eco thermodynamics economics and the second law the laws of physics especially the first and second laws of thermodynamics have significant implications for economic theory the major implications of the first law conservation of mass energy are straightforward and have been discussed at length elsewhere in brief raw material inputs to economic processes are not consumed having been extracted from the environment in the first place they eventually return to the environment as wastes the economic implications of the second law entropy law are far more subtle there is considerable literature initiated by the work of georgescu roegen on the supposed constraints on economic growth imposed by the fact that economic processes utilize low entropy raw materials fossil fuels and high grade metal ores and discard high entropy wastes however as a practical matter the flux of available low entropy energy exergy from the sun is extremely large and certainly adequate to sustain economic activity in the solar system indefinitely even though fossil fuel and metal ore stocks may eventually be exhausted it is argued in this paper that the real economic significance of the second law lies in the fact that exergy is i not conserved and ii is a useful common measure of resource quality as well as quantity applicable to both materials and energy thus exergy can be used to measure and compare resource inputs and outputs including wastes and losses this is potentially important in itself moreover since exergy is not conserved it is truly consumed i e used up in economic processes hence exergy is no less a factor of production than labor or capital this fact has strong implications for economic growth theory especially with regard to assessing the role of technical progress

an experimental investigation of the patterns of international trade this study is the first attempt to create and study a laboratory economy with some of the prominent features of an international economic system the concept of multiple countries in which each country has its own technology preferences and resource endowments is introduced and operationalized the questions posed in the study are related to the law of comparative advantage factor price equalization terms of trade efficiency in production and exchange as guided by multiple and interacting markets and the effects of tariffs on international transactions the study builds on previous work in the experimental study of general equilibrium phenomena

bridging the gap between laboratory experiments and naturally occurring markets an inferred valuation method abstract several recent studies have found important differences between behavior in the laboratory and the field we explore two possible causes for the divergence social concerns and unfamiliarity with the traded good consistent with our conceptual model we find that people overstated their preferences for relatively familiar goods with normative attributes and understated their preferences for a relatively unfamiliar good with low normative motivations in the laboratory as compared to the field we also find that for goods with a normative dimension a new method we refer to as inferred valuation has the potential to narrow the lab field gap in some cases willingness to pay obtained from a conventional valuation elicitation method is more than twice the value from the new inferred valuation approach

does altruism undermine existence value abstract the debate over the use of contingent valuation for existence values or passive use values has failed to explore the validity of motives for such values one potential motive altruism has conflicting implications for benefit cost analysis depending on whether the altruist is paternalistic this paper constructs models of three types of altruism and shows how benefit cost analysis responds to each type of altruism how damage assessment and restoration depend on each type and the implications of a population of heterogeneous altruists

how reliable are simple single equation specifications of import demand this paper examines nine models of aggregate import demand for each of five countries canada germany japan united kingdom and united states in an attempt to determine which of the frequently used single equation models of import demand are appropriate an appropriate model is defined as one which generates unbiased or at least consistent and efficient elasticity estimates while models without lagged adjustments and almon lag models perform rather poorly according to these criteria models including dynamic behavior through lagged values of the dependent variable are frequently accepted results are reported regarding functional form measures of variables and structural shift economists have devoted considerable attention to the estimation of aggregate import demand elasticities because of their importance in trade theory the simplest procedure for estimating these elasticities which is consistent with economic theory is to assume that the elasticity of supply of imports is infinitely elastic and to estimate

global energy modelling a biophysical approach gemba part 1 an overview of biophysical economics abstract economists investors and policy makers need to understand energy systems and the potential for investment in both alternative energy supply and demand side technologies biophysical economics has contributed to conventional economics by incorporating thermodynamic and ecological principles and emphasising the importance of natural resources to economic processes this paper is presented in two parts part 1 gives a historic review of biophysical economics and discusses some previous models of the energy economy system built around the principles of biophysical economics part 2 presents the gemba model a new modelling methodology in the biophysical economics tradition the methodology proposes a new and important contribution to the field of biophysical economics a lifetime evolving function for the dynamics of the energy return on investment eroi the dynamic eroi function was incorporated into the gemba model and implemented in vensim the model is calibrated using historical energy production data i e trained to historical data the trained model is run to 2100 under a variety of assumptions regarding availability of energy resources and corresponding eroi s the main finding of the model is that growth of the renewable energy sector may impact investment in other areas of the economy and thereby stymie economic growth

