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Final

FARE 2700 Final: Key Concepts to Review for Final

13 pages173 viewsFall 2016

Department
Food, Agricultural and Resource Economics
Course Code
FARE 2700
Professor
Maneesh Sharma
Study Guide
Final

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Department of Food, Agricultural and Resource Economics
University of Guelph
FARE*2700 Survey of Natural Resource Economics
Fall 2017
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KEY CONCEPTS TO REVIEW
Before Midterm:
Unit 1
September 11th:
The self extinction premise and carrying capacity
Global environmental challenges
Climate change
Land scarcity and degradation
Economic and physical water shortage
Environmental optimism vs. environmental pessimism
Boserup (optimism) vs. Malthus (pessimism)
Evidence for optimism: Green Revolution, innovation
Evidence for pessimism: national and global food insecurity, food waste, political
instability, population growth, demographic change
Positive and negative feedback loops
Positive: self-reinforcing
Negative: self-limiting
Unit 2
September 13th:
Environment as a composite asset
Closed system, laws of thermodynamics
Normative vs. positive economics
Static and dynamic efficiency
Review of intro econ concepts
Consumer surplus, producer surplus, total surplus, etc.
Intro to cost-benefit analysis
Anthropocentric perspective, importance of opportunity costs
Defining ‘optimal’ and ‘fair’ allocations
First equimarginal principle, Pareto optimality
Intro to present value
Present value criterion, discounting, present value formula
Two examples of present value calculations: single value, and stream of values
September 15th:
The climate change debate: Kerry Emanuel vs. John Christy
Central arguments
Positive and normative points of agreement and disagreement
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Risk perceptions and discount rates
Worked-through example
Climate change and inter-regional fairness
The ‘leakage effect’
Canada’s climate change policy
Rising emissions, inter-regional fairness within Canada
‘Pan Canadian Framework on Clean Growth and Climate Change’
September 18th:
Freeman
The economic problem
Characteristics of consumer preferences
Absence of limits on wants
Substitutability
Ecological goods
The ‘invisible hand’; advantages and limitations to the free market system
Market conditions necessary for efficiency
Limitations to Pareto optimality
Potential compensation criterion
Environmental economics and its limitations
Remedies for market failures
Property rights, taxes/subsidies, standards and regulations
Ex. Pareto optimal environmental quality (or pollution) standard
September 22nd:
Charging for pollution through ‘pseudo-markets’
Risk and the value of life
Worked-through example
Ethical concerns
Discounting debate: should we discount, and if so what rates should we use?
Freeman’s argument
Premises of an economic perspective on the environment
The rest of class was dedicated to reviewing key concepts so far
Unit 3
September 25th:
Why do we assign values to environmental resources?
Resource use decisions, policymaking, valuing environmental damages (litigation)
What is our basis for assigning value to environmental resources?
Intrinsic and instrumental value
How to we value environmental resources?
Measuring willingness to pay (WTP) through non-market valuation
Total WTP = use value + option value + non-use value
Ex. valuing a plot of land
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Valuation methods
Stated preference vs. revealed preference
Direct vs. indirect
List of methods we discussed: contingent valuation, attribute-based models (conjoint analysis,
choice experiments, contingent ranking), travel cost, hedonic property values (and the ‘hazard
effect’), hedonic wage values, avoidance expenditures
We discussed an example of the hedonic property values method (Boxall et al. 2005)
Challenges to environmental valuation
Aggregation, partial values
Review: value of life method (discussed in Freeman)
Unit 4
September 29th:
Definition of property rights (from your text)
Key characteristics: exclusivity, transferability, enforceability
Bison example
Introduction to concept of scarcity rent
Discussion of shift in property rights governing the bison: from common property (before Euro-
American market; robe market), to open access (hide market), to private property (present)
Open access during the hide market led to the complete dissipation of scarcity rents, and
near extinction of the bison
Take home points:
Both rates of harvest and stocks of a resource depend on property rights, which emerge due
to scarcity rents
Market factors play an important role in influencing relative costs/benefits of different
property rights regimes, and ultimately what kind of regimes emerge
October 2nd:
Scarcity rent
Long run producer surplus (producer surplus was reviewed), resulting from persistent rents
(returns to ownership of scarce inputs – in this case resources) over time
Efficient property rights, when bundled with competitive markets, are expected to achieve
outcomes that maximize scarcity rents
Property rights and market failures
Open access (res nullius) property rights regimes
Common-pool resources: non-exclusive, divisible
Results in ‘tragedy of the commons’ (ex. Bison, hide market)
We went over a two-panel graph of this outcome (this would be good to review)
Externalities
External economy (positive externality): ex. flu shot
External diseconomy (negative externality): ex. pollution
Pecuniary externality (transmitted through prices – not a market failure): ex. farmer buying
up all the land in an area, driving up rental prices
Public goods (ex. water quality, air quality, natural scenery à most ecological goods)
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