land development and preservation over time and under uncertainty a review and a research agenda abstract the combination of a rising interest in sustainable natural resource use and the increasingly fractious nature of the interactions between developers and preservationists has led to renewed interest in the question of appropriate natural resource management in this paper i consider the question of land development and preservation over time and under uncertainty i first review the extant literature and then i discuss its shortcomings next i propose a research agenda which will enable us to shed light on some important management questions faced by land developers

option value empirical evidence from a case study of recreation and water quality a procedure for measuring option value and other preservation values of water quality is developed and applied to a case study area in the south platte river basin colorado benefits from water based recreation activities are the focus of the study the results provide an empirical test and confirmation of weisbrod s proposal that option value and other preservation values represent important social benefits and should be added to the aggregate consumer surplus of recreation activities to determine the total benefit of environmental amenities to society in the absence of such an estimate insufficient resources would be allocated by society to preservation of unique environments such as pristine mountain streams where mineral and energy development may irreversibly degrade water quality

intergenerational equity and sustainability abstract this paper explores the limitations of conventional economic analysis of intergenerational problems and examines some of the alternatives suggested in the literature it is argued that proper consideration of future generations has at least three requirements first when future costs and benefits are considered it should be taken into account that they are to be enjoyed by different generations second the sustainability requirement should be adopted this represents an equity commitment to the future and implies the recognition that future generations have the right to nondeteriorated ecological and economic capacity the paper studies the ways in which the recognition of these rights might be incorporated into economic evaluation and management third an appropriate institutional network to enforce the recognition of these rights in decision making processes should be constituted its design and necessary functions are also analyzed

cooperative management of groundwater resources in the presence of environmental externalities this paper investigates how cooperation among users can achieve a better management of groundwater in the presence of environmental externalities cooperation allows users to internalize the damages caused by their activities and reduce extractions the paper develops a game theoretical framework to assess the value of cooperation in an aquifer that is divided into three sub aquifers that are being overly exploited two types of externalities are modeled first water extractions in each sub aquifer impact water levels in neighboring sub aquifers extraction externality second the three sub aquifers are also connected to an ecosystem and thus decisions in each sub aquifer affect the health of the ecosystem environmental externality a cooperative game theory model is applied the model empirically shows how the uncontrolled extractions in each sub aquifer affects neighboring groundwater users but also cause severe impacts to the linked ecosystem the model is tested empirically in one of the most important aquifers in spain the eastern la mancha aquifer the results illustrate how both extraction and environmental externalities interact in affecting the likelihood of cooperation among the users the paper estimates the value of cooperation and its stability with and without the environmental externality

post keynesian money endogeneity evidence in g 7 economies abstract post keynesian theory of money endogeneity emphasizes the importance of bank loans causing money supply changes thus the proponents of endogenous money supply assert banks create money by meeting money demands of economic agents money is said to originate as bank created loans from deposits which in turn create more loans under the endogenous money supply the traditional money supply theory asserts that deposits create money so money is exogenously created this paper provides new evidence on endogenous money supply across g 7 economies over 26 years using quarterly data with controls for monetary regime change effects bank loans cause money supply hence money is endogenous and the monetary regime effect appears to hold as crucial factors in money supply theory money supply behavior is exogenous during two short periods in the uk and the us when monetary targeting policies were in place

measuring values for environmental resources under uncertainty abstract the relationship between conventional hicksian measures of the benefits from changes in environmental amenities under certainty and corresponding measures of valuation when the conditions of access to an uncertain environmental resource are changed is considered the analysis utilizes a contingent commodity framework with the assumption of state dependent preferences the findings suggest that the valuation of these changes will depend upon the availability of fair markets for diversifying risk moreover conventional measures of compensating or equivalent surplus will not necessarily bound the individual s valuation of a change in access to an uncertain environmental resource

ex ante consumer welfare evaluation in cost benefit analysis abstract public projects and policies are normally evaluated ex ante i e while consumers may still be uncertain about future prices income levels interest rates and preferences this paper extends the theory of ex ante consumer welfare evaluation by developing a 2 period model with multiple sources of uncertainty it provides insights into the influence of temporal uncertainty on the empirical measurement of ex ante willingness to pay

a framework for scaling and framing policy problems in sustainability abstract it is argued that a necessary but lacking component of our approach in seeking policy responses to sustainability issues is some repeatable means whereby the relative magnitude and characteristics of these various policy problems faced in a given context can be analysed and described to this end a simple and tentative framework is constructed based on the definition of the key attributes which shape policy problems pertaining to environmental change these are spatial scale of cause and effect magnitude timing and longevity of possible impacts reversibility mensurability complexity and connectivity nature of cause s relevance to the given polity tractability availability and acceptability of means public concern and existence of goals these attributes inform a general taxonomy of micro meso and macro problems the attributes and the taxonomy are described with supporting examples to illustrate possible application of the framework it is discussed briefly in the contexts of operationalising the precautionary principle and policy instrument choice it is concluded that the framework can help focus debate and operationalise vague principles introduce relativity into the notion of sustainability and make policy choice more efficient

ecological economic analysis of wetlands scientific integration for management and policy abstract wetlands all over the world have been lost or are threatened in spite of various international agreements and national policies this is caused by 1 the public nature of many wetlands products and services 2 user externalities imposed on other stakeholders and 3 policy intervention failures that are due to a lack of consistency among government policies in different areas economics environment nature protection physical planning etc all three causes are related to information failures which in turn can be linked to the complexity and invisibility of spatial relationships among groundwater surface water and wetland vegetation integrated wetland research combining social and natural sciences can help in part to solve the information failure to achieve the required consistency across various government policies an integrated wetland research framework suggests that a combination of economic valuation integrated modelling stakeholder analysis and multi criteria evaluation can provide complementary insights into sustainable and welfare optimising wetland management and policy subsequently each of the various components of such integrated wetland research is reviewed and related to wetland management policy

