transferring williamson s discriminating alignment to the analysis of environmental governance of social ecological interdependence institutional fit is operationalized by transferring transaction costs economics tce to the analysis of instances of social ecological interdependence we carefully spell out the differences with conventional tce and outline analytical steps based on discriminating alignment that enable a tce analysis of environmental governance of nature related transactions we illustrate the approach through the example of wildlife management in germany here we find hierarchical governance a prohibition of killing of wolves embedded into a polycentric hybrid monitoring arrangement in applying tce to nature related transactions we argue that characteristics of nature related transactions can be subsumed under the core categories of jointness uncertainty asset specificity frequency rivalry excludability and social relational distance benefits of this approach include its generating a narrow list of descriptors of instances of biophysically mediated interdependence related to one evaluation criterion cost effectiveness the tce of nature related transactions thus identifies sets of stylized contextual factors and aspects related to the governance of hazards of ex post opportunistic behavior that cut across scales they can be used as composite descriptors that facilitate analysis of complex multi scalar arrangements of natural resource governance we propose the concept of governance challenge derived from tce as being useful for building research on environmental governance

water markets and freshwater ecosystem services policy reform and implementation in the columbia and murray darling basins abstract water markets have featured prominently in the reallocation of water rights to restore freshwater ecosystem health incentive based water rights acquisition and transactions have emerged as a market oriented policy approach to reallocate water resources from existing uses to enhance the provision regulation and sustainability of freshwater ecosystem services this paper develops a conceptual framework to examine factors enabling and constraining successful policy reform and implementation in market based environmental water allocation this analysis distills and extends the findings and lessons of a september 2007 workshop in brisbane australia on environmental water transactions two case studies were selected in water stressed basins the columbia u s a and murray darling australia basins where transactional approaches to environmental water allocation first emerged the case studies draw upon practitioner perspectives and previous policy and economic analysis in two regions where shared political economic and physical conditions lend a strong analytical basis for comparison a common set of policy and regulatory reforms has occurred in both cases albeit in different forms and via distinct paths to develop three enabling conditions 1 establishment of rights to and limits on freshwater extraction and alteration 2 recognition of the environment as a legitimate water use and 3 authority to transfer existing water rights to an environmental purpose however these elements of policy reform are necessary but not sufficient for effective implementation a second set of driving forces barriers and adaptations explains the ability to achieve larger scale ecological outcomes these conditions include the physical social and economic factors driving demand for environmental water allocation administrative procedures organizational development and institutional capacity to effect transfers and adaptive mechanisms to overcome legal cultural economic and environmental barriers the case study analysis suggests that environmental water transactions can play an important role in establishing environmental water allocations although water markets require ongoing institutional capacity and adaptive governance the conceptual framework and empirical lessons generated through this cross case comparison provide the basis for an expanded research agenda to evaluate the design and performance of market oriented reforms as implementation experience accrues and new programs emerge in diverse ecological and political economic settings

china s carbon emissions trading overview challenges and future because china has emerged as the largest greenhouse gas ghg emitter in total annual emissions to accelerate the pace of ghg emission reduction in china is important to the success of global efforts in addressing climate change carbon trading is a market mechanism and key instrument in the mitigation of climate change this paper explores the policy process and development state to date of china s carbon trade market to understand the emergence and development of that market and to understand what barriers are hampering china s carbon trade market development to achieve this goal this paper introduces and analyzes china s status in the international market examines the factors driving carbon market launching by the chinese government and traces the development of mandatory carbon emission trading and voluntary emission trading it is argued that china s carbon trading market is confronted with challenges such as the absence of a functional carbon trading market inaccuracy of the quota allocation an imperfect trading mechanism and lagging legislation at the present stage shortcomings such as having no real time carbon price and dominated spot transactions differentiate china s trade market substantially from a functional system a quick market integration of china s carbon market appears remote it is suggested that specific measures be taken to promote the development of the chinese carbon trading market

understanding the evolution and performance of water markets and allocation policy a transaction costs analysis framework abstract water markets and associated allocation policy reforms have struggled to achieve their intended goals in many water stressed rivers in part due to the institutional friction imposed by transition and transaction costs this paper elaborates a transaction costs analysis framework to examine the evolution and performance of water markets and allocation policy reforms this analysis rests on three pillars i a synthesis of three theoretical traditions of institutional analysis williamson north and ostrom often considered independently ii a framework to examine the types and interactions of transaction costs in market based water allocation over time and iii an illustrative analysis of three large river basins the colorado columbia and murray darling with varying levels of success in market based water policy reforms the resulting framework accounts for water s complexity as an economic good this framework and the case studies lead to the identification of several policy implications including the need for a multiphase sequencing of reform strategic investment in institutional transition costs and institutional choices that preserve future flexibility to adjust water rights and diversion limits to manage social and environmental externalities

a global survey and review of the determinants of transaction costs of forestry carbon projects reducing carbon emissions in the forestry sector by means of market based schemes is considered a cost effective measure for tackling climate change impacts however the transaction costs tcs involved are typically unknown or unquantified and therefore often neglected in this study three types of tcs search design and negotiation costs were measured in person days and monetary terms based on a global survey of forestry carbon projects implemented across latin america asia and africa cost estimates vary between zero and 1 201 tco2 for person days and from zero to us 1 738 tco2 for monetary costs key drivers of tcs are identified based on the characteristics of the project in general the transaction the transactors involved and institutional design the latter type of characteristic is shown to have a particularly large impact on tcs

a private property rights regime to replenish a groundwater aquifer groundwater management is often reactive and in some cases the groundwater stock groundwater table of an aquifer may fall below its optimal steady state level before any thought is given to management this paper examines a private property rights regime to restore a groundwater resource to its optimal steady state results from a stochastic dynamic programming model of madera county california show that the private property rights regime recovers about 95 percent of the potential gain from groundwater management

