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NNW is defined as: GAP+non-market output – carnality costs- clean-up costs- depreciation of natural capital- depreciation of created capital. 4. Neoclassical economists discount the future net infinite of investing in environmental protection projects to reflect the opportunity cost of the foregone earnings from alternative investments. 5. The higher the discount rate, the lower the value of benefits received in the future.. Chapter 7 6.
The Malthusian Population Trap shows that as population grows geometrically and the food supply increases only arithmetically, available food per person declines, providing a natural check on further population growth. 7. The Green Revolution that followed WI centered around new, hybrid forms of wheat, rice, and corn seeds that reduced much higher yields than conventional seeds. 8. In the ecological view, as opposed to the neoclassical view, sustainability requires handing down to future generations local and global ecosystems that largely resemble our own. . Advocates of the safe minimum standard argue that unique resources should be preserved at levels that prevent their irreversible depletion, unless the costs of doing so are “unacceptably’ high, with this limit determined by political support for preservation. Chapter 8 10. The three categories of values from environmental protection are: 1) SE value 2) option value 3) existence value The sum of these three categories equals the total value of an environmental resource. 11.
We can measure the benefits of environmental improvement by determining people’s maximum willingness-to-pay (WET) for such improvements or by determine people’s minimum willingness-to- accept (WHAT) compensation in exchange for a degradation in environmental quality. 12. Prospect theory states that people may adopt the status quo as their reference point and demand higher compensation to allow environmental degradation than hey are willing to pay for making improvements. 13. Economists know that people in general are risk-averse, meaning they dislike risky situations. 4. The travel-cost method estimates a demand curve for a non-market good based on the amount of money that people spend to use the resource. Chapter 9 15. The Porter Hypothesis argues that regulation, while imposing short-run costs on firms, often enhances their long-run competitiveness. 16. Two reasons environmental regulation has not caused firms to move to “pollution havens” are: 1) avoidable pollution control costs are a mall portion of total business costs 2) costs are only one factor influencing business location decisions 17.
The “double-dividend” hypothesis argues that pollution taxes could not only reduce pollution, but could also reduce taxes on capital and labor, thus making the whole economy operate more efficiently. Chapter 10 18. The EPA is required to perform benefit-cost studies known as Regulatory Impact Analyses on any regulation expected to cost $100 million or more. 19. A benefit-cost ration greater than 1 means total benefits exceed total costs; a benefit-cost ration less than 1 means total costs exceed total benefits.
However, benefit-cost ratios tell us nothing about whether a proposed policy is efficient. 2 20. Taxing solid waste disposal now and setting aside the generated funds to build new water supplies later, should contamination develop, is an example of an environmental bond. 21 . In the landfill case, the use of 3% discount rate dramatically reduced the benefits associated with reducing cancer cases over 100 years from now. Chapter 11 22. The Easterlies Paradox tells us that the wealthiest of a nation are only mildly happier than the poorest of a nation. 23.
The Bandwagon effect refers to a desire to consume something because others are as well, in order to conform to a social norm. The Snob effect refers to the desire to do or consume something because others aren’t. 24. The two distinguishing features of a rat race are: 1) Everyone would be better off if the race was canceled 2) Given that everyone else is racing, each individual is better off trying to win 25. The two potential economic instruments for reducing the negative spillover effects of consumption discussed in the text were: 1) consumption taxes 2) regulation of advertising 3