valuation and management of wetland ecosystems we recently completed a study of wetland values in coastal louisiana that employed both willingness to pay and energy analysis based methodologies and were able to bracket a range of values within which we feel fairly confident the true value lies however a large amount of uncertainty remains our current estimates of the total prsent value of an average acre of natural wetlands in louisiana are us 2429 6400 per acre assuming an 8 discount rate to 8977 17000 per acre assuming a 3 discount rate at the lowest value the current annual rate of loss of louisiana wetlands 50 sq miles per year is worth about 77 million at the largest value it is worth about 544 million in this paper we a discuss the fundamental theoretical and practical problems underlying natural resources valuation b summarize our methods and findings for louisiana wetlands and c elaborate on some of the more recalcitrant problems attending applied natural resource valuation including discounting and dealing with uncertainty and imprecision the discount rate makes more difference in the final result than any other one factor and yet there is much disagreement about the appropriate approach to discounting natural resources we discuss the discounting problem as applied to natural resources and argue for lower discount rates for valuing renewable natural resources than apply for other aspects of the economy it now seems clear that no reasonable amount of effort will produce very precise estimates of wetland values and we suspect this is also the case for several other classes of natural resources we elaborate a wetlands asurance bonding system to address these problems

valuing environmental commodities some recent experiments a general model of consumer behavior is proposed to assess six recent experiments that have attempted to reveal preferences for environmental goals each experiment used a mix of both the techniques and the theory of demand for non market commodities and each was designed to estimate a non market attitude associated with the environment and to analyze potential biases in the techniques the six cases show some consistency in results the linkage within the contingent market between the environmental attribute institutional setting and the bidding instrument must be realistic and accepted by the respondent to avoid biased results possibly the most important result is the replication of results using a traditional property value study and a contingent bidding approach all evidence obtained to date suggests that hedonic studies of property values or wages travel costs and survey techniques all yield values well one order of magnitude in accuracy 41 references 2 tables

supply uncertainty option price and indirect benefit estimation both the original and many of the subsequent explanations of the concept of option price have been motivated by an assumption of an uncertain supply of the commodity involved 1 consequently it is surprising to find that all of the definitions of option price compare two states of the world which each have known or certain supply conditions paying the option price does not eliminate supply uncertainty as it has been described rather it changes the individual s conditions of access to the good or service from a certainty of no access to a certainty of complete access risk enters the problem only because these analyses assume the individual does not know whether he or she will desire access at the time the payment must be made since the analysis is in terms of planned consumption the reason for this demand uncertainty is sometimes explained by the fact that the consumption must take place in the future when other factors influencing demand may have changed 2 bishop 1982 appears to have been the first to draw attention to this omission of supply uncertainty and proposed a framework without demand uncertainty to demonstrate that there are conditions when option value i e the difference between option price and the expected consumer surplus would be unambiguously positive 3 while there have been a number of theo

an optimal path to extinction poverty and resource degradation in the open agrarian economy this paper constructs a model of the open agrarian economy in order to explore the tendency of many such economies to evolve along paths characterised by severe environmental degradation it pays special attention to the importance of commodity prices and the transfer system in determining agricultural activity levels in ecologically delicate systems

measuring sustainable welfare a new approach to the isew abstract sustainability and welfare assessment is a contemporary theme of major scientific and policy relevance requiring the consideration of multiple dimensions and diverse perspectives the economic approach to sustainability and welfare assessment has frequently relied on alternatives or adjustments to gdp widely used as an indicator of macroeconomic performance several authors have proposed alternative indicators such as the isew which intend to measure sustainability and economic welfare in a way that avoids the limitations of gdp namely accounting for the value of externalities the distribution of income and natural resources depletion since daly and cobb 1989 there have been proposed improvements to the isew however its aptitude to represent a sound alternative to gdp is still the subject of scientific debate this paper presents a new approach to the isew named modified isew including new components and methodological changes for the estimation of the index these have the purpose of avoiding some of the index shortcomings and allow for a direct comparison with the gdp which are advantages over previous studies an application is developed for the us case taking advantage of wide data availability and the possibility of comparing the results with previous works the results obtained provide a clearer picture of the success or failure of environmental and social policies namely by avoiding the tampering effect resulting from the cumulative accounting of environmental externalities this work also emphasizes the inadequacy of gdp as a welfare indicator as well as the need to develop and adopt alternative indicators

the sign and size of option value we adapt the theoretical state preference model to value nonmarket public goods under individual uncertainty about use illustrating with an assessment of willingness to pay to prevent acid rain lake damage in the northeast united states individual

on the valuation of uncertainty in welfare analysis thisarticle developsa general model of private and public choice under temporal uncertainty the model incorporatesthe effectsof ris k preferencesand the pros pect of future learning into both the individual and aggregate valuationsof public projects the analys isprovidesnew ins ightson individual valuation itsimplicationsfor benefit cos t analys isand the characterization of paretoefficiency under uncertainty it also resolves some of the confusion in the option value and quasioption value literature private and public decisions typically involve many sources of uncertainty including uncertainty about prices income technology environmental quality health etc temporal uncertainty is also common where some of the risk 1 getsresolved over time due to learning additionally private and public decisions often exhibit some form of irreversibility implying that current choicescan affect the ability of decision makers to be flexible and to adjust their future choices in response to forthcoming information when uncertainty and irreversibility are both present welfare analys isgainscomplexity and importance although considerable progress has been made since weisbrod s seminal article a better understanding of the roles of uncertainty and irreversibility in welfare analys improve our ability aseconomis ts to communicate the importance of risk in project evaluation to public decision makers

do focus groups and individual interviews reveal the same information for natural resource valuation abstract focus groups and individual interviews have become accepted methods used in the initial stages of valuation research whether focus groups and individual interviews reveal similar valuation information has not been thoroughly studied the research tests the hypothesis that focus groups yield the same ecosystem service information as do individual interviews the research also explores how the focus group and individual interview data might differ the analysis shows that focus groups and individual interviews are not substitutes they yield different information about ecosystem services and resource uses