will markets direct investments under the kyoto protocol lessons from the activities implemented jointly pilots under the kyoto protocol countries can meet treaty obligations by investing in projects that reduce or sequester greenhouse gases elsewhere prior to ratification treaty participants agreed to launch country based pilot projects referred to collectively as activities implemented jointly aij to test novel aspects of the project related provisions relying on a ten year history of projects we investigate the determinants of aij investment our findings suggest that review agency preferences related to national political objectives and possibly deeper cultural ties influenced project selection and limited the number of aij projects bilateral ties also appear to have affected investment decisions directly possibly because of related transaction costs the results suggest an investment process different from the assumptions that underlie well known estimates of cost savings related to the protocol s flexibility mechanisms we conclude that if approaches developed under the aij programs to approve projects are retained the scale of investment under kyoto s flexibility provisions and their cost savings will be less than what is generally anticipated and the pattern of investment less driven by abatement costs

transactions costs of expanding nutrient trading to agricultural working lands a virginia case study abstract agricultural nonpoint sources nps figure prominently in the design of many water quality trading programs in concept water quality trading programs can create incentives for agricultural operators to supply low cost pollutant reductions while still keeping land in agricultural production in practice water quality trading programs in the united states have produced few trades involving agricultural nps transactions costs are a critical but poorly understood feature of water quality trading programs the objective of this study is to examine the transactions costs associated with expanding the use of nps credits in a water quality trading program in virginia united states to include credits generated from agricultural working lands best management practices bmps findings indicate that transactions costs for agricultural nps trades in virginia are currently relatively low due to the activity being credited simple land conversion based on best available evidence transactions costs of creating credits using management and structural bmps will be 2 to 16 times more costly on a per project basis than for land conversion credits compliance monitoring protocols are a significant driver of costs for working lands credits our results suggest an important cost risk tradeoff between verification costs and compliance certainty for program designers to consider

natural resource economics and conservation contributions of agricultural economics and agricultural economists research by agricultural economists on natural resources has been distinguished by an interdisciplinary emphasis and a dynamic perspective it has recognized technological and institutional constraints has been oriented toward solving concrete resource management and policy problems and has emphasized empirical and quantitative analysis agricultural economists have introduced methods for evaluating natural resource conservation efforts for predicting adoption of resource conservation technologies and for designing efficient and sustainable resource management policies they have identified ways of improving land management and preventing land degradation proposed reforms of institutions governing water allocation and water quality and introduced policies for balancing environmental and efficiency considerations in the management of pests biodiversity and livestock diseases their research has had substantial impacts on the formulation of resource conservation policies

transaction costs and institutional performance in market based environmental water allocation policy reforms in the columbia basin spurred water rights reallocation for ecological recovery transaction costs have caused implementation to lag this paper examines transaction costs and institutional performance in environmental water allocation it evaluates spatial and temporal performance trends in watershed cases along three dimensions of adaptive efficiency water recovery transaction costs and program budgets performance trends demonstrate intrastate variability and volatility over time due to the importance of local institutional capacity which is uneven within states higher levels of water recovery may coincide with moderate to high transaction costs and program budgets particularly during initial implementation efforts this finding reflects investments in multilevel policy reform to strengthen enabling conditions and adapt to unintended consequences jel q25 q58

transaction costs in pollution markets an empirical study this paper studies a market in pol lution permits launched in los angeles in 1994 this tradable permit market has been projected to lead to substantial cost savings due to the flex ibility it provides firms in terms of compliance with environmental regulation this paper shows that transaction costs can play an important role in the initial years of the program the transac tion cost variables have been defined to include search costs and information costs these costs are significant in explaining non participation of some firms in the market the study also draws policy implications for the development of future emissions trading programs jel q28 q25

why do transaction costs of agricultural policies vary policy related transaction costs tcs is an important issue when evaluating different policy options however tcs are often not taken into account in policy evaluations but may be as important for efficiency as the direct production costs different policies may result in different tcs and the main aim of this article is to explore possible reasons for these differences we compare the level of tcs for 12 different agricultural policy measures in norway and we analyze the causes of the differences along three different dimensions asset specificity frequency and point of policy application at the national level we find that all three dimensions are of importance when explaining the differences while variation in tcs incurred by farmers are mainly due to differences in point of policy application and asset specificity data show that direct price support has the lowest tcs while more direct payments for environmental amenities has the highest

the problem of instream flows to obtain a surface water right in the arid american west private appropriators have been required to undertake actual physical diversion of the water that requirement largely negates the role of private contacting to preserve or enhance water flows for recreational wildlife and aesthetic purposes in this paper a model is developed and used to examine the courts rationale for denying private claims to instream flows the ways in which such claims can be made amenable to the prior appropriation system are explored the paper is motivated by the failure of public agencies to achieve an approximately optimal solution

exploring the effect of cap and trade mechanism on firm s production planning and emission reduction strategy abstract cap and trade mechanism has a significant effect on firm s production and operation decisions and carbon emissions this study develops a mathematical model to examine the effect of cap and trade mechanism on firm s production planning and emission reduction strategy based on the model the firm s critical production planning decisions such as the optimal production quantity optimal allowance selling price and the maximum profit under the cap and trade mechanism are derived firstly then based on the cost benefit analysis the conditions under which the firm makes the optimal emission reduction strategy between buying carbon allowance from the carbon trading market and conducting low carbon processing are identified the result suggests that when the low carbon processing cost is greater than the potential opportunity benefit the firm is inclined to purchase carbon allowance from the carbon trading market and vice versa finally a numerical analysis is conducted to investigate the effects of relevant factors such as carbon quotas carbon emission rate low carbon processing cost and transaction cost on firm s production and operation decisions the results indicate that under the cap and trade mechanism the transaction cost has a positive effect on allowance selling price the firm s optimal production quantity and maximum profit is positively related to carbon quotas while negatively related to carbon emission rate and low carbon processing cost this research contributes to enrich related literature and knowledge with regard to carbon emissions reduction at the firm level and highlight the critical importance of cap and trade mechanism in reducing carbon emissions

