Exam 4 Lecture Notes

Exam 4 Lecture Notes - Macroeconomics ECO2013 Fall 2008...

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Unformatted text preview: Macroeconomics ECO2013 Fall 2008 Exam 4 Lecture Notes Dr. David Denslow University of Florida 11/19 I. Climate Change A. Not global warming. Will warm in some areas/freeze in others. i. The earth should be in equilibrium as far as temperature in empty space (O degrees Absolute). What keeps us from being so cold is empty space. Gases like methane and carbon dioxide absorb sunlight so we get warmer. B. CO 2 levels have been rising. i. Uncertainties have been involved 1. Feedback Loops- many feedbacks increase or decrease the damage that we dont know. 2. Future Technology- Cheap nuclear power /capture CO 2 in atmosphere, effective fuel storage. 3. ALBEDO effect- More sunlight reflected, lower temperature of the earth, etc. 4. Tundra melts and that emits CO 2 into atmosphere which warms up earth positive feedback effect. ii. Over time the amount of CO 2 equivalent in the atmosphere has been increasing. 1. Once CO 2e enters the atmosphere, it stays for a long time. iii. Damage by CO 2e has been rising. The relationship is unknown/uncertain: 1. Which is going to cause more damage? A steeper damage curve and if carbon stays in the atmosphere forever. 2. Carbon does more damage farther in time. Better technology results in less damage. I I. Carbon Tax A. Standard American Proposal i. Bill Nordhaus: Yale 2015- $35 tax per ton of C ii. Current U.S. Policy $0 B. Standard European Proposal i. Stern Report $350 tax per ton of C C. CO 2 v. C tax. CO 2 i. Tax of $90 C/CO 2 = 12/44=3/11 I I I.Negative Externality A. Use of Gasoline i. Gasoline is used largely for driving 1. Causing Global Warming Local Pollution 2. Congestion to other people 3. Accidents for other people B. Control i. Impose taxes to regulate negative externality. 1. $1 higher for congestion and accidents a. Tax revenue used for reducing other taxes. i. Clothing Tax 1. DWL (Dead Weight Loss)- Tax gasoline to impose no DWL. 2. Eliminate tax on clothing so DWL 2. Controversy about congestion externality a. Accidents are caused by it. C. Tragedy of the Commons i. Illustrated by the Peasant problem: 1. 100 huts with 500 goats. Sustainable for centuries. 5 goats S.O.L. (standard of living). 2. Everyone wants 10 goats, and then 1,000 goats are needed instead. D. Types of Goods i. Rival vs. Non-Rival 1. Rival a. Only one person can use it a time i. Shoes, seats, automobile, bicycle b. Social opportunity cost is positive i. Opportunity cost- next best alternative foregone ii. College tuition, Price of textbooks, Part-time working, More leisure of a regular drop. 2. Non-Rival a. Social opportunity cost is zero b. Examples i. Lighthouse ii. Excludable vs. Non-excludable 1. Excludable a. Easy to charge i. Car, Toll Booths 2. Non-excludable a. Not easy to charge i. Happy Birthday To You, Pythagorean theorem 3. In between continuum a. Roads iii. Mixes 1. Microsoft is excludable and non-rival (Word) 2. Shoes are excludable and r ival....
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Exam 4 Lecture Notes - Macroeconomics ECO2013 Fall 2008...

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