Resource Economics Test 1

Front 1

What is the paradox of happiness and growth? What two reasons were given in class which resolve this seeming paradox?

Back 1

Increasing income goes with increasing happiness across individuals and countries. But within rich countries rising income is not associated with rising happiness.

People's happiness appears to also be dependent on outcomes for others.

TWO REASONS FOR THIS
1) Rivalry (Keeping up with the Joneses)
2) Adaptation (Happiness depends on past experience)

Being optimistic, smiling, and healthy also can lead to happiness.

Front 2

Draw a total utility function for two different people who have different utility functions. Explain why these differences could make the use of utility functions problematic when considering welfare economics questions?

SEE GRAPH

Back 2

Utility functions are different for each person. This approach won't work if:

1) Social welfare function isn't just a sum of individual welfare functions
2) If weights for each person are identical

Front 3

What are the 3 reasons we wrote down in class for why using utility functions to maximize social welfare is problematic.

Back 3

U utility functions different for everyone
I dental weights will make it not work
W elfare is not a function of the sum of everyone's welfare function

Front 4

What is the difference between a pareto improvement and a potential pareto improvement?

Back 4

A pareto improvement is where an action hurts nobody and helps one or more person. (Holy grail).

A potential pareto is where there isn't pareto efficiency, thus a potential improvement (compensating losers)

Front 5

What is the difference between ordinal and cardinal utility?

Back 5

Ordinal utility only gives higher/lower value. (Does bundle give higher/lower utility)

Cardinal utility uses actual numbers. Ordinal not useful for comparing individuals.

Front 6

What is welfare economics?

Back 6

How allocation of resources affects well being. For utilitarians, outcomes that increase welfare is good, and decreases is bad. Only outcomes are important.

Front 7

What is consumer sovereignty and why is it important in considering the utilitarian position?

Back 7

People determine their own preferences. You know what is best.

Important because our choices increase/decrease utility, or happiness. (This is utilitarianism)

Front 8

List the 6 basic tenets of utilitarian philosophy we wrote down in class. Give an example of a humanist utilitarian environmental policy position and a naturalist utilitarian environmental policy position.

Back 8

Environmental economics makes systems for humans and non humans to make utility value choices

O utcomes are what is important

U utilitarianism can extend to non humans
W elfare economics
A ctions that increase welfare = right (VV)
U utility is our level of happiness

Humanist: Do something for benefit of humans only
Naturalist: Don't develop Alaskan oil land (animals)

Front 9

Explain in a sentence or two what libertarian philosophy is. What is the main way it is different from utilitarian philosophy. Give an example of a libertarian answer to an environmental question.

Back 9

Humanist position where individual rights paramount.

Different because not concerned with outcomes, unlike utilitarians.

They would take away government control of environmental protection and give it to individuals / private companies

Front 10

What is Kant’s categorical imperative? Give an example of a humanist categorical imperative regarding environmental policy, and a naturalist categorical imperative regarding environmental policy.

Back 10

Kant: Actions are morally justified if done out of sense of duty to a universal ethical rule.

Naturalist: Protecting land for national parks, those special environmental areas.

Humanist: Protecting fisheries, more out of ensuring long term viability and not just human consumption.

Front 11

Describe the humanist and naturalist philosophies in a sentence or two. Give an example of an ethical question for which these two broad philosophies would have different answers. What might those answers be for each philosophy?

Back 11

Humanist: Rights and obligations only to people.

Naturalists: R/O given to some natural system. Does it "preserve integrity, stability of biotic community". See that higher functioning animals like dogs, chimps, etc deserve respect, freedom from suffering.

Ethical question: Do animals and humans have different rights?

Front 12

What is the main ethical philosophy mainstream economics uses to make value judgements?

Back 12

Utilitarianism

Front 13

Know the difference between positive and normative economics.

Back 13

Positive: Objective. "If X happens, what happens to Y"?

Normative: Subjective. Most informed choices. What should be done, policy. Usually referred to as welfare economics.

Front 14

What natural resources were we worried about running out of 60 years ago? Why is this no longer a problem?