combining revealed and stated preference methods to value environmental amenities at residential locations this paper combines an established revealed preference method discrete choice he donic analysis and a relatively new stated refer ence method choice based conjoint analysis in order to estimate more accurately the aesthetic benefits generated by the presence and quality of environmental amenities associated with residen tial locations it applies the combined approach to the housing market of fairfield connecticut which contains several environmental amenities and is experiencing an improvement in the quality of its coastal wetlands due to active restoration efforts jel q26

the economics of the greenhouse effect the recognition that economic activity is contributing to climatic change with attendant costs that may be of large magnitudes has set in motion a substantial research effort this paper seeks to review the contribution of economics to analysis of the greenhouse effect and to the policies and instruments suggested as means of mitigating its damage a brief overview of the causes and consequences of global warming is given and a number of energy economy forecasting models are examined as the costs of global warming depend upon the extent to which preventative and adaptive measures are undertaken the techniques available to evaluate these costs are surveyed we examine extant targets for greenhouse gas emissions reduction and explore the frameworks within which optimal policy targets can be designed the paper also considers the narrower question of minimized abatement costs and surveys the types of models used to estimate them the merits of alternative policy instruments are examined paying particular attention to the role that risk and uncertainty and the costs of monitoring and implementation of policy under conditions of imperfect information may play in the choice of instruments problems of international co operation in the development of abatement policy are examined and we consider the compensations across both nations and generations that are likely to be necessary conditions for effective action

post keynesian monetary theory some issues abstract post keynesian monetary theory is of increasing interest to economists in the light of world wide financial deregulation of financial markets this paper offers an exposition of the main issues in this area including an overview of the most divisive issue that of interest rate determination and hence the slope of the money supply function post keynesian monetary theorists divide into two camps with respect to the determination of interest rates the markup school and the liquidity preference school it is argued in the paper that the post keynesian theory of the business cycle which incorporates endogeneity of the money supply requires a liquidity preference notion of interest rate determination

niche diversification in environmental ecological economics abstract this paper is devoted to the identification and comparison of the niches of neoclassical environmental economics nee and ecological economics eco it is presented in four sections section 1 argues that the existing literature does not make the differences and relations between the sister disciplines neatly transparent section 2 critically examines the antecedents of the subjects with reference to three structural dimensions such as scarcity perception problem solving orientation and range of integration section 3 collates the elements and reformulates the definitions section 4 is coda on the essay the divide between the paradigms which came to the surface during the 1960s became prominent through the growth controversy of the subsequent decade the controversy over the need for change of economic theory to cope with the growing intensity of environmental uncertainty makes the disciplines sore about each other the neoclassical paradigm comprising of elements like relative scarcity allocative approach market correction and technological optimism characterises nee the distinguishing characteristics of eco include thermodynamic irreversibility absolute scarcity economy ecosystem symbiosis biophysical approach ecological stewardship and prudent pessimism the niches are competitive and complementary in some respects and thus provide a unique example of fruitful niche diversification within environmental ecological economics we have a feeling that the economics profession can trace out the interface of the disciplines in some policy areas and raise the effectiveness of prescriptions so that this academic species diversity can serve humankind to its full potential

environmental bonds and environmental research in innovative activities abstract this paper considers the incentive to uncover potential future social costs of activities having no historical precedents since ex ante markets in the future external effects of historically unique activities are non existent the private incentives to uncover the possibility of thalidomide type results in such activities is weak the paper discusses the value of sequentially determined environmental bonds as mechanisms for the generation of research funds in these cases and derives measures for the calculation of such bonds

environmental policy based on strict liability implications of uncertainty and bankruptcy a firm level model is developed to analyze the impacts of bankruptcy and uncertain firm wealth on incentives for safety under a strict liability rule future damages and wealth are uncertain and a firm s income earning activities that possibly create damages are incorporated into the model this analysis shows that firms do not always undertake more of a risky activity than is socially desirable for the extremely hazardous industry case larger firms always undertake less of a risky activity than smaller firms for the cyclical industry case larger firms do not always conduct less of a risky activity than smaller firms

valuing amenity resources under uncertainty does the existence of fair contingent claims markets matter abstract alternative welfare measures are evaluated as measures of the value of change in access conditions for environmental resources and it is shown that traditional hicksian surplus estimates systematically underestimate benefits it is further argued that the existence of fair contingent claims markets is a peripheral consideration in benefit estimation that state dependent payments present no significant collection obstacles not already encountered in state independent payment schemes and that risk neutral social decision making requires state dependent benefit measures for situations involving individual risk these findings imply that future research should focus on developing theoretical bounds between the expected value of state dependent benefit measures and conventional measures and that contingent valuations techniques need to be extended to measure contingent payment possibilities for changes in uncertain access conditions to environmental resources

valuing non market wildlife commodities an evaluation and comparison of benefits and costs this paper compares the benefits and costs of nature conversation at three sites of special scientific interest benefits are estimated by contigent valuation expressed preferences and also the travel cost method revealed preferences oppurtunity costs are assessed from a financial cost viewpoint and also in terms of shadow prices or social costs results indicate that the valuation of wildlife and nature conservation largely depends upon the frame of reference adopted that social costs are considerably less than financial costs due to the effect of the common agricultural policy that user benefits are considerably less than financial costs and non user benefits must be included to cover even the social costs of nature conservation

estimates of the option values for water quality improvements abstract this paper presents estimates of the option values associated with increased oppurtunities for outdoor recreation resulting from improved water quality the estimates are based on a 1981 survey of 301 households in the pennsylvania monongahela river basin

ecological economics and scientific controversies lessons from some recent policy making in the eec abstract contrasting the very limited scientific evidence on the forest dieback issue with the sudden adoption of policies on air pollution decided in the frg 1983 1984 and extended to the european community 1985 we propose an interpretative framework for the real internalization process at work in what was tantamount to a social crisis for public opinion the media and political actors we conclude that open scientific controversies on some environmental issues effects causes solutions pave the way for some actors to use the issue for their own techno industrial strategies quite alien to ecological constraints in cases of very high uncertainties on impacts it becomes impossible to apply conventional social cost benefit analysis scba as an optimizing tool we propose to develop economic analysis as a negotiation language and to give pride of place to the value of learning time and to the crucial role of technological pluralism as a condition for flexibility in the future

