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Unformatted text preview: Integrating Environmental Values in Societal Decision Making 28/11/2009 17:54:00 ← Cost Benefit Analysis: • Systematic and comprehensive enumeration of all impacts, for alternatives to society over time o Positive and Negative o Tangible and Intangible Tangible: representative market price In tangible: not represented in dollar and cent terms o In monetary terms o Rule for choosing among alternatives (max net benefit) o Descriptive and prescriptive How to choose an alternative that maximizes economic development o Considers impacts for society as a whole o Ex ante: gives results before hand o Economic efficiency – best use for societal resources Resources put to their most highly valuable uses Framework for analyzing policy objectives • Assumptions: o Value of environmental goods and human satisfaction o People are the best judges of how satisfaction is received o Social welfare ( the well being of individuals) is decided by individual preferences which is the basis of societal decision making o Willingness to pay (WTP) as a legitimate measure of preferences and value Individuals willingness to pay a market price o Value of policies to society is aggregate WTP market price Individual preferences should be the only measure of value o Applicable even when market prices are not available o Maximizing net benefit guarantees resources put to best use, AND winners potentially compensate losers EX: Hydroelectric project Winners are the people who benefit from increased water use Losers are downstream Justification for N.B net benefits should be so great that winners compensate losers while still being winners Winners have the potential in that one benefit may in aggregate benefit losers in another project o Goods are put to their best use o I nsurance industry cares the most about cost benefit analysis • Advantage of using environmental policy tools that work through market mechanisms (taxes, subsidies, and transferable permits) is that the final decisions on resource use and goods production lie with firms and individuals • Governments in some cases must make specific decisions that have both economic and environmental implications o Use COST BENEFIT ANALYSIS to balance the positive and negative consequences of a proposed action • CBA and construction of a dam: o Project with have economic benefits: hydroelectric power, a stable water supply for irrigation, and flood control o It will also have negative effects: farmland and wildlife habitats will be flooded, some communities will have to relocate, and some fish species may become extinct ← ← CBA and Parking: •...
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- Fall '09
- Environmental Goods