Back 14

Tin and copper. Plastic has replaced much of previous uses for tin. Fiber optic cables made from sand have replaced the overwhelming need for copper wire.

Front 15

What is Mankiw’s basic answer to the question “Are Natural Resources a Limit to Growth?” What evidence does he provide to support his position?

Back 15

Mankiw says more aren't concerned. Tech progress usually gives ways to avoid these limits.

We use resources much more efficiently. Hybrids use less gas, homes insulated better.

Also, market would have a say. If supply were low, prices would reflect this.

Front 16

What is the difference between what Krugman calls the Ramp approach to climate change, and the Big Bang approach to climate change.

Back 16

Ramp up: Slow, long period of time. Slowly raise prices. Current carbon is not seen as horrible like Bangers.

Big Bang: HUGE, price changes today. Gives more weight to future generations welfare.

Front 17

What two different types of uncertainty are created by corrective taxes versus marketable pollution permits a.k.a. cap-and-trade?

Back 17

Corrective Taxes. People know what they'll pay, but government won't know how much will be produced.

Cap and Trade: Government knows total pollution, but people don't know the price.

Front 18

What is the principle problem with relying on command regulations to fight negative externalities. Give an example of a command regulation which nonetheless seems to be working well.

Back 18

"Does not offer any scope for flexibility and creativity"

However, specific emissions standards and no smoking laws are effective.

Front 19

What is a negative externality? Give one example. What are the three general types of policies we can enact to fight negative externalities.

Back 19

"Costs economic actors impose on others without paying a price for their actions". (Car emissions)

Pigouvian Taxes: Paying for negative eternality. Price on pollution

Command Control: Specific regulations

Marketable pollution permits

Front 20

What are the three recommendations from the Brundtland report which we discussed in class?

Back 20

R educe material content of economic activity

E conomize on the use of resources

S ubstitute reproducible capital for environmental capital

Front 21

In Limits to Growth, and Beyond the Limits, Meadows et al reach 3 conclusions about economic growth based on their World3 model. States these conclusions in one simple sentence for each.

Back 21

G rowth not sustainable on current path

S sustainability only if we change what do

Q uicker we act, the better

Front 22

What is the definition of a positional good?

Back 22

Good whose value determined by its desirability for others, in comparison to substitutes.

Satisfaction from consuming something, relative to other people.

IE: Education less valuable the people get it.

Front 23

Why do economists care so much about economic growth? Give one positive effect of economic growth and one negative effect of economic growth?

Back 23

It might be the key to environmental improvement and getting rid of poverty.

Allows poor to get richer without taking from rich.

Positive is reduced poverty, negative is more pollution from developing economies.

Front 24

Draw the basic Kuznets curve shown in box 2.3. Be sure to label your graph and explain why it is shaped like it is. Finally, explain what are the long-run implications for environmental impact of humanity depending on if a or b turns out to be true.

e= ay
emissions are some function of income

Back 24

More income leads to higher environmental impact but reaches some threshold where income causes impact to fall to level "k", or maybe "0" in long run.

Says growth is key to fixing environment, not a threat.

"a" shows income is panacea. "B" implies rising income making impact at constant level "k". (>0) . "b" probably most realistic.

Front 25

What are four policies Perman notes seem to reduce family size?

Back 25

R educe incentives for large families
E ducation, especially women
E lderly pensions
E conic development (More income, less children)

Front 26

What is the definition of Human Energy Equivalent (HEE)? What was the HEE for the average person in: the hunter-gatherer period before 10,000 B.C? During the agricultural phase of human development from 10,000 B.C. to 1800 A.D? In 1900? What is it today for the U.S.A. and for Bangladesh?

Back 26

Average amount of energy human needs in one year.

In HG era, about 2 HEE.

In Agricultural era, about 3-4 HEE.

1900 about 14 HEE

US about 93 HEE, and Bangladesh about 4 HEE.

Front 27

Tell me in one sentence or two how the IPAT identity can be useful.

Back 27

It can be useful for thinking about certain scenarios. Can be useful in looking how supply and demand affect price inputs.