capital adjustment costs a nonrenewable resource industry the exploitation of a nonrenewable resource by a monopolist or by competitive firms has been studied extensively since hotelling 2 one focal point has been the investigation of markets characterized by a cartel competing with a group of smaller firms as in the oil industry salant 7 and gilbert 1 conclude that the opec cartel will increase its market share and attain monopoly status the industry s history from 1980 through 1986 however suggests that this is not the case the price set by the cartel has encouraged expansion by other firms pushing opec to the point of near collapse further the structure of the nickel and other resource industries has changed from monopoly into competition the fact that existing models fail to track observed trends in market structure implies that important economic elements have been omitted from the analysis as the present study will show including limitations on the ability of firms to expand production quickly yields a more general model of the evolution of market structure

environmental issues and economic decisions in developing countries abstract this paper explains the key role of environmental economics in incorporating environmental concerns into decision making and in facilitating the more efficient management of natural resources as a step toward sustainable development it reviews concepts and techniques for valuation of environmental impacts for use in conventional cost benefits analysis as well as key related aspects including environmental impacts of economywide policies multicriteria analysis risk and uncertainty and discount rate issues several developing country case studies are summarized which cover a range of practical valuation methods the evidence presented suggests that the valuation techniques for determining use values may be applied successfully in appropriate cases but examples involving nonuse values are rare the use of multiobjective desicion methods also needs to be explored where economic valuation is not feasible

threshold effects and incentives for the conservation of biodiversity biological diversity is a central component of the stock of natural capital on which all economic development is based other things being equal loss of biologically diversity implies loss of development potential and its conservation through sustainable use or outright protection implies the protection of that potential one characteristics of biodiversity loss of especial importance is that biodiversity loss more than any other current environmental problem is associated with ecological threshold effects the paper explores the implication of this characteristics for the properties of a biodiversity conservation strategy

economic value of wetlands based recreation abstract the loss of wetlands is an issue of growing concern previous studies have focused primarily on quantifying the commercial storm protection and energy output values of wetlands relatively little research has been devoted to quantifying the outdoor recreational value of wetlands in this paper the recreational value of wetlands is discussed conceptually within a total economic value framework total economic value contains many value components which are broadly divided into non use current use and future use values each of these value categories can be further subdivided into expenditures and consumer s surplus an empirical study was conducted to measure expenditures and consumer s surplus associated with on site current recreational uses of a coastal wetlands area aggregate expenditures were estimated at approximately 118 million and aggregate consumer s surplus was estimated at approximately 27 million these results suggest that the economic impacts and net economic benefits associated with wetlands based recreation may be substantial hence recreational functions provided by wetlands may be important considerations for wetlands policy and management

externality or sustainability economics abstract in an effort to develop sustainability economics baumgartner and quaas 2010 neglect the central concept of environmental economics environmental externality this note proposes a possible connection between the concepts of environmental externality and sustainability in addition attention is asked for other aspects of sustainability economics namely the distinction weak strong sustainability spatial sustainability and sustainable trade distinctive sustainability policy and the ideas of early sustainability economists i argue that both sustainability and externalities reflect a systems perspective and propose that effective sustainability solutions require that more attention is given to system feedbacks notably other regarding preferences and social interactions and energy and environmental rebound the case of climate change and policy is used to illustrate particular statements as a conclusion a list of 20 insights and suggestions for research is offered

guilty until proven innocent regulation with costly and limited enforcement abstract we consider optimal regulations for a polluting firm when regulators cannot observe emission control costs and can only observe emissions via costly monitoring fines or subsidies for enforcing compliance are also limited the optimal regulations resemble a deposit refund system the firm reports its emissions and pays an initial tax based on this report if the firm is monitored it receives a rebate when actual and reported emissions coincide the enforcement constraints and the firm s rights determine whether the incentives to reduce emissions are optimally provided by varying the rebate for compliance the monitoring probability or the initial tax

economy and environment a theoretical essay on the interdependence of economic and environmental systems preface notation guide 1 introduction part i the physical economy environment system 2 closed physical systems a model 3 structure and time in the physical system 4 technological change and the environmental constraints to physical growth part ii the economic system 5 the price system 6 prices property and the environment 7 economic conflict and environmental change part iii environmental strategies in an evolutionary economy environment system 8 time uncertainty and external effects 9 the market solution 10 the stationary state 11 conclusions references index

money interest and capital a study in the foundations of monetary theory list of illustrations list of tables series preface preface 1 real analysis and monetary analysis an introduction part i real analysis critique 2 wicksellian monetary theory 3 neo walrasian monetary theory 4 the neoclassical synthesis revisited 5 keynesian and monetarists 6 friedman s monetary framework the quantity theory restated part ii monetary analysis foundations 7 re laying the foundations of monetary theory 8 some further questions of method and methodology 9 marshallian microfoundations of monetary equilibrium 10 macroeconomic analysis and monetary equilibrium 11 real analysis and monetary analysis the central arguments references index

an experimental analysis of the effectiveness of an environmental assurance bonding system on player behavior in a simulated firm it has long been recognized that the present command and control methods for pollution abatement are inefficient using market mechanisms for environmental management is a promising alternative to the direct regulatory approach market mechanisms are just beginning to appear in u s environmental policy for example tradable permit schemes are being developed and implemented for some air pollutants under the amended clean air act various other forms of taxes and tradable permits have been proposed however these systems do not address the large uncertainty inherent in most environmental problems one mechanism currently being studied to address uncertainty more effectively is a flexible environmental assurance bonding system designed to incorporate environmental criteria and uncertainty into market incentives this study uses an experimental approach employing an interactive computer game simulation model with human players to examine the effectiveness of the assurance bonding system under varying degrees of uncertainty an environmental cost efficiency index ecei or profit per unit waste is used to measure player performance preliminary results indicate that players are more successful under the assurance bonding system in terms of ecei than under the simulated current system

