Chapter 3 - Berck _ Helfand

Chapter 3 - Berck _ Helfand - Chapter 3: Markets and Market...

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Chapter 3: Markets and Market Failure Objectives of this Chapter Psychologists study individual behavior. Sociologists study group behavior. Economists study markets. While that statement is an over-generalization, markets – where individuals interact to exchange goods and services – are the distinguishing topic of economic analysis. Understanding how effective markets are when they work well, and how dangerous they can be when they fail, is critical for anybody interested in public policy issues. In this chapter, we will discover: How markets can be used to protect scarce resources. That environmental goods are economic goods. The advantages markets provide. What happens when markets don’t work well. PROTECTING WOLVES THROUGH MARKETS Wolves have long been an object of fear and hatred to many humans. Stories such as Little Red Riding Hood and the Three Little Pigs portray the wolf as evil incarnate, and its destruction as meritorious. Within what is now the United States, it is estimated that about 400,000 wolves roamed freely at the time of European settlement. 1 European settlers colonizing North America viewed the wolf, like much of the natural landscape, as a symbol of the wild America that had to be subdued and conquered in the name of civilization. The opening of the American West by settlers of European origin, and settlers’ subsequent vigorous hunting of populations of bison, deer, elk, and moose, led to a decline in wolves’ sources of food. As a consequence, wolves began to hunt homesteaders’ sheep, cattle, and other livestock. Whether caused by wolves or not, ranchers blamed most missing or killed livestock on wolf predation, and they sought revenge against the predator. In response to the perceived threat to their livestock, personal safety, and way of life, ranchers and government agencies initiated aggressive campaigns to eliminate wolf populations. Bounty programs began in the 18th century and continued until 1965, offering $20-$50 per wolf. By 1925, it appeared that wolves were virtually extinct in the lower 48 states, and that no viable wolf population remained anywhere in the greater Yellowstone National Park area. 2 The Endangered Species Preservation Act The Endangered Species Preservation Act of 1966, later amended to the Endangered Species Act of 1973 (ESA) 3 , brought protection to the gray wolf in 1967. 4 The ESA requires the 1 Defenders of Wildlife. “Wolves of North America.” . (last visited September 30, 2004); and U.S. Fish and Wildlife Service. “Gray Wolf.” July 1998. 2 Fritts, Steven H. et al. 1997. Planning and Implementing a Reintroduction of Wolves to Yellowstone National Park and Central Idaho. Restoration Ecology 5 : 7-27. 3 7 U.S.C. 136; 16 U.S.C. 460 et seq. (1973)
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This note was uploaded on 03/03/2009 for the course ECON 370 taught by Professor Helfand during the Winter '08 term at University of Michigan.

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Chapter 3 - Berck _ Helfand - Chapter 3: Markets and Market...

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