an empirical note on economic freedom and income inequality i report estimates for a fixed effects model of country level gini coefficients as a function of economic freedom along with relevant control variables gini coefficients are drawn from the unu wider world income inequality database version 2 0a while economic freedom is measured by the fraser institute s economic freedom of the world index controls are included for per capita income political structure education demographics and industrial composition over a broad range of freedom the estimated relation between economic freedom and income inequality is positive statistically significant but relatively inelastic

transaction costs and environmental policy design abstract this article synthesizes the growing empirical literature on transaction costs to identify pragmatic design recommendations for environmental and natural resource policies the new institutional economics literature recognizes that appropriate policy choice and design will be a function of the specific characteristics of the problem the physical and institutional determinants of both transaction costs and abatement costs should be considered in the policy design process due to potential interactions between them analysts also need to incorporate the extent to which the technologies institutional environment governance structures or policy designs can be changed some factors can only be adjusted to or designed around while others can be designed differently this framework highlights the importance of property rights since transaction costs will be incurred to obtain or retain property rights and since the rights assignment may affect both the magnitudes and distribution of costs another implication is that education and extension programs or use of behavioral economics concepts to affect choices can be cost effective in some circumstances policy design should take advantage of economies of scale and foster technical change appropriate sequencing of policy instruments may decrease transaction costs particularly if there is potential for technical change

when to pollute when to abate intertemporal permit use in the los angeles nox market we study intertemporal trading of nitrogen oxides permits in southern california s reclaim program we model reclaim s distinct intertemporal features two overlapping permit cycles and two overlapping compliance cycles in the model competitive equilibrium is cost effective and firms have an incentive to delay abatement from 1994 to 2006 reclaim facilities traded intertemporally by using permits of the opposite cycle we test two theoretical propositions delayed abatement and trading across cycles with a difference in differences estimator and show weak though inconclusive support of the theory the theoretical and empirical results are relevant to cap and trade programs with potential for overlapping permit cycles jel q58

the externalities associated with the common property exploitation of groundwater abstract in this paper the rate of groundwater extraction under the common property arrangement is the outcome of a dynamic game played with feedback strategies the analysis clarifies the externalities associated with the common property extraction of groundwater and identifies an risk externality that arises when firms are risk averse identifying the various externalities bears on the development of appropriate forms of groundwater management in particular the risk externality would be unknown to the watermaster of a central control agency suggesting the need for creative decentralized forms of groundwater management

a dynamic model for the single vendor multi buyer problem abstract we consider a problem of a dynamic production distribution situation for a single product we examine the situation where a vendor produces a product in a batch production environment and supplies it to multiple buyers under deterministic conditions stationarity of buyers demands does not imply stationarity of the demand at the vendor which follows a periodic sequence we consider buyers and the vendor demands as periodic sequences in this case some turnpike policies relative to the class of periodic dynamic parameter problems are recommended some remarks on the existence of planning and forecast horizons are also given

the paradox of water pricing dichotomies dilemmas and decisions we deliver a public policy perspective on the dichotomies dilemmas and decisions of water pricing first the dichotomies between price and value and costs are defined to explain the paradox of water pricing the price of water almost never equals its value and rarely covers its cost second the dilemmas of water pricing are highlighted across efficiency and equity objectives for water pricing and the instruments available to decision makers third the challenges of decision making are evaluated and illustrated in relation to water pricing fourth an adaptive process is provided that includes participatory assessment of risks and options to guide water pricing decision making

seller incentive properties of epa s emission trading auction abstract the new clean air act amendments instruct the environmental protection agency epa to conduct annual sealed bid offer auctions of emission allowances the auction pricing rules are discriminative and sellers with the lowest asking prices receive the highest bids this paper assesses the seller incentives of this auction and demonstrates that the auction rules cause sellers to choose asking prices that under reveal their cost of emission control furthermore increasing the number of sellers intensifies this misrepresentation if the number of buyers remains fixed the epa s rules can therefore generate significantly biased price signals and reduce the efficiency of the allowance trading market

factors that influence transaction costs in development offsets who bears what and why abstract environmental policy instruments generate transaction costs to public and private parties there is a growing literature reporting on the size of transaction costs produced by environmental policy instruments this paper extends that literature through an analysis of the factors that influence transaction costs in environmental policy and how this influence occurs the theory based factors that influence transaction costs are categorised as 1 transaction characteristics 2 transactor characteristics 3 nature of the institutional environment and 4 nature of the institutional arrangements we examined how these factors influenced transaction costs through the analysis of two australian based development offset schemes with different policy designs we found evidence of all four theory based categories of influence in the policy case studies the degree of influence and how each factor influenced transaction costs varies across the two policies and between parties policy design as a component of the institutional environment had a particularly large bearing on transaction costs of offset buyers and the policy administrator an important contribution to transaction cost theory assumes the institutional environment as given

the effect of allowance allocations on cap and trade system performance abstractan implication of the coase theorem is that under certain conditions the market equilibrium in a cap and trade system will be cost effective and independent of the initial allocation of tradable rights that is the overall cost of achieving a given aggregate emission reduction will be minimized and the final allocation of permits will be independent of the initial allocation we call this the independence property this property is important because it means that the government can establish the overall pollution reduction goal for a cap and trade system by setting the cap and leaving it up to the legislature to construct a constituency in support of the program by allocating the allowances to various interests without affecting either the environmental performance of the system or its aggregate social costs we examine the conditions under which the independence property is likely to hold both in theory and in practice

