Intro_English.pdf - Markets and the Environment Central...

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Markets and the Environment: Central questions Fundamental problem in economics: How to allocate goods and scarce resources in an optimal fashion? Natural Resource Economics: At what moment should we use how much of our resources? (optimal intertemporal allocation) Environmental Economics: Do market mechanisms lead to optimal resource use? Or are there market failures? And if the market fails to allocate resources optimally, how can we correct this failure? Markets and the Environment : 3
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Markets and the Environment: Course Program 1 Introduction 2 Resource Management I Non-renewable resources I Renewable resources 3 Instruments for correcting market failures I The optimal level of pollution I Interventionist solutions I Market instruments 4 Valuation of natural resources I Revealed preferences I Stated preferences I Cost Benefit Analysis 5 International aspects and international environmental agreements Markets and the Environment : 4
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Topic 1 Introduction 1 Functions of the environment 2 Market failures 3 Environmental regulation 4 International aspects 5 Growth and sustainability Markets and the Environment Introduction: 5
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1. Functions of the environment provider of resources receptor of residuals generator of utility Markets and the Environment Introduction: Functions of the environment 6
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2. Market failures Fundamental problem in economics: How to allocate goods and scarce resources efficiently? First Theorem of Welfare Economics The allocation of scarce resources through competitive markets is Pareto efficient if market prices exist for each good and they reflect the social opportunity cost of resource use. Markets and the Environment Introduction: Market failures 7
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2. Market failures The market equilibrium maximizes the sum of consumer surplus and producer surplus. Markets and the Environment Introduction: Market failures 8
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2. Market failures Example 1: Tropical forest; can clear-cut and use the area for pasture or conserve the forest for eco-tourism. (for simplicity, abstract from commercial timber and other forestry benefits) Markets and the Environment Introduction: Market failures 9
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2. Market failures Example 2: Tropical forest; Tropical forest; can clear-cut and use the area
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