain the more is better assumption of the utility function. Who argues against it?

Answer 10

People are happier when given more stuff. When someone has too much stuff, they can sell it or give it to a friend, so it benefits them. More of a good increases human hapiness.

Proponents of safety and sustainability standards argue that it incorrectly builds a bias towards economic growth .

Question 11

When considering the happiness associated to social welfare, what needs to be considered?

Answer 11

The increase of consumption of market and nonmarket goods makes individuals happy.

To improve the welfare of society, we need to consider fairness and rights. Need to figure out how to weigh the decrease of ones happiness against the increase of ones happiness.

Question 12

What is the social welfare function?

Answer 12

Makes assumptions about fairness explicit.

Determines a desirable way of adding individual utilities.

SW = f (U (X+, P-)) + (U (X+, P-)) + …

Question 13

What is equal marginal utility of consumption?

Answer 13

When applying the social welfare function, we assume equal marginal utility of consumption so that social welfare is just the sum of individual happiness, regardless of the distribution of benefits within a generation, across generations, or between victims of pollutions.

Example, if one person goes up by a dollar and the other goes down by a dollar, social welfare is the same.

Question 14

Explain how social welfare deals with an increase of happiness.

Answer 14

Increases in each person’s happiness receives equal weight - social welfare improves at the same rate.

Question 15

Explain how social welfare does not protect the well-being of future generations.

Answer 15

We gain more benefits from consuming today than later.

Question 16

Explain why the social welfare function assumes that pollution victims have no special rights.

Answer 16

The function is blind to the distribution of the costs and benefits of economic events within the current generation, across generations, and between pollution victims and beneficiaries.

All that matters for boosting social welfare is increasing the net consumption regardless of who wins or loses.

Question 17

What are the ideas behind the efficiency standard?

Answer 17

Maximize the net benefits (benefits minus costs) of economic growth by carefully weighing the benefits (more consumption) against the costs (pollution and resource degradation).

Done without reference about who bears the costs or gains the benefits.

Question 18

What do efficiency advocates say about the efficiency standard even though it imposes costs on someone?

Answer 18

Overtime, most people will benefit if the net consumption benefits from pollution control are maximized.

In other words, lower prices of consumer goods for the vast majority must be strictly balanced against protection of environmental quality and health.

If the winners outnumber the losers, over time, most people will benefit.

Question 19

What is the sustainability standard?

Answer 19

Social welfare does not rise if increases in consumption today come at the expense of the welfare of our children.

A concern for future generations is incorporated in the efficiency standard. Increases in happiness for the average individual cannot come at the expense of future generations.

SW = w*Ur(X+, P-) + Uj(X+,P-)+…

R= Rachel, J = John

The w is a weighing number big enough to ensure that increases in John’s consumption do not substantially penalize Rachel.

Question 20

What is the safety standard?

Answer 20

The interests of personal liberty - a person has the right to protection from unsolicited damage to their health regardless of the costs. The negative effects of pollution in the utility function will be weighed more heavily.

SW = Ur(X+, w*P-) + Uj(X+) + …

R = Rachel, J = John

Question 21

What do both safety and sustainability specifications of the social welfare imply?

Answer 21

1. A happy society is more than just the sum of its parts.
2. When considering the trade-off between reducing pollution and reducing production and consumption of polluting goods, fairness criteria is based on the harmful impact as well as the distribution of those impact (both within and between generations) must be met as well.