using tradable water permits in irrigated agriculture the present paper examines both theoretically and empirically the environmental and economic benefits of introducing a policy to optimally manage groundwater used in irrigated agriculture and the efficiency potential of allowing trading of water permits we confirm the results appearing separately in the literature on optimal resource management and tradable permits that both tradable water permits and non tradable quotas provide the basic mechanism for sustainable water use and yield substantial economic benefits and that allowing trading of water permits improves efficiency in order to derive the above results we develop a discrete time model to realistically describe farmer s myopic behavior while using a continuous time model to describe optimal management we also incorporate into the analysis the economic effect of sea water intrusion in the aquifer and we estimate the cost of water overexploitation under myopic behavior the empirical part of the paper is based on simulations using data from an agricultural region in northern greece the main contribution of the paper is the introduction of heterogeneity in crops production and market characteristics we show that the more diverse are the crops in technology and market prices and the stricter is the water constraint the higher are the benefits from using a tradable water permit system

choices without prices without apologies valuing is usually regarded as a process of compressing information about attributes into a single metric armed with this reduced form of compact information the consumer can consider a particular object with a particular price attached or implied and make an informed decision but the process of valuing is less straightforward than we ordinarily suppose when environmental goods and services become the object of information compaction it is possible that important information is lost we comment on the choice problem germane to environmental goods and services and challenge the presumption that environmental choices made without explicit pricing are inferior to those in which hypothetical valuation studies are undertaken

economic freedom culture and growth how do economic freedom and culture impact economic growth this paper argues that culture as measured by the world values surveys and economic institutions associated with economic freedom are both independently important for economic prosperity but the strength of their impact can be better understood only when both are included in the growth regression our results indicate that economic freedom is more important than culture for growth outcomes suggesting substitutability between the two we posit that culture is important for growth when economic freedom is absent diminishing in significance once economic freedom is established

tradable permits and unrealized gains from trade with the advent of tradable permit programs for bad outputs e g so2 emissions concerns arose over whether the theoretical gains from trade would be realized we will employ a methodology that calculates the potential gains accruing to coal fired electric power plants from implementing a tradable permit program the magnitude of the potential gains in a plant s kilowatt hour output from a tradable permit program relative to its observed production provides insights into the existence of intertemporal allocative inefficiencies and spatial allocative inefficiencies after the implementation of a tradable permit program

public benefits private benefits and policy mechanism choice for land use change for environmental benefits the choice of policy mechanisms for encouraging environmentally beneficial land use change should depend on the relative levels of private or internal net benefits and public or external net benefits a map of recommended policy mechanisms is developed depending on the relative levels of these variables positive incentives negative incentives and extension need to be targeted carefully to appropriate projects where private net benefits are closer to zero and or public net benefits are more extremely positive or negative technology development is suggested where private net costs outweigh public net benefits no action is recommended for many potential projects

economic prescriptions for environmental problems how the patient followed the doctor s orders o ne of the dangers with ivory tower theorizing is that it is easy to lose sight of the actual set of problems which need to be solved and the range of potential solutions as one who frequently engages in this exercise i can attest to this fact in my view this loss of sight has become increasingly evident in the theoretical structure underlying environmental economics which often emphasizes elegance at the expense of realism in this paper i will argue that both normative and positive theorizing could greatly benefit from a careful examination of the results of recent innovative approaches to environmental management the particular set of policies examined here involves two tools which have received widespread support from the economics community marketable permits and emission charges pigou 1932 dales 1968 kneese and schultze 1975 both tools represent ways to induce businesses to search for lower cost methods of achieving environmental standards they stand in stark contrast to the predominant command and control approach in which a regulator specifies the technology a firm must use to comply with regulations under highly restrictive conditions it can be shown that both of the economic approaches share the desirable feature that any gains in environmental quality will be obtained at the lowest possible cost baumol and oates 1975 until the 1960s these tools only existed on blackboards and in academic journals as products of the fertile imaginations of academics however some countries have recently begun to explore using these tools as part of a broader strategy for managing environmental problems

the economics of organization the transaction cost approach the transaction cost approach to the study of economic organization regards the transaction as the basic unit of analysis and holds that an understanding of transaction cost economizing is central to the study of organizations applications of this approach require that transactions be dimensionalized and that alternative governance structures be described economizing is accomplished by assigning transactions to governance structures in a discriminating way the approach applies both to the determination of efficient boundaries as between firms and markets and to the organization of internal transactions including the design of employment relations the approach is compared and contrasted with selected parts of the organization theory literature

economic freedom government policy and the trade off between equity and economic growth this study investigates the role that economicfreedom plays in economic growth and in the distribution in marketincome the role of government policy in advancingeconomic progress and in promoting income equality and the effectthat the rate of economic progress has on thedistribution of market income structural and reduced formmodels are estimated that reveal that economic freedompromotes both economic growth and equity and that there is apositive but relatively small trade off between growth andincome inequality

the impact of economic freedom on the black white income gap abstract using state level data from 1980 2010 we examine whether economic freedom as measured by the economic freedom of north america index has had any impact in increasing or decreasing the ratio of median income for black households to the median income of white households to our knowledge there has been no research on racial income disparities and the role that economic freedom might have in alleviating or exacerbating the problem we find evidence that economic freedom is associated with an increase in the racial income gap

how many parts to make at once reprinted from factory the magazine of management volume 10 number 2 february 1913 pp 135 136 152 interest on capital tied up in wages material and overhead sets a maximum limit to the quantity of parts which can be profitably manufactured at one time set up costs on the job fix the minimum experience has shown one manager a way to determine the economical size of lots

