L7. Public Policy for Natural Resources with questions

L7. Public Policy for Natural Resources with questions -...

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Public Policy for Natural Resources n Refers to collective actions undertaken through governmental institutions n Objectives of Public Policy q Economic Efficiency q Equity q Flexibility q Enforceability
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Public Policy for Natural Resources n Economic Efficiency q Maximize the net benefit to members of society q Does not imply market is preferred over nonmarket. q Uncontroversial in the abstract q Impractical in the real world n Information needs are large: q Social costs may be hard to measure q Social benefits may be hard to quantify n Equity q Fairness q Differences arise over distribution of overall benefits
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Public Policy Objectives n Equity continued q Example of local petroleum deposit n Optimal national extraction rate high, one among many n Optimal local extraction rate low, only local source of nonhuman wealth q Preservation vs. Extraction n Brazilian Amazon q World wants preservation, higher future value assigned q Locals want extraction to reap short term benefits q Distributional disconnect due to n Benefits widely dispersed in population but costs local q Endangered species act: most citizens enjoy non-use benefits, costs are concentrated amongst people with rights to land on which the species reside n Benefits are local and cost widely dispersed q Beach restoration project paid by non-local taxes
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Objectives of Public Policy n Flexibility q Example of inflexible policy n Price for purchasing a mineral claim is still $5 an acre in the United States since 1872. q How policies adapt to changing circumstances n Changes that affect the willingness to pay q Demand side changes and social benefit changes n Changes that affect the Marginal Total Costs q Social cost changes and current cost changes n Enforceability q If the cost of enforcing a law is too high it may not be enforced at all q Balance needed between law and ability to enforce it
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Objectives of Public Policy n Enforceability q People will not automatically comply with a law unless there is enforcement. q Enforcement requires people, time and institutions n Monitoring, and legal systems are key. q Enforcement: n Monitoring: measuring actions and comparing it with the law. q Made difficult because violators have the incentive to cheat n Sanctioning: bring violators to justice q Court cases imply time and precious resources. n Can higher penalties deter violation? q Greater the potential sanction – the more the deterrence? q Expected Penalty = probability of detection X penalty q But courts are reluctant to impose high penalties § Stiff penalties or closing down a polluting plant may throw people out of work and eventually a smaller penalty is imposed q Balance needed between law and ability to enforce it
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Types of Public Policies n The aim of public policy is to align peoples private behavior with what is socially appropriate q Two ways to do this n Incentives: influence people to make decisions that are in the best interest of all. n
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L7. Public Policy for Natural Resources with questions -...

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