an assessment of the empirical magnitude of option values for environment goods this paper provides an empirical assessment of the magnitude of option values relative to expected surplus using a model presented by larson and flacco 1992 option values and option prices are computed for both simulated data sets and actual estimates of recreation demands results indicate that option values engendered by price and income uncertainty are generally quite a small percent of expected surplus

government failure the cause of global environmental mismanagement abstract this paper argues that although pollution may move across national boundaries and polluters are mobile governments should be able to coordinate a sound management of the environment through transfer payments or commitments however governments may respond to political pressure rather than maximize social welfare because pollution tends to hurt large unorganized groups future generations and those who are uninformed there is likely to be a government failure resulting in too little protection of the environment government failure in one country may also reduce the desirable level of cleaning in other countries brief analyses of atmospheric emissions the destruction of the tropical rainforest consumption of tobacco and the development and diffusion of new technology by multinational corporations further suggest that government failure is a major cause of environmental mismanagement it is advocated that an international body should be instituted to compensate for this

nonuse values in benefit cost analysis benefit cost analysis bca is a pragmatic realization of the theory of welfare economics much of the research associated with bca has sought to expand the types of benefits that can be measured in dollar terms with this research there has been a progressive movement of goods and services from the set without measures usually designated as intangibles in bca terminology to the set with for example the recreational services provided by projects associated with dams for hydroelectric power or flood control were regarded as intangible until the development of the travel cost model for estimating the demand for outdoor recreation sites one of the current frontiers in bca research is associated with modeling and measuring nonuse benefits in contrast to the past efforts with intangibles research on this topic has remained controversial with few direct effects on the practice of applied welfare economics there are two principal reasons for this outcome first there has not been an accepted set of definitions for nonuse benefits and second applied studies with empirical estimates of nonuse benefits have until recently been non existent clearly these problems are related a consistent set of definitions is a necessary prerequisite for empirical implementation i will argue that consistent definitions for nonuse benefits have been elusive because the conceptual frameworks used in the literature to describe its primary components option value and existence values are not mutually consistent in the process of demonstrating this result i will describe the elements of a consistent framework for treating both use and nonuse benefits and apply it in explaining some of the problems with the available empirical estimates of nonuse benefits

taxes subsidies and insurance as drivers of united states coastal development abstract ever increasing coastal populations in the united states and worldwide are putting growing quantities of people and property at risk due to coastal disasters at the same time poorly planned development policies and practices erode the natural capital of coastal regions eliminating existing landscape protection from intense wind and waves government tax subsidy and insurance policies can encourage or discourage particular forms of development in the u s there is no consistent set of incentives or disincentives for coastal development and many programs have ambiguous or contradictory goals federal programs are highly fragmented being administered by a variety of government agencies state and local governments can also implement policies to improve coastal disaster protection but often fail to do so in other cases state and local policies designed for local economic growth work against the goals of federal policy increasing flood damage risk while relying on federal aid once disaster does strike these programs frequently lead to perverse subsidies where economically inefficient policies degrade natural capital and foster economic inequality in this study we evaluate the existing tax subsidy and insurance structures that led to coastal development patterns on the u s gulf coast over the last sixty years and propose alternative policies that could create a more sustainable just economically efficient and storm adaptive region

a note on option value and the expected value of consumer s surplus abstract in roughly contemporaneous papers cicchetti and freeman quart j econ 1971 and schmalensee amer econ rev 1972 reached apparently conflicting conclusions about the sign taken by option value cicchetti and freeman conclude that option value is always non negative schmalensee concludes that option value may be either positive or negative depending upon the circumstances this paper reconciles these seemingly contradictory conclusions it is demonstrated that cicchetti and freeman s unambiguous conclusions concerning the sign of option value are the result of two special strong assumptions not imposed by schmalensee

grazing the commons an empirical analysis of externalities subsidies and sustainability abstract an empirical means of measuring externalities in the fifty states of the us is presented and the relationship between externalities subsidies and sustainability is investigated firms seeking to maximize profits create externalities thus securing implicit internal subsidies the subsidies are generally supported by those less well off and the socioeconomic energy and environmental indicators of the public sector worsen as externalities and subsidies increase implicit subsidies due to externalities in pollution control energy consumption and taxes are quantified the amount of subsidy is calculated by state and statistically compared to socioeconomic energy environmental and economic variables poverty unemployment and income disparity are found to increase significantly while income economic development attractiveness energy efficiency and environmental quality decline with increasing externalization across states an empirical method of operationalizing sustainability is presented and the relationship of sustainability to subsidies is investigated and found to be significant and negative recommendations are presented for minimizing the effects of externalities

the end of economic growth a contracting threshold hypothesis this paper argues that gdp growth in both developed and developing countries has associated costs that can outweigh the benefits and thus reduce sustainable well being this conclusion is based upon the findings of empirical applications of the genuine progress indicator gpi to a range of countries in the asia pacific region the studies conducted on seven asia pacific countries indicate that in the case of five of the seven nations more recent gdp growth has reduced the sustainable well being experienced by the average citizen residing within them moreover the threshold point at which the costs of gdp growth outweigh the benefits appears to be contracting i e occurring at a much lower per capita level of gdp this paper therefore introduces a new contracting threshold hypothesis as the economies of the asia pacific region and the world collectively expand in a globalised economic environment there is a contraction over time in the threshold level of per capita gdp as a consequence the threshold point confronting growth late comers i e developing countries occurs at a much lower level of sustainable welfare than what wealthy nations currently enjoy the consequences of this for developing countries are clearly significant and require a new approach to economic development