transaction costs and tradeable permits abstract tradeable permit systems are at the center of current interest and activity in market based reforms of environmental policy because these systems can offer significant advantages over conventional approaches to pollution control unfortunately claims made for their relative cost effectiveness have often been exaggerated transaction costs which may be significant in these markets reduce trading levels and increase abatement costs in some cases equilibrium permit allocations and hence aggregate control costs are sensitive to initial permit distributions providing an efficiency justification for politicians typical focus on initial allocations

the market for sulfur dioxide emissions the 1990 clean air act amendments initiated the first large scale use of the tradable permit approach to pollution control the theoretical case for this approach rests on the assumption of an efficient market for emission rights the authors empirical analysis shows that the emission rights market created by the 1990 amendments had become reasonably efficient by mid 1994 they also show that the auctions specified in the amendments to jump start trading had become a small part of the overall market finally the authors demonstrate that the strategic bidding behavior discussed in the literature has had no effect on market prices copyright 1998 by american economic association

analysis of prices in tradable emission markets an empirical study of the regional clean air incentives market in los angeles the regional clean air incentives market is an emissions trading programme which is expected to help in reducing oxides of nitrogen and sulphur from stationary sources in the los angeles area this paper uses econometric techniques to determine the factors that can explain the development of the price of emission permits by controlling for various characteristics of the trades the regression results allow one to isolate the impact of each factor and conduct a detailed analysis of the implications of this factor on price the results show that the price of permits is affected by institutional factors such as the trading rules and regulations governing the permit programme the permits are priced higher in the coastal zone higher for trades recorded in 1997 as compared to 1994 or 1995 and are affected by the trader category brokers are involved in well over half of the trades and have acquired a substantial inventory of permits facilities buying from brokers pay higher prices than if they buy from ano

forecast horizons in the discounted dynamic lot size model we derive a sharp upper bound on the minimal forecast horizon in the discounted dynamic lot size model with constant initial demand this bound is given by mm 1 where m is the eoq s worth i e the number of periods for which the total demand equals economic order quantity our results do not require the solution of the infinite horizon problem to be unique nor do they require the infinite horizon problem to be well defined we also prove some sensitivity results with respect to the discount factor and the setup cost

economic performance through time prize lecture to the memory of alfred nobel december 9 1993 this abstract was borrowed from another version of this item

improving environmental decisions a transaction costs story abstract a multidisciplinary team of researchers made efforts to influence the design and implementation of environmental policy in australia a focus of these efforts was the development of the investment framework for environmental resources inffer in addition the team undertook a range of communication activities training user support and participation in committees and enquiries transaction costs were relevant to these efforts in a variety of ways environmental managers perceived inffer to involve relatively high transaction costs a balance was struck between the system having simplicity and low transaction costs and delivering environmental benefits transaction costs were factored into the planning and prioritisation processes developed for example public and private transaction costs are accounted for in the calculation of benefit cost ratios and in the choice of policy mechanisms there are diverse roles that transaction costs play in the processes of developing implementing and influencing environmental policy programmes a key observation is that appropriate strategic investment in transaction costs can improve decisions and increase net benefits from an environmental programme a well designed decision process can involve incurring transaction costs at one stage in order to save transaction costs at a later stage

2006 presidential address water markets in the west prices trading and contractual forms rising urban and environmental demand for water has created growing pressure to reallocatewaterfromtraditionalagriculturaluses theevolutionofwatermarketshas beenmorecomplicatedthanthoseforotherresources inthispaper wefirstexplainthese differences by examining water rights and regulatory issues second we place our research in the context of the economics literature on water marketing third we present new comprehensive data on prices and the extent nature and timing of water transfers across 12 western states from 1987 to 2005 we find that prices are higher for agriculture to urban trades versus within agriculture trades in part reflecting the differences in marginal values between the two uses prices for urban use are also growing relative to agricultural use markets are responding in that the number of agriculture to urban transactions is rising whereas the number of agriculture to agriculture transfers is not further there is a shift from using shortterm leases to using multiyear leases of water and permanent sales of water rights this pattern underscores the need to consider the amounts of water obligated over time rather than examining only annual flows in assessing the quantities of water traded as is the common practice in the literature considering water obligated over time termed committed water we find significantly more is transferred and the direction of trading is different than if the focus is on annual flows finally the data reveal considerable variation in water trading across the states jel q2 n5 l5 k3

income inequality and economic freedom in the u s states this paper examines the impact of economic freedom on income inequality using cross sectional data for u s states while previous research has explored this relationship internationally the results have been conflicting in addition while it seems obvious that the large institutional differences across countries will impact income inequality it isn t so obvious that the smaller variation in policies among u s states can have a measurable impact can improvements in income inequality be used as a justification for marginal pro market policy reforms at the state level or is this argument applicable only to national level institutional reforms

the political economy of pollution markets historical lessons for modern energy and climate planners this article explores some of the central economic and political problems with the use of tradable permits to solve environmental problems drawing from transaction cost economics political economy and market theory it does so by looking at the history of three programs for curbing pollution in the united states the clean air act the leaded gasoline phase out and water permits in wisconsin the article begins by briefly summarizing the history of each of these programs before looking at a host of challenges related to political compromises in program design transaction costs spatial distortions such as geographic sensitivity and wrong way trading of credits temporal distortions such as the episodic nature of pollution and volatility of market prices and market abuses these concerns are raised with an eye for how historical experience may inform the current debate about how to design effective market mechanisms to respond to climate change and other forms of energy related environmental degradation

analytical evaluation of heuristics performance for the single level lot sizing problem for products with constant demand abstract in this paper we examine the performance of several commonly used heuristics for the single level lot sizing problem for products with stationary demand and cost parameters a particular combination of demand and cost combination introduced by blackburn and millen called the lot sizing index lsi is shown to be an excellent predictor of heuristics performance for any finite horizon problem the importance of the lsi as a performance predictor is established through an analysis of the heuristics objective function and the optimal cost function