Front 28

Know the IPAT identity. Know how we measure P, A, and I, and how from this T can be derived. Get out a calculator and practice calculating all the values in table 2.4. Be prepared for me to give you new values for 3 of these variables and ask you to calculate the 4th .

Back 28

Simple model showing economic impact on environment. (I = PAT)

Global emissions = Population x Affluence x Technology

Population and affluence have grown dramatically in past 100 years.

Front 29

How many earths did Wackernagel and Rees estimate they say humanity was using in 1961? In 1999? In 2003?

Back 29

1961: 0.7 (70%)

1999: 1.2

2003: 1.25

It is earths capacity for production and waste disposal.

Front 30

What are the four main findings of the Millennium Ecological Assessment (MEA) discussed in your textbook?

Back 30

Dramatic ecosystem change in past 50 years, reducing biodiversity

Lives improved, but environment damaged, unsustainable

Likely worse in next 50 years

Degradation is reversible, with new policy, institutions, practices.

Front 31

What is the definition of biodiversity? What are three ways we measure it? Describe one problem with measuring biodiversity which we discussed in class.

Back 31

DEF: ecosystem with large variety of species, and large populations within each species.

Species biodiversity: Distinct kinds
Ecosystems: Diversity important
Population: Genetic diversity increases survivability

We don’t have solid criteria for measuring diverse ecosytems, sometimes large animals might be hunted and biodiversity is reduced, but number of animals stay constant.

Front 32

Explain what it means to say “Dose-response relationships may exhibit non-linearities and discontinuities” Show this graphically. Give an example of it.

Back 32

Low level pollution maybe negligible, but maybe a tipping point eventually.

"Dose response relationships may involve thresholds".

Water pollution tolerable at low level, but maybe a threshold could be crosses, giving discontinuity.

Front 33

What is the definition of resilience?

Back 33

The ability of an ecosystem to retain its organizational and functional structure after a disturbance.

Front 34

What is the definition of stability?

Back 34

Ability for ecosystem to return to equilibrium after a disturbance

Front 35

What is the definition of ecology we gave in class?

Back 35

Study of the distribution of an ecosystems plant and animals with their abiotic environment.

Front 36

What are the three implications of Materials Balance model?

Back 36

1) Mass of B + C + D = A
What we take (A) must be given back

2) Treatment of residuals doesn't alter their mass, but can change their form or location

3) Recycling is important because for any E, the larger F is, the smaller A will be.

Front 37

Be prepared to draw figure 2.2, showing the Materials Balance model of economy-environment interactions.
a) What is the materials balance principle?

Back 37

Term used by economists to describe law of conservation of mass.

All production comes from the environment and will return to it.

Front 38

For most of human history, what limited the amount of work that could be accomplished on Earth. What has allowed humans in the past 200 years to exceed this limit? According to Perman, does this path appear to be sustainable in the long-run?

Back 38

Solar energy from outside the solar system.

Fossel fuels have allowed us to overcome this, for now. Sustainable if we find new source of energy (fusion)

If not, we could fall back to the pre fossil fuel era.

Front 39

Which economist called the Second Law of Thermodynamics ““The ultimate basis for scarcity in economics.” What did he mean by this?

Back 39

Georgescu-Roegen

Can't recycle 100%, completely recycling not possible.

Therefore we have scarcity

Front 40

State the First and Second Laws of Thermodynamics.

Back 40

1) Energy neither created or destroyed, only transformed

2) Heat flows spontaneously from hotter to cooler bodies, not transformed 100% efficiently. (Entopy is unavailable energy)

Front 41

In this model, what are the two possible substitutions for environmental services? How does human capital normally play a role in this process?

Back 41

1) Substitute human capital with technology (Sewage treatment)

2) Move to hydroelectric power from fossil fuels

Human capital allows knowledge to build and hopefully make better environmental decisions and develop new technology

Front 42

In this model, what are the two purposes that recycling serves?

Back 42

Reduce strain on assimilative capacity of environment

Reduce total demand on resource base

Front 43

What two reasons does Perman give when discussing figure 2.1 for why Fossil Fuels should be separated out from other minerals?

Back 43

1) Fossil fuels are a distinguishing characteristic of industrial economies.

