lect04-20-10

Lect - Readings(April 20 April 22 Miller and Spoolman 19 Baumol W and A Blinder"Environmental Protection and Resource Conservation" in

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Unformatted text preview: Readings (April 20 April 22) Miller and Spoolman, Chapters 23, 18, 19 Baumol, W. and A. Blinder "Environmental Protection and Resource Conservation" in Economics: Principles and Policy, Orlando: Harcourt Brace Jovanovich, 1988, pp. 739 768 Ruff, L. "The Economic Common Sense of Pollution", The Public Interest, Vol. 19, 1970 "A Price on the Priceless", The Economist, August 17, 1991 Mechanisms for Protection of Species national laws (e.g., Endangered Species Act, 1973) international treaties (e.g., CITES, 1975, Rio Summit, 1992) wildlife refuges, zoos, gene banks protection of habitats on world-wide basis (direct vs. indirect approaches Ferraro & Simpson, 2001) reform of public policies that encourage deforestation and destruction of wildlife habitats (Economist, 1991) Economics & Design of Environmental Policy Role of Benefit-Cost Analysis in Policy Design Principle of Marginalism Valuation of Non-market Benefits & Costs Role of Benefit-Cost Analysis in Policy Design why should the government protect the environment? externalities & other sources of market failure benefit-cost analysis needed to help answer questions such as: how much pollution to control what to spend on habitat protection measures what level of support to offer for soil erosion control how much to spend on protection of open-space Principle of Marginalism need to examine marginal benefits & marginal costs of environmental protection general rule 1: marginal benefits & marginal costs of environmental protection should be equal at desirable level of protection the above rule implies that while it may be desirable to reduce pollution, elimination of pollution would be too costly in most cases general rule 2: pollution control occurs at lowest overall cost if marginal costs of control are equated across polluters Marginal Benefit of Pollution Control $5 Marginal Benefit of Pollution Control 4 3 2 1 MB 10 20 30 40 50 60 70 80 Quantity of Pollution Controlled o Marginal Cost of Pollution Control $5 4 Marginal Cost of Pollution Control 3 2 1 MC o 10 20 30 40 50 60 70 80 Quantity of Pollution Controlled Socially Desirable Level of Pollution Control $5 Marginal Benefit, Marginal Cost of Pollution Control 4 3 2 1 MC MB 10 20 30 40 50 60 70 80 Quantity of Pollution Controlled o Allocation of Pollution Control Across Firms Two Firm Example $ MC $ MC B 0 QA Emissions Reduced 0 QB Suppose each firm emits 30 units & desired total emission is 40 units Then desired total emissions reduction is 20 units This means that desired (Q + Q ) = 20 units A B Allocation of Pollution Control Across Firms Two Firm Example $ MC 9 $ 15 MC B 0 10 QA Emissions Reduced 0 10 QB Desired (Q + Q ) = 20 units A B Uniform emissions control: QA = 10 units QB = 10 units Allocation of Pollution Control Across Firms Two Firm Example $ MC $ MC B 11 11 0 17 QA Emissions Reduced 0 3 QB Desired (Q + Q ) = 20 units A B For lowest overall cost of control: MC = MC , QA = 17 units QB = B ...
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This note was uploaded on 04/30/2010 for the course ARE 110 taught by Professor Ebbin,s during the Spring '08 term at UConn.

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