trading off positive and negative service changes in childcare a choice experiment using a latent class modelling approach theoretically the choice of childcare mode should be influenced by the quality of the childcare attributes however such preference relations have been difficult to identify in past studies one

an exploration of alternative measures of natural resource scarcity the case of petroleum resources in the u s abstract the concern about natural resource scarcity has traditionally focused on changes in the cost quality and availability of energy and material inputs to the production process ecological economists are increasingly concerned with an additional aspect of scarcity the growing scarcity of environmental services that sustain human economic existence the analysis here explores economic and biophysical indicators of natural resource scarcity the indices are quantified for the extraction of petroleum resources in the u s the economic indicators are the market price of crude oil and natural gas the unit capital plus labor cost of extraction and the average total cost of extraction dollars per btu extracted the biophysical index is the energy return on investment eroi all indices show a trend of decreasing and then increasing scarcity of petroleum at the wellhead the economic and biophysical cost indices indicate that the 1960s marked the transition from a decreasing to an increasing cost resource base the market price of oil is influenced by nonscarcity forces to the extent that it does not reflect that turning point the increase in the energy cost of petroleum extraction is in stark contrast to the changes in the energy cost of producing other goods and services in the u s economy which generally declined in the last 20 years the increase in the energy cost of extraction has important economic implications from 1954 to 1987 the fraction of total industrial output in the u s generated in the petroleum extraction sector declined almost 40 despite the declining share of its output the petroleum industry s share of direct energy use fossil fuels and electricity generally increased in that period the result is a clear increase in the amount of energy diverted from other potential uses to secure an additional unit of output in the petroleum sector none of the indicators reflect to any degree substantial nonmarketed environmental cost of petroleum extraction the biophysical perspective however emphasizes the coupling between physical scarcity and the demands that extraction places on renewable resources and ecosystem services the extraction of one barrel of oil equivalent for example requires 250 gallons of fresh water and emits more than 60 pounds of co2 and these costs are increasing

aggregation and the role of energy in the economy methods for investigating the role of energy in the economy involve aggregating different energy flows a variety of methods have been proposed but none has received universal acceptance this paper shows that the method of aggregation has crucial effects on the results of the analysis we review the principal assumptions and methods for aggregating energy flows the basic heat equivalents approach economic approaches using prices or marginal product for aggregation emergy analysis and thermodynamic approaches such as exergy we argue that economic approaches such as the index or marginal product method are superior because they account for differences in quality among fuels we apply various economic approaches in three case studies in the us economy in the first we account for energy quality to assess changes in the energy surplus delivered by the extraction of fossil fuels from 1954 to 1992 the second and third case studies examine the importance of energy quality in evaluating the relation between energy use and gdp first a quality adjusted index of energy consumption is used in an econometric analysis of the causal relation between energy use and gdp from 1947 to 1996 second we account for energy quality in an econometric analysis of the factors that determine changes in the energy gdp ratio from 1947 to 1996 without adjusting for energy quality the results imply that the energy surplus from petroleum extraction is increasing that changes in gdp drive changes in energy use and that gdp has been decoupled from between aggregate energy use all of these conclusions are reversed when we account for changes in energy quality 2000 elsevier science b v all rights reserved

an inferred valuation method although estimates of people s values for public goods are often needed to conduct cost benefit analysis existing value elicitation methods are prone to a number of well documented biases we argue that some of these biases result because people derive utility from the act of saying they are willing to pay for a good to counteract this phenomenon we consider an approach that asks people to predict or infer others values for a good instead of asking people to state their own value both a conceptual model and results from a laboratory experiment lend support for the new approach