public transaction costs of agri environmental schemes and their determinants analysing stakeholders involvement and perceptions despite an overall budget increase for rural development in the new programming period 2007 2013 most older member states in the now expanded european union are facing a substantial reduction in their budget for rural development and thus for agri environmental schemes aess it can be assumed that in most countries none or at best only part of this loss can be offset by national funds therefore the design of more efficient national governance structures for aess which decrease public transaction costs tcs would be an appropriate solution to this problem the objective of this paper is to define the factors that influence these public tcs so that appropriate action can then be taken to reduce them a statistical analysis with a proxy for public tcs is combined with an analysis of stakeholder perceptions excluding farmers concerning public tc influencing factors the research showed that it is mainly scheme related factors that are perceived to be important although the governance structure institutional environment and level of trust also play a role finally the analysis of perceptions concerning tcs also showed that aes related actors have a limited knowledge of tcs

fishing quota markets abstract in 1986 new zealand responded to the open access problem by establishing the world s largest individual transferable quota itq system using a 15 year panel dataset from new zealand that covers 33 species and more than 150 markets for fishing quotas we assess trends in market activity price dispersion and the fundamentals determining quota prices we find that market activity is sufficiently high in the economically important markets and that price dispersion has decreased we also find evidence of economically rational behavior through the relationship between quota lease and sale prices and fishing output and input prices ecological variability and market interest rates controlling for these factors our results show a greater increase in quota prices for fish stocks that faced significant reductions consistent with increased profitability due to rationalization overall this suggests that these markets are operating reasonably well implying that itqs can be effective instruments for efficient fisheries management

how vulnerable is the emissions market to transaction costs an abms approach abstract the impact of transaction costs on the early emissions trading market is examined by applying an agent based model and simulation abms approach for a realistic model set up bounded rationality stochastic characteristics and learning by doing are considered in our search processes marginal abatement cost parameters are obtained from yoo et al 2010 which is an experimental study on the emissions trading in the korean power sector sensitivity analyses are performed on market performance indices with regard to transaction cost parameters which represent scales and the learning elasticities of transaction costs a total of 960 simulations were run in this sensitivity analysis sensitivity analysis results consistently show that higher transaction costs worsen market performance the most remarkable finding in these results is that welfare performance of all the transactions decreases by up to 50 as the scale parameters of transaction costs increase implying that welfare gain from introducing emissions trading disappears significantly however with learning curve effect welfare performance could be regained by up to 26 in sum although transaction costs significantly encroach upon trade gains at the early stage based on our simulation results the welfare loss by way of transaction costs is lessened as the knowledge of market participants progresses

property rights regimes and natural resources a conceptual analysis the term common property resource is an example of a term repeatedly used to refer to property owned by a government or by no one it is also used for property owned by a community of resource users such usage leads to confusion in scientific study and policy analysis in this paper we develop a conceptual schema for arraying property rights regimes that distinguishes among diverse bundles of rights ranging from authorized user to claimant to proprietor and to owner we apply this conceptual schema to analyze findings from a variety of empirical settings including the maine lobster industry

what do emissions markets deliver and to whom evidence from southern california s nox trading program a perceived advantage of cap and trade programs over more prescriptive environmental regulation is that enhanced compliance flexibility and cost effectiveness can make more stringent emissions reductions politically feasible however increased compliance flexibility can also result in an inequitable distribution of pollution we investigate these issues in the context of southern california s reclaim program we match facilities in reclaim with similar california facilities also located in non attainment areas our results indicate that emissions fell approximately 24 percent on average at reclaim facilities relative to our counterfactual furthermore we find that observed changes in emissions do not vary significantly with neighborhood demographic characteristics

bringing water markets down to earth the political economy of water rights in chile 1976 1995 abstract for 15 years chile has been the leading international example of pro market policies for water resources and its 1981 water code has recently been touted as a model for other countries to follow water markets are controversial in both theory and practice their potential benefits include greater efficiency and flexibility of water use and less state intervention and expenditure while their drawbacks include social and environmental externalities vulnerability to high transactions costs and other common examples of market failure no country has taken the experiment as far as chile since its water code privatized water rights reduced state administration and attempted to stimulate a free market in water rights the results have been mixed and uneven the lesson of the chilean case is that setting up water markets is harder and more complicated than it may seem even in the fairly simple arena of irrigation transfers

economic freedom and equality friends or foes how does economic freedom mainly how property rights are designed and protected relate to income equality whilst this is argued to be theoretically ambiguous the empirical results reveal that there is a positive relationship between changes in economic freedom and equality the more a country increased its economic freedom between 1975 and 1985 the higher the level of equality around 1985 most important in this regard is trade liberalization and financial deregulation also there are signs that the level of economic freedom in 1985 is negatively related to the level of equality around that year plausibly because of less redistribution

futures contracts in water leasing an experimental analysis using basin characteristics of the rio grande nm providing for increased water demands during periods of persistent drought and climatic variability may require water managers users and planners to think differently about how water resources are allocated a water marketing institution that allows water rights holders to reallocate water on a temporary basis could overcome these challenges with minimal conflict in this paper a water marketing institution that allows for the temporary reallocation of water rights in a spot and futures market is investigated the results provide insight into three key questions 1 how does trading impact the physical system 2 does the value of water differ by trading agents 3 how is economic welfare redistributed as a result of trading results of experimental treatments display minor impacts to the physical system that prices differ across the different type of trading agents and the addition of a futures market has the ability to decrease market prices while increasing economic welfare as a futures market allows users to hedge against future water uncertainty

