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ECON210 Final Exam Study Notes

40 Pages

Course Code
ECON 210
Robert Gateman

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ECON 210 Professor Gateman Final Exam Study Notes December 13 2012ECONOMICS AND ETHICS History of Environment and Economics1985 discovery of ozone hole led to 1987 Montreal Protocol to ban CFCs stabilization of greenhouse gases that produce global warming fueled 1985 Rio Summit and 1997 Kyoto Accord 3 Categories of Emission Control o 1 Command and Control RegulationGovernment commands companies to meet specific standards such as amounts of particular pollutants and controls the methods such as technology to achieve standardso 2 Incentive Based RegulationUses economic behaviour of firms to achieve environmental goalsSet standards and allow market to determine meansExamples pollution tax marketable pollution permitsProsEfficient allocation of resourcesSatisfy equity argumentsEncourage pollution reduction o 3 Clean TechnologyPut incentives for new technology that meets lower pollution goals How do Economics and Ethics fit together o Economics is anthropocentric humanscentre of attention and utilitarian regarding rightness as a measure against whether an actionorhuman welfareTwo views short run and long runIn the short run efficiency is most importantIn the long run ethics are most importanto Utility Function Parts of the utility functionGood happiness Bad happinessConsumption bundle market or nonmarket goods used by an individual o Market good determines supply and demand iPad food material items o NonMarket good does not determine supply and demandClean air sunset views laughter things that make you happy that you cant buyTotal Utility HappinessUtility of Consumption BundleU UX A A AU UiPadfoodclean airsunset views A AConsidering pollution because it is badpollutionutilityhappiness U UX P where Pis a bad pollution A A AAA U UiPadfoodclean airsunset viewsA A pollutiono Assumptions of the Utility Function 1 Growth vs Environment TradeoffAssume that more consumption leads to more environmental damage o X leads to P A AIn other words protecting environmentlower growth opportunity cost2 More is BetterMore consumptionmore happinessEven if an individual is materially satisfied himself he can still take goods and sell them to makean individual will always accept moreo Social Welfare FunctionNormative assumption that social welfare total happiness of society is determined by adding up individual utility functionsBenthams idea that aggregate happinesssun of individual happiness o Balancehappiness of one individual withhappiness of another individual it only matters that total benefitstotal costs o Potential Pareto OptimalityImagine a scenario where A hits B with a bike in order to get to work on time A gains 3 udals from not being fired and B loses 1 udal from getting hurtAccording to PPO the potential for A to compensate B and still incur more benefit that before justifies A hitting B with the bike as being okay or beneficialIf A compensates B 1 udal A will have 2 udals and B will have 1A still gains udals therefore the situation after hitting B with a bike is still better than if A did not hit B with a bike
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