energy returns and the long run growth of global industrial society abstract the extreme interconnectedness of energy and economic systems will tend to confound any attempt to estimate the energy return on investment at anything other than the global scale here i apply a very simple model of global energy use to specify the dynamic characteristics of global scale energy returns on investment eroig this suggests that the observed long run relative growth rate of 2 5 yr 1 in global primary energy use is associated with an equilibrium return from infrastructure investments of 2 1 with returns accruing with a time constant of 40 years the analysis also attempts to show how growth leads to reductions in the supply efficiency of energy and how this decline is offset by increases in the efficiency with which industrial society can extract useful work from primary energy flows this observed preservation of the overall energy efficiency of the global energy system implicates variations in the decay decommissioning rate of infrastructure in observed long wave like variations in the relative growth rate of global primary energy use and hence eroig

the value of mortality risk reductions pure altruism a confounder this paper examines public valuations of mortality risk reductions we set up a theoretical framework that allows for altruistic preferences and subsequently test theoretical predictions through the design of a discrete choice experiment by varying the tax scenario uniform versus individual tax the experimental design allows us to verify whether pure altruistic preferences are present and the underlying causes we find evidence of negative pure altruism under a coercive uniform tax system respondents lower their willingness to pay possibly to ensure that they are not forcing others to pay at a level that corresponds to their own higher valuations this hypothesis is supported by the observation that respondents perceive other individuals valuations to be lower than their own our results suggest that public valuations of mortality risk reductions may underestimate the true societal value because respondents are considering other individuals welfare and wrongfully perceive other people s valuations to be low

combining participatory crop trials and experimental auctions to estimate farmer preferences for improved common bean in rwanda abstract participatory crop improvement raises the prospects for developing seed varieties that meet the needs of subsistence farmers but may face challenges regarding preference elicitation particularly in complicated policy environments we integrate binding experimental auctions with participatory variety selection to elicit farmers preferences for improved common bean varieties in rwanda we find that auctions reveal farmer preferences more accurately than stated nonbinding rankings in this context and that participatory on farm crop research is essential to understanding how farmers evaluate tradeoffs between multiple crop attributes we also find that farmers highly value intercrop yield despite government policy that encourages farmers to monocrop

is hypothetical bias a universal phenomenon a multinational investigation a concern with the contingent valuation method cvm is the finding that hypothetical and real statements of value often differ we test whether hypothetical bias broadly defined is independent of location by comparing real and hypothetical votes on a dichotomous choice referendum in china france indiana kansas and niger we find significant differences in hypothetical bias across locations and reject the hypothesis that hypothetical bias is independent of location as opposed to the typical finding reported in the literature subjects in niger significantly understated their willingness to pay in the hypothetical referendum

measuring agricultural knowledge and adoption understanding the trade offs in improving the precision of agricultural measures through survey design is crucial yet standard indicators used to determine program effectiveness may be flawed and at a differential rate for men and women the authors use a household survey from mozambique to estimate the measurement error from male and female self reports of their adoption and knowledge of three practices intercropping mulching and strip tillage despite clear differences in human and physical capital there are no obvious differences in the knowledge adoption and error in self reporting between men and women having received training unanimously lowers knowledge misreports and increases adoption misreports other determinants of reporting error differ by gender misreporting is positively associated with a greater number of plots for men recall decay on measures of knowledge appears prominent among men but not women findings from regression and cost effectiveness analyses always favor the collection of objective measures of knowledge given the lowest rate of accuracy for adoption was around 80 percent costlier objective adoption measures are recommended for a subsample in regions with heterogeneous farm sizes

the transition towards renewable energies physical limits and temporal conditions abstract the perspectives of the depletion of fossil energy resources together with the consequences of climate change have provoked the development of numerous national and pluri national energy policies however there have been few overall studies on the evolution of these resources this paper uses a dynamic model to study the exhaustion patterns of world fossil and nuclear fuels and their possible replacement by renewable energy sources the results show that peak oil will be the first restriction and it will not be easily overcome electric vehicles can produce some interesting savings but they are insufficient to avoid the decline in oil biofuels are even more limited due to the enormous extensions of fertile land they require and their low productivity this shows that overcoming the decline in oil will need much more ambitious policies than the mere substitution of technology if the oil economy relationship does not change substantially world economic growth may be seriously limited or even negative in contrast the production of electrical energy is not such a worrying problem in the short and middle term