the empirical properties of two classes of designs for transferable discharge permit markets abstract previous work by atkinson and lewis j environ econ manag 1 237 250 1974 and anderson et al an analysis of alternative policies for attaining and maintaining a short term no2 standard mathtech inc princeton n j 1979 has indicated the tremendous cost advantages to be achieved by moving from a policy based on emission standards to one based on marketable emission permits as tietenberg land econ 56 391 416 1980 points out however neither of the major permit designs treated in the literature are optimal from all points of view this has triggered a search for alternative permit designs which while they may not minimize compliance costs have sufficient other virtues as to make them attractive on other grounds the purpose of this paper is to examine within the context of an empirical mathematical programming model the air quality emission and cost consequences of two classes of the permit designs which can be implemented in the absence of information on control costs this case study involves particulate control in st louis

a note on supply side option value there has recently been a resurgence of interest in the concept of option value anderson 1981 freeman 1984 1985 graham 1981 and smith 1983 1985 two articles in this journal brookshire eubanks and randall 1983 and bishop 1982 have suggested that option value is a more meaningful concept when demands are certain but future availability of the resource is uncertain a change which involves exchanging supply uncertainty for supply certainty will for the risk averse consumer be worth more than the change in expected consumer s surplus the amount more will be the worth of the risk reduction or the option value it will be unambiguously positive freeman 1985 has pointed out that exchanging supply uncertainty for supply certainty is just one of the possibilities and that at least in some cases what is assumed with respect to the price flexibility of income for the good can make a difference the objective of this note is to show that even when the price flexibility of income for the good is zero the sign of option value will be ambiguous in the case where the change involves an increase in the probability of supply fromp ito p2 with 0 p p2 1 this is freeman s 1985 case d and also the case which is the basis for brookshire eubanks and randall s empirical analysis however what is shown here is that neither freeman s 1985 assertion of a negative option value nor brookshire eubanks and randall s assertion of a positive option value can in general be justified for this case a model with supply uncertainty

returns to scale adjustment costs and the optimal investment of the mining firm abstract this paper analyses the optimal investment programme of a competitive mining firm for two different technologies and capital adjustment costs in the first part the case of a variable proportions technology with decreasing returns to scale is studied and it is concluded that under the assumption of a constant mineral price a first stage in the exploitation period of the deposit will occur in which capital stock is increasing in the second part the optimal investment programme is determined when there are constant returns to scale and hotelling s rule governs the dynamics of the mineral price

valuing environmental damage the purpose of this paper is to review the most important parts of the economic theory and measurement of environmental damage the paper is structured as follows section 2 introduces the willingness to pay concept and money measures such as the compensating variation and the equivalent variation this section also offers an interpretation of money measures in terms of the outcome of a referendum section 3 defines the total value of an environmental asset in order to give the reader an idea of the complexity of the money measures used in recent empirical studies section 4 and 5 introduce risk or uncertainty and discuss the choice of money measure in a risky world in section 6 three frequently employed methods for the estimation of money measures are introduced the paper ends with some remarks regarding the limitations of these approaches to decision making copyright 1990 by oxford university press

adaptation and the option value of uncertain environmental resources abstract just as ecology has benefited from the economic theory of optimization economics can benefit from the ecological theory of adaptation we examine the impact of short term non genetic adaptive self protection on the values individuals attach to uncertain prospective environmental resources we demonstrate that collective provision of reductions in supply uncertainty does not necessitate a positive option value given that uncertainty is influenced by the individual s ability to adapt through self protection we conclude that the total value of reducing the supply uncertainty of a natural resource is reflected in both the individual s option price payments for collective provision and in his willingness to pay for adaptation through self protection by ignoring adaptive self protection traditional benefit cost analysis has systematically underestimated the total value of environmental resources that are characterized by uncertain supplies

a flexible assurance bonding system for improved environmental management abstract current methods of regulating activities that are known or suspected to be environmentally danaging are not working well they induce legal confrontation obfuscation and government intrusion into the inner workings of firms they tend to suppress technical and social innovation aimed at long term solutions they do not mesh well with the market signals that firms use to make decisions this paper discusses some of the underlying reasons for this problem and outlines a flexible environmental assurance bonding system designed to incorporate environmental criteria and uncertainty into the market system and to induce positive environmental technological innovation in addition to direct charges for known environmental damages an assurance bond equal to the current best estimate of the largest potential future environmental damages would be levied and kept in an interest bearing escrow account the bond plus a portion of the interest would be returned if and only if the firm could prove that the suspected damages had not occured or would not occur if damages did occur the bond would be used to rehabilitate or repair the environment and to compensate injured parties by requiring the users of environmental resources to post a bond adequate to cover potential future environmental damages with the possibility for refunds the burden of proof is shifted from the public to the resource user and a strong economic incentive is provided to research the true costs of environmentally innovative activities and to develop innovative cost effective pollution control technologies

environmental impairment liability as an instrument of environmental policy abstract this paper evaluates the role of liability that may arise in the context of an impairment of the environment environmental impairment liability or eil for short is analyzed as an instrument of environmental policy interrelationships between injurers victims the legal system insurers and the environment serve to show that eil may contribute to preserve the environment however peculiarities such as mass torts and uncertain behavior of courts serve to detract from the effectiveness of eil the question arises of whether these shortcomings are 1 mitigated or exacerbated by eil insurance the potential contribution of insurance to eil is found to be undermined by partial market failure which however can be alleviated by permitting the flotation of environmental risk warrants on capital markets

adjustment costs uncertainty and the theory of investment the case of non renewable natural resources abstract this paper examines the effects of mineral price and extraction cost uncertainty on the investment program of a competitive resource extracting industry that faces convex costs of adjustment the results show that depletion of mineral reserves will slow down if the marginal adjustment cost function is concave or linear whereas the effect will be ambiguous if the function is convex

ecosystems contingent valuation and ethics the case of wetland re creation this paper addresses a current issue in environmental valuation namely the extent to which environmental preferences depart from the usual economic paradigm to incorporate some lexicographic elements after a theoretical discussion the paper reviews attempts to explore this question empirically by supplementing contingent valuation analyses with an exploration of the motives behind willingness to pay responses including zero bids and refusals to answer this is followed by the presentation of new evidence investigating respondents willingness to pay for the creation of a wetland taken from 713 personal interviews of the british public 2000 elsevier science b v all rights reserved