sequestration offsets versus direct emission reductions consideration of environmental co effects abstract atmospheric greenhouse gas accumulation and consequential temperature increase can be remedied by emission reductions or agricultural carbon sequestration both options have direct and external environmental effects this paper examines the magnitudes of existing estimates of corresponding external co effects and how they could affect optimal combination of emission reductions and agricultural carbon sequestration we discuss whether government intervention in the form of taxation subsidization is justified for internalizing the externalities considering their relative magnitudes implementation costs and potential benefits that could be derived from such intervention we conclude that the existing estimates of external benefits from sequestration and emission reduction do not provide enough support for allocating resources to alter the market mix of carbon sequestration and direct emission reduction strategies

income determination and income discrimination in shenzhen shenzhen is not only one of the fastest growing urban agglomerations in mainland china shenzhen also stands for a unique most rapid and successful transformation into an urban market economy how important are personal characteristics social norms and policy related discriminatory factors for income determination in such an extraordinary city this paper estimates the income effect of non productivity related discriminatory factors like personal characteristics social norms and policies compared with productivity related returns on human capital the design of the shenzhen household survey 2005 enables the inclusion of a large set of discriminating factors in a mincer becker type of income model together with a unique look at the migrant population in this urban centre the results show that the human capital approach holds strong evidence is also found of a significant influence of social norms and policies which is particularly relevant in a developing and transitional economy even in such an

transaction costs collective action and adaptation in managing complex social ecological systems abstract with the escalating uncertainties and surprises faced in responding to environmental and natural resource challenges has come growing recognition of the need to manage such issues as social ecological systems and value the capacities that enable adaptation to these changes adaptations in environmental management often involve complex including wicked problems of collective action institutions introduced to reduce the transaction costs of solving these problems do not come for free a cost effectiveness framework designed to provide a comprehensive and logical structure for economic evaluation of path dependent institutional choices in this context and a procedure for boundedly rational empirical application of the framework are proposed and illustrated in this article including for the choice between water buy back and infrastructure upgrade programmes for accumulating the environmental water needed to sustain the ecosystems of australia s murray darling basin also outlined is a research strategy designed to help identify the heuristics needed for application of this procedure

transaction costs risk aversion and the choice of contractual arrangements publisher summary this chapter discusses transaction costs risk aversion and the choice of contractual arrangements every transaction involves a contract and the transactions conducted in the marketplace entail outright or partial transfers of property rights among individual contracting parties the contractual arrangements through which these transfers are negotiated are several and varied the chapter presents a theory that states that economic efficiency is the same under various land tenure arrangements subject to the constraint of private property rights although transaction costs exist in the real world the theory enables the understanding of much of the farming behavior however the presence of a variety of contractual arrangements under the same constraint of competition poses the question of the choice of these arrangements if a firm can increase efficiency in production by employing productive resources of more than one resource owner a contract to combine the resources will be obtained the formation of the contract involves partial transfers of property rights in one form or another such as leasing hiring or mortgaging

do transaction costs influence firm trading behaviour in the european emissions trading system this study is one of the first to empirically investigate firm trading behaviour and the importance of permit trading transaction costs such as information costs and search costs in the first phase of the european union s emissions trading system eu ets the signs and significance of our constructed transaction costs proxy variables indicate for a presence of these costs in the initial years of the eu ets in particular this paper shows that ets firms with the smaller number of installations and with less trading experience were less likely to participate in the european emissions trading market and traded the lower quantities of permits furthermore these firms chose to trade permits indirectly via third parties this study also supports the concerns that transaction costs could be excessive for smaller participants and firms operating in the new eu member states

transaction costs power and multi level forest governance in indonesia since 2005 there has been considerable international interest in reducing emissions from deforestation and forest degradation redd a program intended to finance protection of tropical forests through the sale of carbon offsets or from donor funding requiring the collaboration of local and international civil society stakeholders firms and donor and host governments redd is inherently a multi level governance project but to date participation in redd and coordination across governmental levels have been weak combining literature on multi level and polycentric governance of socioecological systems with transaction cost economics we argue that transaction costs structure cross level information sharing and collaboration relationships among organizations engaged in redd policy development at the national and provincial levels in indonesia using an exponential random graph modelling approach with data collected from interviews with over 80 organizations between 2010 and 2012 we find that powerful organizations tend to dominate cross level connections though this effect is somewhat mediated by organizational similarity which reduces transaction costs we suggest that explicit efforts to help local organizations overcome the transaction costs of building cross level relationships will be a central component of building an effective and equitable multi level governance system for redd in indonesia

an experimental investigation of the seller incentives in the epas emission trading auction the clean air act requires the epa to conduct annual auctions of emission allowances under the discriminative auction rules sellers with the lowest asking prices receive the highest bids this paper studies an inverted version of this auction in which buyers face the same incentives as sellers in the epa auction consistent with theoretical predictions buyers bid above their valuation auction outcomes are inefficient and increasing the number of buyers increases bids buyers facing human opponents compete more aggressively than the risk neutral prediction but bids do not differ systematically from this prediction when buyers face computerized nash robots copyright 1995 by american economic association

influences of transaction costs in environmental policy abstract there is a growing literature reporting the extent of transaction costs for environmental policies however understanding why transaction costs occur and why they are small or large is also important for efficient policy selection and evaluation following an analysis of the organisational economics literature and reports of the extent of transaction costs for a number of environmental policies three key influences to transaction costs in environmental policies are identified these are the following 1 the characteristics of the transaction for the environmental good 2 the nature of the transactors and 3 the current institutional environment and arrangements these affect transaction costs to the government and all other parties influenced by a policy transaction costs occur due to actions of information collection and policy design policy enactment and establishment implementation and contracting administration and monitoring and enforcement an interrogation of transaction cost influences reveals that 1 the influence varies between parties and is affected by the actions and interactions of and between all parties to a policy 2 how transaction costs are experienced varies across time and 3 who experiences transaction costs depends on the policy itself future policy selection and refinement will benefit from empirical analysis of the causes of transaction costs

