Economics of Conservation. Economics - Basic Economics is a tool which helps us answer 3 basic questions: 1. What commodities should be produced and in.

Economics of Conservation

Economics - Basic

Economics is a tool which helps us answer 3 basic questions:

1. What commodities should be produced and in what quantity?

2. How should we produce those goods? and

3. For whom should we produce those goods?

Descriptive Economics

• The description of economic facts and relationships falls under the category of descriptive economics - it is relatively speaking, a pure science and is objective and its questions can only be answered by facts

Normative Economics

• Normative Economics addresses questions that cannot be answered by facts and figures – for normative questions there are no right and wrong answers but rather questions of “should” or “ought”

• They are questions about value judgments and must be decided by social and political processes

Ecological or Environmental Economics

• Ecological economics is an emerging discipline that studies interactions between economic and ecological systems.

• People working in this field attempt to facilitate understanding between economists and ecologists and seeks to integrate their thinking into a transdiscipline or multidisciplinary approach aimed at developing a sustainable world

Two Basic Economic Systems

1. Command economy in which the government dictates production and distribution goals

2. In a market economy companies generally produce goods and services which produce the highest profit thus answering the first question of what to produce and how much. Profit also dictates how goods are produced. For whom is answered by ability to pay.

Elephant Ivory for Sale

Increase in price of ivory; decline in number of elephants

• http://www.theguardian.com/environment/2014/nov/06/illegal-elephant-ivory-prices-tanzania-spike-china-xi-jinping?CMP=EMCENVEML1631

Oil Prices

BFI Monopoly?

Back to Ecological Economics

• The goal for ecological economics is to develop methods to provide better values for biological diversity and ecosystem services by integrating economic valuation with ecology, environmental science, sociology and ethics

Adam Smith• Theorized that economic

systems were based on each individual acting with enlightened self-interest – everyone involved in an economic exchange seeks to improve their position

• Smith assumed that all costs and benefits of free exchange were accepted and borne by the participants in an economic exchange

External Cost

• External Cost, a cost to society not paid by the manufacturer or its customers

Market Failure

• Where externalities exist, we have a market failure – society fails to realize the full benefits of economic activity. Some individuals or businesses benefit at the expense of larger society – as a result, society as a whole becomes less prosperous rather than more prosperous

Tragedy of the CommonsCows on Selsley Common, UK

Market Failure – Regulations Enforced?

Discounting

• Often economists will discount the value of a good to be used in the future, thus giving it a lower current value. This comes about from the idea that it is better to harvest the benefits of economic activity today and invest the profits than to wait and use that resource later

External Costs

External Costs?

Internalization of pollution costs in US

• 1970 – Clean Air Act (and later amendments)

• 1972 – Clean Water Act (and later amendments)

• 1976 – Resource Conservation and Recovery Act

• 1977 – Surface Mine Control and Reclamation Act

Cost Benefit Analysis

• marginal cost of pollution - added cost to all present and future members of society of an additional unit of pollution

• marginal cost of pollution abatement - added cost to all present and future members of society of reducing a given type of pollution by one unit

Richmond, California

Risk Acceptability

• Risk acceptability is measured as the cost a society will bear or accept - Ideally the benefits of controlling a pollutant should be equal to the costs of control

Wetlands and Flood Control

Hurricane Sandy – NYC Subway,

Oct. 29, 2012

Wetland and Oyster Bed Restoration - NYC

Wetland and Oyster Bed Restoration - NYC