Final Review Flashcards
(31 cards)
Why do we discount?
1- time value of money (could be making more with $)
2- pure time preference (we just want money now)
Stern vs nordhaus
Nordhaus- high discount rate for climate change
Stern- low discount
0% discount rate is complete value retention
How to set up CBA?
1- specify project
2- determine inputs/outputs
3- value non market costs and bennefits
4- compare c/b
What is risk neutrality?
The willingness to assume risk to ensure returns,
Can be risk averse- maximin (least worst outcome)
Nuetral expected value ( highest expected value)
or seeking maximax (alternative with best outcome)
Frame work of eval (1)
What is total economic value? (TEV)
Describes 3 values
1) direct use value
- extractive
2) indirect use value
- ecosystem service such as life support or soil ret.
3) non use value
- existance value, inherent value, could be option value or bequest
Framework of eval (2)
What are ecosystem services?
4 catagories
1) provisioning services (extractive)
2) regulating (indirect use)
3) cultural (non use/ indirect)
4) supporting services - these help support other 3 and can be nutrient cycling for example (non use)
Techniques for valuation
Preferences?
Have both stated and revealed
Revealed preferences?
Creates market based and surrogate markets
Market based valuation?
1- market prices
Value traded at in markets, however, environment often not represtented
2- Production function
Statistical model that can project present and future production, need lots of good info
3- avoided cost
Defensive expenses, only provides human substitutes
Surrogate markets? (Revealed preference)
Hedonic pricing
Just used for homes, only applicable where consumers know about homes
Travel cost
$ to travel to a location is willingness value, not equitable
- only looks at use value
- value of time?
- multi site trips
- estimated costs
Non market based valuation (stated preference)
Contingent value
- comes usually to dichotomous choice
- choice experements
Theoretical
Discrete choice modeling
Creates bundles of options that people choose between, creates a flexible modle that reveals preferences
Kinds if bias
Interviewer bias, framing bias, anchoring bias, social desirability bias and hypothetical bias
Stated preference limitations
Wtp vs wta
Strategic response
Lack of knowledge
Classifying pollutants
1- absorptive capacity
- cumulative(stock) vs noncumulative(flow)
2- spatial scale
- local vs global
3- origin
- point vs non point source
4- occurance
- continual vs episodicPollution as an economically defined concept
Absorptive capacity
^
|
Emissions-> pollution accumulation-> damage -> econ value
Marginal damage cost curve
Relation between quantity of pollutant and marginal damage of each unit of it
Usually slopes upward
Problems with optimal pollution?
1 uncertainty - hard to estimate price of MAC and MDC
2 weak sustainability
3 ignores equity
4 ignores marginal utility of money
Alternative to optimal pollution analysis
1 show MAC and MDC with uncertainty
2 set absolute standards (safe min standards, sms)
3 determine affordability in sms
Equimarginal principle
1 optimal pollution, ie last unit abated equals marginal damage cost
2 marginal cost of last abated unit is the same for all regulated agents
Goal vs policy vs action
Goal is what aim to achieve
Policy is the law or actions of gov to meet goals
Action is taken by different actors to accomplish goal
Policy criteria
1) effective?
2) efficient?
3) equality?
4) simplicity?
5) acceptable?
Voluntarism
No regulation, voluntary internalization of externalities
Eg house hold energy auditis
Simple and politically acceptable
Inefficient, inequitable, not very affective
Assign property rights?
Pollution efficiency
Works when simple,
Simple, effective, efficient and acceptable, sometimes not equitable