option value a conceptual overview the importance of nonuser benefits to the process of efficiently allocating natural environments was first emphasized by krutilla 15 a decade and a half ago one of the components of these nonuser benefits is option value originally introduced by weisbrod 23 as relevant for assets that might be difficult to reproduce option value has been the subject of considerable debate perhaps the simplest approach to explaining the meaning of option value is to use an example consider an individual who is uncertain whether he or she will consume the services of a particular asset in the future furthermore assume this individual is also uncertain whether the asset will be available in the future should he

ecological economic modeling and valuation of ecosystems abstract we are attempting to integrate ecological and economic modeling and analysis in order to improve our understanding of regional systems assess potential future impacts of various land use development and agricultural policy options and to better assess the value of ecological systems starting with an existing spatially articulated ecosystem model of the patuxent river drainage basin in maryland we are adding modules to endogenize the agricultural components of the system especially the impacts of agricultural practices and crop choice and the process of land use decision making the integrated model will allow us to evaluate the indirect effects over long time horizons of current policy options these effects are almost always ignored in partial analyses although they may be very significant and may reverse many long held assumptions and policy predictions this paper is a progress report on this modeling effort indicating our motivations ideas and plans for completion

information and the dynamics of environmental protection the concept of the critical period earlier work on environmental decisions under uncertainty is extended from two periods to many permitting treatment of a richer variety of problems implications for pollution control policy of several different kinds of ecosystem recovery dynamics are considered in the context of improving information about ecosystem behavior and preferences for environmental goods multiperiod analogs of the two period concept of quasi option value are developed

option price estimates for water quality improvements a contingent valuation study for the monongahela river abstract we present the findings from a contingent valuation survey designed to estimate the option price bids for the improved recreation resulting from enhanced water quality in the pennsylvania portion of the monongahela river the findings are based on a survey design that used professional interviewers to conduct personal interviews determined from a representative sample of 393 households in addition the research suggests that protest bids and outliers be viewed similarly accordingly a new technique for identifying outlying responses is proposed the findings suggest that the question format affects the option price estimates and that criteria for determining the final sample of responses can have an important influence on contingent valuation results

limits to environmental bonds abstract bonds have recently been promoted as an alternative tool to control environmental damages particularly in those instances when the innovative activities of a firm have uncertain future impacts under this mechanism a firm would post a bond ex ante forfeiting all or a portion of the bond if its activities harmed environmental resources while the benefits of bonds have been developed there has been little systematic effort to explore their limitations in contrast the labor literature has extensively studied the limits of bonds as a mechanism to prevent worker shirking using insights from this parallel problem this paper explores the limits to environmental bonds focusing on the problems of moral hazard liquidity constraints and legal restrictions each limit offers a challenge to the success of environmental bonds we explore the use of bonds in surface mining and agricultural nonpoint pollution as motivating examples we also consider how other incentive schemes suggested by the labor literature might prove useful in the context of environmental management we consider the labor mechanisms of efficiency wages increasing wage profiles trust funds and rank order tournaments

efficiency and applicability of economic concepts dealing with environmental risk and ignorance abstract the paper examines the efficiency and applicability of various economic concepts dealing with environmental uncertainty their applicability is analysed by classifying environmental uncertainty according to different criteria using such a structure it can be shown that while the economic concepts are able to deal satisfactorily with some types of environmental uncertainty they are unable to deal with others adequately the analysis of efficiency distinguishes between environmental risk in which the decision maker is aware of the distribution function of the random variables and ignorance in which the decision maker does not know the relevant distribution functions the concept of a risk premium proposed by siebert the policy recommendation to promote integrated technologies and the environmental assurance bonding system developed by costanza and perrings are examined in terms of efficiency and applicability the analysis reveals the following i the application possibilities of the three concepts differ significantly ii a concept which concentrates on the reduction of risk may lead to an increase in ignorance iii while an economic concept may be efficient in the context of risk it can be inefficient when ignorance exists iv a trade off exists between the possibility to precisely state whether an economic concept is efficient and the scope of its applicability

option value under income and price uncertainty abstract we present a rigorous examination of the sign of option value under income and price uncertainty we state and prove three theorems on the sign of option value when preferences are state independent if income is uncertain the sign of option value is opposite the sign of the income elasticity of the good in question the analysis of price uncertainty is in two parts one covers the case of own price uncertainty and the other the case where the price of some other good is uncertain in both cases the sign of option value is generally ambiguous

option value a general approach this article examines a potential bias if expected consumer surplus is used to measure the benefits of a price change under uncertainty this bias which is called option value may be positive or negative a general framework is developed for analyzing the determinants of the sign of option value and this framework is applied to three types of uncertainty income uncertainty quality uncertainty and uncertainty over consumer tastes in the first two cases option value has a determinate sign however in the last case option value may be positive negative or zero in an unpredictable fashion

option value an exposition and extension this article examines the role of the discount rate in making decisions that will have significant implications for the environment the authors begin by providing a rationale for discounting in general and by describing the main factors that determine

integration of environmental concerns into economic analyses of projects and policies in an operational context abstract the efficient use of natural resources both mineral and biological as well as man made capital and human resources is a vital prerequisite for economic and social development one key role of ecological economics is to help value environmental and natural resources more precisely and internalize the cost and benefits of using such resources into the decision making process this paper reviews current economic approaches to the analysis of projects and policies and discusses possibilities for better intergrating environmental concerns into public decision making it reviews current practices as they relate to project analysis the analysis of economic policies and national income accounting a major need at present is not for more theory or techniques but for application of existing methodology and approaches to concrete problems particularly in developing countries the major objective should not be to provide fine turned numbers but to indicate orders of magnitude some project and policy alternatives can be ruled out in this fashion also one can often identify the key estimates to which the decision is sensitive and focus more refined analyses on them cost benefit analysis should be used to the extent possible alongside one needs to consider and to the extent possible rigorously analyze consequences and risks that cannot be measured in monetary terms and use for example multi criteria analysis where possible this together with sound judgement are at present the best inputs into decision making