2) Their combustion is irreversible

Minerals used as inputs to production can be recycled.

Front 44

What is the difference between a resource flow and a resource stock?

Back 44

Resource flow is one whose current use doesn't affect future availability (solar, wind)

Resource stock is one whose current use DOES affect future availability (fish, oil, coal) Either renewable (trees) or non renewable (oil)

Front 45

What is the only thing that crosses the black border that represents the environment in this model?

Back 45

Solar energy

Front 46

What are the 4 basic functions of the environment?

Back 46

L ife support (recyle, water)
A menity flow
W aste sink (Sewage)
R esource base (planes, rail)

Front 47

Give two reasons why economists value economic growth so highly? Give one reason why some ecologists more skeptical of the benefits of economic growth?

Back 47

1) If you buy it, growth will be panacea for environment
2) Could also be solution to poverty (No Robin Hood)

Maybe we won't get the tech breakthrough (fusion) we need. Maybe we'll pollute forever, despite rising income.

Front 48

What do we mean when we talk about the depletion of a resource being reversible or irreversible. Give an example of each kind of depletion.

Back 48

Irreversible is oil. Can't let its capacity grow with time.

Reversible is animal populations (biotic). Back of hunting them. Extinction is irreversible.

Front 49

What are the two broad dimensions of sustainability Perman discusses in Chapter 1?

Back 49

1) Question if one resource can be replaced by another (solar instead of fossil)

2) Can environmental resource be replaced by other inputs, especially human made capital?

Front 50

Explain the difference between natural resource stocks and natural resource flows, giving an example of each. Also explain the difference between biotic stocks and abiotic stocks.

Back 50

Resource stock - Current use does affect future availability (oil)

Resource flow - Current use does not affect future availability (solar, wind)

Renewable are biotic, plant and animals, can grow with time.

Nonrenewable are abiotic, stock of minerals, can't grow over time, are exhaustible.

Front 51

Explain why well-defined property rights are so important if markets are going to allocate resources efficiently. Why do markets often fail if property rights are not well-defined.

Back 51

They are necessary for market efficiency in allocation.

A failure can exist if not defined or enforced well.

Sometimes prices may not reflect true social costs (cigarettes, emissions). Failures seem abundant in environmental economics.

Front 52

Explain with 2-3 short sentences Kenneth Boulding’s thesis and main points regarding Spaceship Earth.

Back 52

Earth closed system except to solar energy. Rejects endless frontier of resources (cowboy economy).

Our main goal should be to have high stocks of knowledge and human capital to satisfy us.

Create as much health and happiness, especially with fewer resources, which are finite.

Humans must fin a sustainable place in this spaceship. Prices may be helpful, but not solution

Front 53

What, according to Perman, is the central principle of ecological economics?

Back 53

Our economics system is a part of the larger system that is "planet earth", or the environment. They are interdependent.

Only two disciplines, concerned directly with central problem of sustainability.

Front 54

What Greek root word is shared by both “economics” and “ecology?” What does it mean?

Back 54

"oikos" root for eco. Means household.

Ecology is the study of natures "housekeeping" and economics is the study of "human housekeeping".

Front 55

What is welfare economics? What is the difference between Pareto efficiency and a Pareto improvement?

Back 55

It is how the allocation of resources affects well being.

Pareto efficiency (optimality) is where no one can be made better off without making someone else worse.

Pareto improvement is a change where at least one person is made better off without making someone else worse off.

Front 56

What is Delong’s definition of sustainability? Why does Delong feel thinking about Global Warming is more important than thinking about Harry Potter?

Back 56

"Engaging in behavior today that keeps our options open tomorrow"

Having policies that preserve and enlarge future options.

Mor important because it LITERALLY affects lives of 2 billion people, and others.

Entertainment vs. Serious reality

Front 57

What are the three broad themes covered in Chapter 1? Explain each with one sentence.

Back 57

S ustainability: Behave today, keep options tomorrow.
Work to maintain systems indefinitely, for posterity

O ptimality: Use resources most effectively. Optimal if it reaches some objective within given restraints

E fficiency: Find ways to get greater output with fewer inputs.