what experimental protocol influence disparities between actual and hypothetical stated values preferences elicited in hypothetical settings have recently come underscrutiny causing estimates from the contingent valuation method to bechallenged due to perceived hypothetical bias given that the receivedliterature derives value estimates using heterogeneous experimentaltechniques understanding the effects of important design parameters onthe magnitude of hypothetical bias is invaluable in this paper we addressthis issue statistically by using a meta analysis to examine data from 29experimental studies our empirical findings suggest that on averagesubjects overstate their preferences by a factor of about 3 in hypotheticalsettings and that the degree of over revelation is influenced by thedistinction between willingness to pay and willingness to accept publicversus private goods and several elicitation methods

is the experimental auction a dynamic market experimental auctions are generally thought of as static markets this paper presents the results of an experimental auction designed to test whether participants perceptions regarding the relative difficulty of delaying or reversing a transaction outside the experimental market systematically affect their willingness to pay bids the results show that auction participants perceptions significantly impact their bids in a manner that is consistent with real option theory these results suggest that economists must be careful to consider the existence of outside markets when designing experimental auctions

physical energy cost serves as the invisible hand governing economic valuation direct evidence from biogeochemical data and the u s metal market abstract energy supply is mandatory for the production of economic value nevertheless tradition dictates that an enigmatic invisible hand governs economic valuation physical scientists have long proposed alternative but testable energy cost theories of economic valuation and have shown the gross correlation between energy consumption and economic output at the national level through input output energy analysis however due to the difficulty of precise energy analysis and highly complicated real markets no decisive evidence directly linking energy costs to the selling prices of individual commodities has yet been found over the past century the us metal market has accumulated a huge body of price data which for the first time ever provides us the opportunity to quantitatively examine the direct energy value correlation here by analyzing the market price data of 65 purified chemical elements mainly metals relative to the total energy consumption for refining them from naturally occurring geochemical conditions we found a clear correlation between the energy cost and their market prices the underlying physics we proposed has compatibility with conventional economic concepts such as the ratio between supply and demand or scarcity s role in economic valuation it demonstrates how energy cost serves as the invisible hand governing economic valuation thorough understanding of this energy connection between the human economic and the earth s biogeochemical metabolism is essential for improving the overall energy efficiency and furthermore the sustainability of the human society

assessing the date of the global oil peak the need to use 2p reserves combining geological knowledge with proved plus probable 2p oil discovery data indicates that over 60 countries are now past their resource limited peak of conventional oil production the data show that the global peak of conventional oil production is close many analysts who rely only on proved 1p oil reserves data draw a very different conclusion but proved oil reserves contain no information about the true size of discoveries being variously under reported over reported and not reported reliance on 1p data has led to a number of misconceptions including the notion that past oil forecasts were incorrect that oil reserves grow very significantly due to technology gain and that the global supply of oil is ensured provided sufficient investment is forthcoming to turn resources into reserves these misconceptions have been widely held including within academia governments some oil companies and organisations such as the iea in addition to conventional oil the world contains large quantities of non conventional oil most current detailed models show that past the conventional oil peak the non conventional oils are unlikely to come on stream fast enough to offset conventional s decline to determine the extent of future oil supply constraints calculations are required to determine fundamental rate limits for the production of non conventional oils as well as oil from gas coal and biomass and of oil substitution such assessments will need to examine technological readiness and lead times as well as rate constraints on investment pollution and net energy return

how closely do hypothetical surveys and laboratory experiments predict field behavior we compare the ability of three preference elicitation methods hypothetical choices nonhypothetical choices and nonhypothetical rankings and three discrete choice econometric models the multinomial logit mnl the independent availability logit ial and the random parameter logit rpl to predict actual retail shopping behavior in three different product categories ground beef wheat flour and dishwashing liquid overall we find a high level of external validity our specific results suggest that the nonhypothetical elicitation approaches especially the nonhypothetical ranking method outperformed the hypothetical choice experiment in predicting retail sales we also find that the rpl can have superior predictive performance but that the mnl predicts equally well in some circumstances experiment