requiem for option value as freeman 1984 accurately notes a lot of ink has been spilled over the concept of option value during the last two decades graham in his seminal 1981 article outlined the specific conditions under which option price is and more significantly is not an appropriate and relevant measure of value under demand uncertainty while graham s article demonstrates that option value is relevant only under restrictive assumptions regarding preferences and the nature of the uncertainty both the tone and contents of recent articles on the

valuation for renewable energy a comparative review abstract environmental cost benefit analysis is applied for the evaluation of renewable energy projects since some benefits and costs do not have monetary values economic valuation techniques are applied to estimate them this paper reviews the literature on the valuation evaluation of renewable energy resources and summarizes the methods used in them it discerns four main streams of valuation in renewable energy the first is economic welfare oriented and comprises stated and revealed preference methods the second is the financial option analysis with a financial background the third is emergy analysis which is mostly an ecological engineering based method with capable economic links and the fourth is again economic but not welfare based the paper discusses the main directions discerned in these studies and recognizes first that proper valuation takes place only in the first method while the other methods describe only evaluation procedures and second that there is a research gap that has yet to be filled in as compared to other areas of environmental resource and energy economics

valuing public goods discrete versus continuous contingent valuation responses independent applications of open ended and dichotomous choice formats are compared using tests of means estimating joint likelihood functions and nonparametric tests of distributions the null hypothesis of no difference in the open ended and dichotomous choice estimates of central tendency cannot be rejected for two out of three data sets while estimated standard deviations are significantly different for all three data sets in addition actual dichotomous choice means and standard deviations exceed those from comparable synthetic dichotomous choice data sets suggesting either open ended questions underestimate values or dichotomous choice bid structures may lead to systematic overestimates

the role of property rights in economic research on u s wetlands policy abstract the purpose of this essay is to define the role of resource economics in the development of u s wetlands policy i argue that the optimal pollution model based on maximation of net benefits of wetland protection is for the most part not directly applicable to the creation of wetlands policy for two reasons 1 the delineation of property rights among wetland owners and the general public as opposed to the maximization of net benefits is the more fundamental political issue and therefore drives policy making 2 the predominant public benefits of wetlands fall into the economic category of nonuse values which are very difficult to define and measure in a policy relevant way and the public s legal rights to them have not been established these conclusions indicate that resource economics research that focuses upon 1 the economic significance to interested parties of alternative delineations of property rights 2 development of policy tools appropriate for each possible property rights delineation and 3 the relative cost effectiveness of these policy tools is most useful for policy making

sustainable land use management under biodiversity lag effects the destruction of natural habitats for agricultural production results in local biodiversity loss biodiversity loss in turn affects agricultural production indirectly through a range of biodiversity dependent ecosystem services land conversion thus results in a negative externality mediated by changes in biodiversity when the consequences of this externality are delayed in time lack of internalization results in overshoot and collapse dynamics which are undesirable from a sustainability perspective here we emphasize the importance of forward looking policies for the long term sustainability of human nature interactions we show that the internalization of this externality through a land tax can result in several win win effects in the long run first more biodiversity is preserved at equilibrium which increases the carrying capacity and total well being of the human population second a taxation path that maximizes the discounted sum of human utilities prevents or greatly alleviates overshoot and collapse crises thus increasing the sustainability of the system in particular this result holds in the case of imperfect information regarding the precise temporal dynamics of biodiversity loss suggesting that the design of efficient land use management policies is possible despite incomplete ecological data this study highlights the need to internalize biodiversity dependent externalities through economic incentives especially under uncertainty regarding long term ecological dynamics

thinking economically about climate change abstract uncertainty over both the regional impacts and timing of climatic changes the way they tend to magnify the likelihood of so called natural disasters and their irreversibility require careful analysis of policy options from an economic standpoint the best approach is to apply cost benefit thinking the essential trade off is between doing nothing now and investing in either important preventive or adaptive measures the choices involve analysis of incurring costs now against the benefits of reducing vulnerability and future damage costs for any given level of warming the aim is to minimize the sum of policy costs and costs of adaptation by individuals any resulting policy decision will have to address issues of international cooperation and compensation these considerations may in turn influence the resulting policy choices between carbon taxes marketable permits and regulatory restrictions

the value of a watershed as a series of linked multiproduct assets abstract this paper views ecosystem as long lived multiproduct factories increased use of one ecosystem good or service function often affects the supplies of other ecosystem functions the relationships between these functions can be modeled in terms of key variables related to ecosystem management thus the analyst can determine the different mixes of functions an ecosystem can perform watersheds can be viewed as a series of ecosystems linked spatially and temporally by the downward flow of water changes in the mix of upstream ecosystem functions change the mix of downstream ecosystem functions the paper presents an approach to valuing one ecosystem as a multiproduct factory using consumer surplus the author then proceeds to apply the same methodology to a watershed viewed as a series of linked multiproduct assets because the flow of water closely links upstream and downstream ecosystems a watershed can be treated as one unit and valued accordingly however this approach obscures a question of particular interest if erosion in an upstream ecosystem causes it to lose value but in turn causes the wetlend downstream to gain value does the value of the watershed rise or not the paper examines this issue in terms of boundaries redundancy and defensive expenditures sustainability and other factors which must be considered in the economic valuation of the watershed

the choice of a welfare measure under uncertainty use of option price as a welfare measure when conducting a benefit cost analysis under uncertainty is appropriate only if the project under consideration will have no impact on the allocation of risk among individuals use of the willingness to pay locus as a benefit measure is appropriate only if the project will result in an efficient allocation of risk a more general welfare measure is proposed maximum agreeable payment that correctly measures the benefits and costs of any project