lot sizing for products with finite demand horizon and periodic review inventory policy abstract this paper analyzes and develops an efficient algorithm for solving a simple generalization of the classical economic order quantity eoq model where the demand horizon is finite and a periodic review inventory policy is followed such problems could arise in production shops where the product under consideration is going to be discontinued and or replaced by some other product after a certain known number of periods such problems could also arise as subproblems in large prodution inventory problems were demand rate is constant in some periods and varying in others

heuristics for impulse replenishment with continuous periodic demand abstract we present a model where the demand appears at continuous time and all demand must be met the demand function is periodic with active and passive periods linear increasing and decreasing demand rates respectively the inventory is replenished at discrete time this paper is concerned with the problem of how to determine the replenishment schedule that minimizes the total production and holding cost over a long time horizon we show that there is no forecast horizon in our model even if the demand rate is constant there exists approximate forecast horizon for such case we obtain an explicit formula for the minimal sets of rational initial decisions for the periodic demand rate case we formulate some necessary conditions for optimal schedules two heuristics are also proposed the first is an improved version of the silver meal heuristic and the second is based on turnpike policies

designing more efficient markets lessons from los angeles smog control market based approaches for environmental protection are beginning to take root around the world this article attempts to improve our understanding of the performance of environmental markets by constructing and evaluating an information base on trades in los angeles which includes the first detailed data on trading prices the analysis suggests that trading activity has been shaped by the detailed regulations governing the market in addition transaction costs have played a crucial role we argue that the move toward adopting market based approaches for environmental protection needs to be accompanied by a vigorous effort to assess the properties of these systems as they are actually implemented

existence of forecast horizons in undiscounted discrete time lot size models we are concerned with a discrete time undiscounted dynamic lot size model in which demand and cost parameters are constant for an initial few periods as our main result we obtain an upper bound on the number of these periods which guarantees the optimality of the economic order quantity eoq as the size of the production lot to be produced in the first period the upper bound is given and the optimality holds for every problem with an horizon not less than the upper bound and for the infinite horizon problem the data beyond the upper bound are allowed to be specified arbitrarily in the context of forecast horizon theory we obtain conditions for a finite forecast horizon to exist in the undiscounted dynamic lot size model furthermore existence results for forecast horizons in an undiscounted optimization problem are obtained for the first time in this paper

dynamic version of the economic lot size model this article originally appeared in management science october 1958 volume 5 number 1 pp 89 96 published by the institute of management sciences a forward algorithm for a solution to the following dynamic version of the economic lot size model is given allowing the possibility of demands for a single item inventory holding charges and setup costs to vary over n periods we desire a minimum total cost inventory management scheme which satisfies known demand in every period disjoint planning horizons are shown to be possible which eliminate the necessity of having data for the full n periods

distributing pollution rights in cap and trade programs are outcomes independent of allocation standard economic theory predicts that if property rights to pollute are clearly established equilibrium outcomes in an efficient emissions permit market will be independent of how the emissions permits are initially distributed this so called independence property has important implications for policy design and implementation past studies document a strong positive correlation between the initial permit allocation and firm level emissions raising concerns that the independence property is failing to hold in real world settings we exploit the random assignment of firms to different permit allocation cycles in southern california s reclaim program in order to test the independence of permit allocation and emissions our results lend empirical support to the independence hypothesis

an early classic misplaced ford w harris s economic order quantity model of 1915 the familiar square root formula for the optimal economic order quantity was derived originally by harris in 1915 harris f w 1915 what quantity to make at once the library of factory management vol v operation and costs a w shaw company chicago 47 52 since all citations found to harris s paper over the past 35 years are incorrect it seems that no one has been able to locate the paper during this period the paper s apparent misplacement probably stems from an inaccurate citation given by raymond in 1931 raymond f e 1931 quantity and economy in manufacture mcgraw hill new york harris s paper exemplifies skillful presentation of the concepts of management science and still merits reading today s researcher can learn much from harris s modeling approach and would do well to emulate his expositional clarity and motivational effectiveness

a tale of two water markets in australia lessons for understanding participation in formal water markets water markets are promoted as a demand management strategy for addressing water scarcity although there is an increasing literature on the institutional preconditions required for successful formal water markets there has been less focus on understanding what drives participation after establishment of the basic enabling conditions participation can be measured in terms of either trading activity conducting either a permanent or temporary water trade and or trade volumes across time and market products australia s water markets in the southern and northern basins of the murray darling basin provide a notable example of a tale of two water markets offering insights about the economic policy levers that can drive participation across different hydrological irrigation and socioeconomic contexts key lessons include distribution of initial property rights in resource allocation the need to prepare for and seize opportunities to strengthen property rights and robust monitoring and compliance requirements all of which will reduce transaction costs and increase participation

infinite horizon production planning in time varying systems with convex production and inventory costs we consider the planning of production over the infinite horizon in a system with time varying convex production and inventory holding costs this production lot size problem is frequently faced in industry where a forecast of future demand must be made and production is to be scheduled based on the forecast because forecasts of the future are costly and difficult to validate a firm would like to minimize the number of periods into the future it needs to forecast in order to make an optimal production decision today in this paper we first prove that under very general conditions finite horizon versions of the problem exist that lead to an optimal production level at any decision epoch in particular we show it suffices for the first period infinite horizon production decision to solve for a horizon that exceeds the longest time interval over which it can prove profitable to carry inventory we then develop a closed form expression for computing such a horizon and provide a simple finite algorithm to recursively compute an infinite horizon optimal production schedule