the truth the whole truth and nothing but the truth a multiple country test of an oath script hypothetical bias is one of the main issues bedeviling the field of nonmarket valuation the general criticism is that survey responses reflect how people would like to behave rather than how they actually behave in our study of climate change and carbon emissions reductions based on the increasing bulk of evidence from psychology and economics regarding the effects of making promises we investigate the effect of an oath script in a contingent valuation survey the survey was conducted in sweden and china and its results indicate that an oath script has significant effects on respondent behavior in answering willingness to pay wtp questions in both countries the shares of zero wtp responses and extremely high wtp responses decrease when an oath script is used resulting in lower variance furthermore the conditional wtp decreases in the chinese but not in the swedish sample we also find that the effect of the oath script is not generally dependent on respondent characteristics and the few differences we observe vary with the countries

tariff cuts and us net potential benefits the case of the us and mexico this paper seeks to investigate us net potential benefits of merchandise imports from mexico under tariff reductions it applies a partial equilibrium framework which is static and highly aggregative in nature the results suggest that the magnitudes of us net potential benefits of tariff cuts on merchandise imports from mexico are conditional upon periods of duration of unemployment discount rates price elasticities of supply and demand and existing tariff situations high or low hence the findings of the paper suggest that the us potential benefits and costs of merchandise imports from mexico under tariff cuts should be weighed quite carefully

valuing unfamiliar and complex environmental goods a comparison of valuation workshops and internet panel surveys with videos abstract we compare two discrete choice experiments eliciting willingness to pay wtp for increased cold water coral protection in norway using valuation workshops and an internet panel survey with videos the video presentation provides the same visual presentation of information about the good and valuation task as in the valuation workshop in doing so we are the first to compare these survey modes the two survey modes perform equally well with respect to sampling but the internet survey gives significantly lower wtp estimates we identify a large number of status quo sq choosers in the internet survey that partly explain this result furthermore respondents who speed through the survey questionnaire and believe the survey to be inconsequential are more likely to be sq choosers while an internet survey is a fast and cost effective way of obtaining a representative population sample the potential biases in the valuation of complex and unknown environmental goods outlined here should be carefully addressed in future internet panel surveys

the impact of deal proneness on wtp estimates in incentive aligned value elicitation methods even after controlling for hypothetical biases some incentive aligned value elicitation methods still produce different willingness to pay wtp estimates in this study we compare wtp estimates from three incentive aligned value elicitation methods real choice experiment rce real double bounded dichotomous contingent valuation rcvm and becker degroot marschak auction bdm we find that participants aggressiveness in obtaining low prices i e deal proneness influences wtp estimates in the bdm auction but not those elicited from the rce and rcvm the participants with higher levels of deal proneness tend to submit lower bids in the bdm auction the discrepancies in wtp estimates between different incentive aligned procedures are narrower for participants with lower levels of deal proneness our results indicate that the bids in bdm auctions may be understated and the auction mechanism may induce the gambling behavior of people who are deal prone that is whether the bdm auction is truly incentive aligned is again called into question we also discuss the practical implications for food retailers

elicitation formats and the wta wtp gap a study of climate neutral foods we conduct a field valuation experiment where we vary the valuation method contingent valuation vs inferred valuation as well as the payment format dichotomous choice vs payment card willingness to accept and willingness to pay valuations are elicited in a within subjects design for foods with climate neutral labels we find a similar gap for valuations elicited with the contingent or the inferred valuation method however we also find that the gap can be muted by using a payment card elicitation format

a new explanation for the wtp wta disparity abstract we propose a new explanation for the wtp wta disparity in experiments and surveys uncertainty irreversibility and limited learning opportunities can generate commitment costs driving a wedge between wtp and wta we present experimental evidence that supports our hypothesis

winning isn t everything corruption in sumo wrestling although the theoretical literature on corruption is well developed empirical work in this area has lagged because it has proven difficult to isolate corrupt behavior in the data in this paper we look for evidence of corruption in an unlikely place the highest echelons of japanese sumo wrestling this paper provides strong statistical evidence documenting match rigging in sumo wrestling a non linearity in the incentive structure of promotion leads to gains from trade between wrestlers on the margin for achieving a winning record and their opponents we show that wrestlers win a disproportionate share of the matches when they are on the margin increased effort can not explain the findings winning on the bubble is more frequent when the two competitors have met often in the past success on the bubble tends to rise over the course of a wrestler s career but declines in his last year consistent with the game theoretic predictions wrestlers who are victorious when on the bubble lose more frequently than would be expected the next time they meet that opponent suggesting that part of the payment for throwing a match is future payment in kind systematic differences across wrestling stables suggest that the stables play a role in facilitating the corruption in times of increased media scrutiny the match rigging disappears this abstract was borrowed from another version of this item

neoclassical theory versus prospect theory evidence from the marketplace several experimental studies have provided evidence that suggest indifference curves have a kink around the current endowment level these results which clearly contradict closely held economic doctrines have led some influential commentators to call for an entirely new economic paradigm to displace conventional neoclassical theory e g prospect theory which invokes psychological effects this paper pits neoclassical theory against prospect theory by investigating data drawn from more than 375 subjects actively participating in a well functioning marketplace the pattern of results suggests that prospect theory adequately organizes behavior among inexperienced consumers but consumers with intense market experience behave largely in accordance with neoclassical predictions moreover the data are consistent with the notion that consumers learn to overcome the endowment effect in situations beyond specific problems they have previously encountered this transference of behavior across domains has important implications in both a positive and normative sense

prosocial behavior and incentives evidence from field experiments in rural mexico and tanzania abstract incentive based schemes for natural resource conservation are based on the premise that offering payments to groups of land users will motivate them to organize collectively to provide environmental services in contrast research from behavioral economics shows that introducing monetary incentives can undermine collective action that is motivated by social norms in such a case payment could have perverse impacts in view of this dichotomy we conducted choice and field experiments in rural mexico and tanzania to test the response of prosocial behavior to incentives the field experiments involved voluntary participation in real communal tasks under different incentive structures findings suggest that payments help raise participation where people are otherwise uninterested but that participation in communal tasks can be high irrespective of the incentive if social norms favoring participation are present in tanzania high individual payments do not undermine participation although they appear to reduce people s satisfaction from the task relative to when there is no payment in mexico group payments made through village authorities yield lower participation where people distrust leaders challenges to conducting field experiments in our research settings limit what we can conclude from our work but the findings raise important points and suggest areas for further research

the external validity of experimental economics techniques analysis of demand behavior this paper examines the parallelism which exists between demand behavior determined from the sale of a private good in an actual real world field setting and in a laboratory auction setting the demand behavior observed in the two settings is significantly the same leading to the corroboration of the thesis that there is often correspondence between laboratory and real world behavior

dynamic hypothetical bias in discrete choice experiments evidence from measuring the impact of corporate social responsibility on consumers demand abstract this paper is aimed at studying the dynamics of consumers preferences for corporate social responsibility the data come from both a discrete choice experiment dce and a field experiment conducted in a real market setting the results show that in a static setting first month predictions of a standard dce study and real market shares are statistically similar for the various profiles of corporate social responsibility however as time evolves real market shares present some dynamic patterns that are not mirrored by the standard dce predictions the overall conclusion is that differences between real market behavior and dce data can be attributed to the lack of learning experience or adaptation in dce surveys rather than to the hypothetical nature of the experiments

theft gift giving and trustworthiness honesty is its own reward in rural paraguay in developing countries lacking legal enforcement villagers may use implicit contracts to minimize crime i construct a dynamic limited commitment model in which a thief cannot commit to forego stealing but is induced to steal less by the promise of future gifts combining survey data on production theft gifts and trust with experiments measuring trustworthiness i provide supporting evidence farmers living near more relatives or with plots that are difficult to steal from give fewer gifts and trust more and those living near more relatives also experience less theft giving increases when trust is lower and the threat of theft is greater